AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 25, 2003

REGISTRATION NO. 333-107689
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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AMENDMENT NO. 3

FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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COSI, INC.
(Exact Name of Registrant as Specified in Its Charter)

<Table>

DELAWARE 5812 06-1393745
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)

242 WEST 36TH STREET
NEW YORK, NEW YORK 10018
(212) 653-1600
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive
Offices)
</Table>

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KEVIN ARMSTRONG
CHIEF EXECUTIVE OFFICER
242 WEST 36TH STREET
NEW YORK, NEW YORK 10018
(212) 653-1600
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)

COPIES TO:

DENNIS J. BLOCK, ESQ.
WILLIAM P. MILLS, III, ESQ.
CADWALADER, WICKERSHAM & TAFT LLP
100 MAIDEN LANE
NEW YORK, NEW YORK 10038
(212) 504-6000
(212) 504-6666 (FAX)
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 being 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 of 1933, 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 of 1933, 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 of 1933, 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
under the Securities Act of 1933, check the following box. [ ]

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON A DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON A DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID 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 prospectus is not an offer
to sell or a solicitation of an offer to buy nor shall there be any sale of
these securities in any state in which the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED NOVEMBER 25, 2003

PROSPECTUS
COSI, INC.
UP TO 19,166,946 SHARES
COMMON STOCK
AT A MAXIMUM AGGREGATE OFFERING PRICE OF
$9,583,473
ISSUABLE UPON THE EXERCISE OF SUBSCRIPTION RIGHTS

We are distributing to our stockholders non-transferable subscription rights
to purchase shares of our common stock, par value $0.01 per share. You will
receive one subscription right for each share of common stock that you owned as
of the record date, which is November 24, 2003. We will not distribute or pay
fractional shares or cash in lieu thereof.

Each subscription right entitles you to purchase a number of shares of
common stock with a value equal to an aggregate of $0.6776, at a purchase price
per share equal to the lesser of (i) $1.50 and (ii) 85% of the weighted average
price per share of our common stock as reported on the Nasdaq National Market
for the 15-trading-day period ending three business days prior to December 19,
2003.

If you exercise all of your subscription rights and our stockholders
subscribe for an aggregate of less than $7.5 million pursuant to the basic
subscription privilege, you also will have an over-subscription right to
subscribe, at the subscription price, to purchase additional shares of common
stock that are not otherwise purchased by other stockholders in this offering,
up to an aggregate offering of $7.5 million. If there are not enough shares
available to satisfy fully all subscriptions for additional shares, we will
allocate the available shares of common stock on a pro rata basis among holders
exercising their over-subscription rights.

We have entered into an investment agreement (the "Investment Agreement")
with Eric J. Gleacher, one of our stockholders and formerly one of our
directors, Charles G. Phillips, one of our stockholders, LJCB Nominees Pty Ltd
("LJCB"), one of our largest stockholders, and ZAM Holdings, L.P. ("ZAM
Holdings"), our largest stockholder (collectively, the "Funding Parties").
Pursuant to the Investment Agreement, subject to certain conditions, the Funding
Parties have agreed to provide funding to us following consummation of this
rights offering in an aggregate amount up to $8.5 million reduced by the amount
outstanding under a $1,943,068.74 senior secured promissory note, a $759,397.00
senior secured promissory note and a $304,634.26 senior secured promissory note
issued by us (collectively, the "$3 Million Note") and a $969,240.50 senior
secured promissory note, a $378,802.00 senior secured promissory note and a
$151,957.50 senior secured promissory note issued by us (collectively, the "$1.5
Million Note"). At the option of the Funding Parties, the Funding Parties may
fund such greater amount permitted by the Investment Agreement to allow the
Funding Parties to maintain certain relative ownership levels. If our
stockholders (other than the Funding Parties) subscribe for at least $2.0
million worth of shares in this rights offering, the Funding Parties would,
subject to certain conditions, provide this funding in the form of an investment
in our common stock at the subscription price and the Funding Parties who hold
the senior secured promissory notes would convert the notes into shares of our
common stock. If our stockholders (other than the Funding Parties) do not
subscribe for at least $2.0 million worth of shares in this rights offering, we
will not consummate this offering and the Funding Parties will provide, subject
to certain conditions, this funding to us in the form of, at their option, a
purchase of shares of our common stock at the subscription price or the purchase
of a senior secured note which is convertible into shares of our common stock.
If our stockholders (other than the Funding Parties) subscribe for at least $7.5
million worth of shares in this rights offering, the Funding Parties are not
obligated to provide any additional funding to us (other than the $3 Million
Note and the $1.5 Million Note). The Funding Parties have agreed not to exercise
their basic subscription privilege or over-subscription privilege in this rights
offering. The $8.5 million in funding described above is allocated as follows:
(a) Mr. Gleacher, $2,000,000; (b) Mr. Phillips, $750,000; (c) LJCB, $750,000 and
(d) ZAM Holdings, $5,000,000.

The shares are being offered directly by us without the services of an
underwriter or selling agent. A total of up to 19,166,946 shares of common stock
will be offered in the rights offering, for a maximum aggregate offering price
of $9,583,473; however, we will not consummate the rights offering if our
stockholders (other than the Funding Parties) do not subscribe for at least $2.0
million worth of shares in this rights offering pursuant to the basic
subscription privilege and over-subscription privilege. All of the shares of
common stock offered in this offering are being issued by us. The proceeds from
the sale of the shares of common stock will be immediately available to us for
the purposes set forth in this prospectus.

The rights will expire at 5:00 p.m., Eastern Standard time, on December 19,
2003, unless extended at our sole discretion. You are encouraged to consider
carefully the exercise of the rights prior to their expiration. YOUR ELECTION TO
EXERCISE RIGHTS IS IRREVOCABLE. We expect to make delivery of the common stock
as soon as practicable after you validly exercise the corresponding rights.

Our common stock is traded on the Nasdaq National Market under the symbol
"COSI." On November 24, 2003, the last reported sale price for our common stock
was $2.01 per share.

IF YOU FULLY SUBSCRIBE FOR YOUR BASIC SUBSCRIPTION AMOUNT AND OUR
STOCKHOLDERS SUBSCRIBE FOR AN AGGREGATE OF MORE THAN $7.5 MILLION PURSUANT TO
THEIR BASIC SUBSCRIPTION AMOUNT, YOUR PERCENTAGE OWNERSHIP OF OUR EQUITY WILL BE
REDUCED. IF YOU FULLY SUBSCRIBE FOR YOUR BASIC SUBSCRIPTION AMOUNT AND OUR
STOCKHOLDERS SUBSCRIBE FOR AN AGGREGATE OF LESS THAN $7.5 MILLION BUT MORE THAN
$2 MILLION, YOUR PERCENTAGE OWNERSHIP OF OUR EQUITY WILL NOT BE REDUCED;
HOWEVER, YOUR OWNERSHIP PERCENTAGE RELATIVE TO CERTAIN OF THE FUNDING PARTIES
WILL BE REDUCED.

OUR CURRENT STOCKHOLDERS WHO DO NOT PARTICIPATE IN THE RIGHTS OFFERING WILL
SUFFER A SUBSTANTIAL DILUTION IN THEIR RELATIVE PERCENTAGE OWNERSHIP IN US UPON
ISSUANCE OF OUR COMMON STOCK TO HOLDERS EXERCISING RIGHTS IN THE RIGHTS OFFERING
AND TO THE FUNDING PARTIES.

INVESTING IN OUR COMMON STOCK INVOLVES RISK. WHETHER OR NOT YOU INTEND TO
INVEST IN OUR COMMON STOCK YOU SHOULD READ "RISK FACTORS" BEGINNING ON PAGE 10.

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.

The date of this prospectus is , 2003.

TABLE OF CONTENTS

<Table>
<Caption>
PAGE
----

QUESTIONS AND ANSWERS ABOUT THE RIGHTS OFFERING............. ii
FORWARD-LOOKING STATEMENTS.................................. vii
PROSPECTUS SUMMARY.......................................... 1
OUR COMPANY................................................. 1
THE OFFERING................................................ 4
SUMMARY FINANCIAL DATA...................................... 8
RISK FACTORS................................................ 10
USE OF PROCEEDS............................................. 18
PRICE RANGE OF COMMON STOCK................................. 18
DIVIDEND POLICY............................................. 18
CAPITALIZATION.............................................. 19
DILUTION.................................................... 19
SELECTED FINANCIAL DATA..................................... 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS
OF OPERATIONS............................................. 23
THE RIGHTS OFFERING......................................... 38
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES....... 45
PLAN OF DISTRIBUTION........................................ 48
BUSINESS.................................................... 49
MANAGEMENT.................................................. 56
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 66
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 69
DESCRIPTION OF CAPITAL STOCK................................ 71
SHARES ELIGIBLE FOR FUTURE SALE............................. 78
LEGAL MATTERS............................................... 78
EXPERTS..................................................... 78
WHERE YOU CAN FIND MORE INFORMATION......................... 79
CONSOLIDATED FINANCIAL STATEMENTS INDEX AND FINANCIAL
STATEMENTS................................................ F-1
</Table>

QUESTIONS AND ANSWERS ABOUT THE RIGHTS OFFERING

WHAT IS A RIGHTS OFFERING?

A rights offering is a distribution to holders of our common stock, at no
charge, of non-transferable rights to purchase shares of our common stock at the
rate of one right for each share of our common stock owned as of November 24,
2003, the record date.

WHY IS COSI ENGAGING IN A RIGHTS OFFERING?

The rights offering is being made in connection with an Investment
Agreement among Cosi and the Funding Parties to raise up to approximately $14
million. We want to give you the opportunity to participate in this fund raising
effort and to purchase additional shares of our common stock.

WHAT IS A SUBSCRIPTION RIGHT?

Each subscription right enables you to purchase a number of shares of our
common stock with a value equal to an aggregate of $0.6776 at the subscription
price (which is discussed below). You will not receive any fractional shares or
cash in lieu thereof.

Your exercise of a right means that you agree to purchase from us $0.6776
worth of shares of our common stock. The actual number of shares you receive for
the exercise of each right will equal $0.6776 divided by the subscription price.
You may exercise any number of your rights, or you may choose not to exercise
any rights. Each right carries with it a basic subscription privilege and an
over-subscription privilege.

For example, if you own 1,000 shares of our common stock, your basic
subscription privilege will entitle you to purchase up to $677.60 worth of our
shares in this rights offering. If you choose to fully subscribe for your basic
subscription privilege, and the subscription price equals $1.50 per share, we
will deliver to you 451 shares, and we will return to you $1.10 (because we will
not deliver fractional shares).

WHAT IS THE BASIC SUBSCRIPTION PRIVILEGE?

The basic subscription privilege of each right entitles you to purchase a
number of shares of our common stock with a value equal to an aggregate of
$0.6776, at the subscription price.

WHAT IS THE OVER-SUBSCRIPTION PRIVILEGE?

If you fully exercise your basic subscription privilege and our
stockholders subscribe for an aggregate of less than $7.5 million pursuant to
their basic subscription privilege, you also will have an over-subscription
right to subscribe, at the subscription price, to purchase additional shares of
common stock that are not otherwise purchased by other stockholders in this
offering, up to an aggregate offering of $7.5 million. By extending an
over-subscription privilege we are providing stockholders that exercise all of
their basic subscription privileges with the opportunity, subject to limitations
as described herein, to purchase those shares that are not purchased by other
stockholders through the exercise of their basic subscription privilege.

WHAT IS THE SUBSCRIPTION PRICE?

The subscription price is the lesser of (i) $1.50 per share and (ii) 85% of
the weighted average price per share of our common stock as reported on the
Nasdaq National Market for the 15-trading-day period ending three business days
prior to the expiration of the rights offering, which is expected to be December
19, 2003. We may extend the expiration date by issuing a public announcement no
later than 9:00 a.m. Eastern Standard Time on the next business day after the
expiration date. However, we will not consummate the rights offering if we would
be required to issue more than 19,166,946 shares.

HOW DID WE DETERMINE THE SUBSCRIPTION PRICE?

market price of our common stock on the date the subscription price was
determined on March 31, 2003. The subscription price is the same as the price at
which the Funding Parties agreed to provide their funding commitment, which
price was determined through negotiations between the special committee and the
Funding Parties.

HOW SOON MUST I ACT?

You will be able to exercise your rights only during a limited period. If
you do not exercise your rights before 5:00 p.m., Eastern Standard time, on
December 19, 2003, your rights will automatically expire. In order to
participate in the offering, you must ensure that American Stock Transfer &
Trust Company, the subscription agent, actually receives all required documents
and payments from you before such date and time.

WHAT IF THE STOCKHOLDERS DO NOT EXERCISE THEIR BASIC AND OVER-SUBSCRIPTION
PRIVILEGES IN FULL?

We have entered into an investment agreement (the "Investment Agreement")
with Eric J. Gleacher, one of our stockholders and formerly one of our
directors, Charles G. Phillips, one of our stockholders, LJCB Nominees Pty Ltd
("LJCB"), one of our largest stockholders, and ZAM Holdings, L.P. ("ZAM
Holdings"), our largest stockholder (collectively the "Funding Parties").
Pursuant to the Investment Agreement, subject to certain conditions, the Funding
Parties have agreed to provide funding to us in an aggregate amount up to $8.5
million reduced by the amount outstanding under a $1,943,068.74 senior secured
promissory note, a $759,397.00 senior secured promissory note and a $304,634.26
senior secured promissory note (collectively, the "$3 Million Note") and a
$969,240.50 senior secured promissory note, a $378,802.00 senior secured
promissory note and a $151,957.50 senior secured promissory note issued by us
(collectively, the "$1.5 Million Note"). At the option of the Funding Parties,
the Funding Parties may fund such greater amount permitted by the Investment
Agreement to allow the Funding Parties to maintain certain relative ownership
levels. If our stockholders (other than the Funding Parties) subscribe for at
least $2.0 million worth of shares in this rights offering, the Funding Parties
would, subject to certain conditions, provide this funding in the form of an
investment in our common stock at the subscription price and the Funding Parties
who hold the senior secured promissory notes would convert the notes into shares
of our common stock. If our stockholders (other than the Funding Parties) do not
subscribe for at least $2.0 million worth of shares in this rights offering, we
will not consummate this offering and the Funding Parties will, subject to
certain conditions, provide this funding to us in the form of, at their option,
a purchase of shares of our common stock at the subscription price or the
purchase of a senior secured note which is convertible into shares of our common
stock. The Funding Parties have agreed not to exercise their basic subscription
privilege or over-subscription privilege in this rights offering. The $8.5
million in funding described above is allocated as follows: (a) Mr. Gleacher,
$2,000,000; (b) Mr. Phillips, $750,000; (c) LJCB, $750,000 and (d) ZAM Holdings,
$5,000,000.

We will not consummate the rights offering unless our stockholders
subscribe for a minimum of $2.0 million pursuant to the basic subscription
privilege and the over-subscription privilege.

If you fully subscribe for your basic subscription amount and our
stockholders subscribe for an aggregate of more than $7.5 million pursuant to
their basic subscription amount, your percentage ownership of our equity will be
reduced. If you fully subscribe for your basic subscription amount and our
stockholders subscribe for an aggregate of less than $7.5 million but more than
$2 million, your percentage ownership of our equity will not be reduced,
however, your ownership percentage relative to certain of the Funding Parties
will be reduced.

Our current stockholders who do not participate in the rights offering will
suffer a substantial dilution in their relative percentage ownership in us upon
issuance of our common stock to holders exercising rights in the rights offering
and to the Funding Parties.

HOW MANY SHARES WILL BE OUTSTANDING AFTER THE RIGHTS OFFERING?

Assuming (i) a subscription price of $1.50, (ii) conversion of the $3
Million Note and the $1.5 Million Note at a conversion price of $1.50 (and
excluding accrued and unpaid interest) and (iii) our stockholders subscribe for
the maximum amount in this rights offering, 27,126,939 shares of our common
stock will be outstanding after the rights offering, based on the number of
shares outstanding as of November 24, 2003. Warrants to purchase

iii

104,702 shares of our common stock have provisions which provide for
anti-dilution adjustments to the price and number of underlying common shares if
we sell shares of our common stock below fair market value. The disclosure in
this prospectus regarding outstanding shares and potential dilution of our
common stock excludes any anti-dilution adjustment as well as any accrued and
unpaid interest on the convertible notes and shares which may be issued pursuant
to Mr. Forrest's employment agreement. If the subscription price is less than
$1.50 we would be required to issue additional shares. We will not consummate
the rights offering if we would be required to issue more than 19,166,946
shares.

HOW WILL THE PROCEEDS BE USED?

We intend to use the net proceeds from the rights offering for general
corporate purposes, including, but not limited to, funding our operating losses,
funding costs associated with developing and incorporating a franchising and
area developer model into our growth strategy, and funding costs associated with
closing under-performing restaurants.

HAS THE BOARD OF DIRECTORS MADE A RECOMMENDATION REGARDING THIS OFFERING?

No. Our board of directors makes no recommendation to you about whether you
should exercise your rights.

MAY I TRANSFER MY SUBSCRIPTION RIGHTS?

No. The subscription rights are non-transferable.

TO WHOM MAY I DIRECT QUESTIONS OR SEND FORMS AND PAYMENT?

If you have questions about the rights or would like to request additional
copies of offering documents, you may call American Stock Transfer & Trust
Company at (718) 921-8200.

You should return your subscription documents and payments to American
Stock Transfer & Trust Company at the address indicated in the instructions
forwarded with this prospectus.

AM I REQUIRED TO EXERCISE MY BASIC SUBSCRIPTION RIGHTS? HOW ARE STOCKHOLDERS
AFFECTED IF THEY DO NOT EXERCISE ANY RIGHTS?

You are not required to exercise any rights or otherwise take any action in
response to this rights offering. If you do not exercise all of your rights, and
this offering is consummated or the Funding Parties otherwise purchase shares of
our common stock pursuant to the Investment Agreement, the number of shares that
you own will not change, but your percentage ownership of our total outstanding
common stock will decline.

If you fully subscribe for your basic subscription amount and our
stockholders subscribe for an aggregate of more than $7.5 million pursuant to
their basic subscription amount, your percentage ownership of our equity will be
reduced. If you fully subscribe for your basic subscription amount and our
stockholders subscribe for an aggregate of less than $7.5 million but more than
$2 million, your percentage ownership of our equity will not be reduced;
however, your ownership percentage relative to certain of the Funding Parties
will be reduced.

If our stockholders, other than the Funding Parties, do not subscribe for a
minimum number of shares with an aggregate value of $2 million, we will not
consummate the rights offering and the Funding Parties will not be required to
convert the $3 Million Note and the $1.5 Million Note into shares of our common
stock. Furthermore, if the Funding Parties, pursuant to the Investment
Agreement, elect to provide funding in the form of a senior secured convertible
note, such note, along with the $3 Million Note and the $1.5 Million Note, will
be secured by all of our tangible and intangible property (other than equipment
pledged to secure our equipment loan credit facility). Therefore, our
stockholders' equity interest in Cosi will be effectively subordinate to the
senior secured position of the Funding Parties.

WHAT FORMS AND PAYMENT ARE REQUIRED TO PURCHASE COMMON STOCK?

If you were a record holder of our common stock on November 24, 2003, you
are receiving with this prospectus a rights certificate and instructions on how
to purchase shares. The rights certificate must be properly filled out and
delivered before expiration of the rights with full payment for the aggregate
dollar amount for which you wish to subscribe.

WHAT IF A BROKER, BANK OR OTHER NOMINEE IS THE RECORD HOLDER OF MY SHARES OF
COMMON STOCK?

If you hold your shares through a broker, bank or other nominee and you
wish to purchase shares in the rights offering, please promptly contact the
broker, bank or other entity holding your shares. Your broker or other nominee
holder is the record holder of the shares you own and must either exercise the
rights certificate on your behalf for shares you wish to purchase or arrange for
a rights certificate issued in your name. We have requested all known brokers
and banks to contact you for instructions on exercising your rights.

WHAT SHOULD I DO IF I WANT TO PARTICIPATE IN THE RIGHTS OFFERING AND I AM A
STOCKHOLDER IN A FOREIGN COUNTRY OR IN THE ARMED SERVICES?

The subscription agent will mail rights certificates to you if you are a
rights holder whose address is outside the United States or if you have an Army
Post Office or a Fleet Post Office address. To exercise your rights, you must
notify the subscription agent on or prior to 5:00 p.m., Eastern Standard time,
on December 19, 2003, and take all other steps which are necessary to exercise
your rights, on or prior to that time. If you do not follow these procedures
prior to the expiration of the rights offering, your rights will expire.

MUST I PAY THE SUBSCRIPTION PRICE IN CASH?

In order to participate in the rights offering, you must timely pay the
subscription price by wire transfer, certified or cashier's check drawn on a
U.S. bank or personal check that clears before expiration of the rights.

WILL MY MONEY BE RETURNED IF THE RIGHTS OFFERING IS CANCELLED?

Yes, but without any payment of interest.

IS EXERCISING THE SUBSCRIPTION RIGHTS RISKY?

Yes. The exercise of your rights involves risks. Exercising your rights
means buying additional shares of our common stock and should be considered as
carefully as you would consider any other equity investment. Whether or not you
intend to invest in our common stock, you should carefully consider, among other
things, the risks described under the heading "Risk Factors," beginning on page
10.

WHAT FEES OR CHARGES APPLY IF I DO CHOOSE TO EXERCISE MY RIGHTS?

We are not charging any fee or sales commission to issue rights to you or
to issue shares to you if you exercise rights. If you exercise rights through a
broker or other holder of your shares, you are responsible for paying any fees
that person may charge.

MAY I CHANGE OR CANCEL MY EXERCISE OF RIGHTS AFTER I SEND IN THE REQUIRED FORMS?

No. Your election to exercise your rights is irrevocable.

WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF EXERCISING MY SUBSCRIPTION
RIGHTS AS A HOLDER OF COMMON STOCK?

A holder of common stock will not recognize income or loss for federal
income tax purposes in connection with the receipt or exercise of subscription
rights in the rights offering. However, you should consult with your own tax
advisor concerning the tax consequences applicable in light of your particular
circumstances. See "Certain United States Federal Income Tax Consequences" on
page 45.

WILL THE NEW SHARES BE INITIALLY LISTED ON NASDAQ AND TREATED LIKE OTHER SHARES?

Yes. Our common stock is traded on the Nasdaq National Market under the
symbol "COSI." On August 4, 2003, the last trading day prior to the initial
filing of this registration statement relating to this rights offering, the
closing price of our common stock on Nasdaq was $2.23 per share. On November 24,
2003, the last trading day before the date of this prospectus, the closing price
of our common stock on Nasdaq was $2.01 per share.

FORWARD-LOOKING STATEMENTS

This prospectus contains statements about future events and expectations
that constitute forward-looking statements. Forward-looking statements are based
on management's beliefs, assumptions and expectations of our future economic
performance, taking into account the information currently available to
management. These statements are not statements of historical fact.
Forward-looking statements involve risks and uncertainties that may cause our
actual results, performance or financial condition to differ materially from the
expectations of future results, performance or financial condition we express or
imply in any forward-looking statements. Factors that could contribute to these
differences include, but are not limited to:

- the cost of our principal food products;

- fluctuations in our quarterly results;

- labor shortages or increased labor costs;

- the rate of our internal growth, and our ability to generate increased
revenue from existing restaurants;

- changes in consumer preferences and demographic trends;

- increased government regulation;

- increasing competition in the fast casual dining segment of the
restaurant industry;

- supply and delivery shortages or interruptions;

- expansion into new markets;

- market saturation due to new restaurant openings;

- our ability to effectively manage our business with a reduced general and
administrative staff;

- our ability to incorporate a franchising and area developer model into
our strategy;

- inadequate protection of our intellectual property;

- adverse weather conditions which impact customer traffic at our
restaurants;

- the availability and cost of additional financing, both to fund our
existing operations and to grow and open new restaurants;

- adverse economic conditions; and

- our ability to generate positive cash flow from operations.

The words "believe," "may," "will," "should," "anticipate," "estimate,"
"expect," "intend," "objective," "seek," "strive" or similar words, or the
negatives of these words, identify forward-looking statements. We qualify any
forward-looking statements entirely by these cautionary factors. We undertake no
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.

vii

PROSPECTUS SUMMARY

This summary does not contain all the information that you should consider
before deciding whether to invest in our common stock. Whether or not you intend
to invest in our common stock, you should read the entire prospectus carefully,
including the section entitled "Risk Factors" and our consolidated financial
statements and the accompanying notes included elsewhere in this prospectus. In
this prospectus, the terms "we," "us," "our," "the Company," and "Cosi" refer to
Cosi, Inc.

OUR COMPANY

GENERAL

We own and operate 89 fast casual restaurants in 11 states and the District
of Columbia. Cosi restaurants are all-day cafes that feature signature bread and
coffee products in an environment we adjust appropriately throughout the day.
The majority of our restaurants offer breakfast, lunch, afternoon coffee, dinner
and dessert menus.

We operate our restaurants in two formats: Cosi and Cosi Downtown. Cosi
Downtown restaurants, which are located in non-residential central business
districts, close for the day in the early evening, while Cosi restaurants offer
dinner and dessert in a casual dining atmosphere. The atmosphere of Cosi is
appropriately managed for each daypart by changing the music and lighting
throughout the day. Our restaurants are located in a wide range of markets and
trade areas, including business districts and residential communities in both
urban and suburban locations.

Cosi was created through the October 1999 merger of two restaurant
concepts, Cosi Sandwich Bar, Inc. and Xando, Incorporated. Each company served a
similar customer, but focused on different parts of the day. Since the merger,
we have added Cosi Sandwich Bar products to the Xando Coffee and Bar multiple
daypart platform.

Our principal executive offices are located at 242 West 36th Street, New
York, New York 10018, and our telephone number is (212) 653-1600. Our web site
address is http://www.getcosi.com. Information on our web site is not a part of
this prospectus.

CONCEPT AND BUSINESS STRATEGY

Our objective is to build a nationwide system of distinctive restaurants
that generate attractive unit economics by appealing to a broad range of
customers. In 2003, we announced our intention to incorporate a franchising and
area developer model into our business strategy. While we expect that
company-owned restaurants will always be an important part of our new restaurant
growth, we believe that incorporating a franchising and area developer model
into our strategy will position us to maximize the market potential for the Cosi
brand and concept consistent with our available capital and thus maximize
shareholder value.

Our strategy is to offer a differentiated menu featuring our signature
bread and coffee products in a comfortable, warm and inclusive atmosphere. We
believe that our menu offering of proprietary products distinguishes us from our
competition. Our menu items do not require extensive preparation on site. Our
restaurants are located in a wide range of markets and trade areas, which
include business districts and residential communities in both urban and
suburban locations. Additionally, a wide range of our products is available
outside of the four walls of our restaurants through our catering services.

REVITALIZATION PLAN

We believe that, when properly delivered, our menu, food quality and
restaurant experience provide customers with a unique and positive dining
ambiance. However, we experienced lower sales and operating profits than we had
projected, mostly related to underperformance at new restaurants opened in the
second half of 2002 and in the first quarter of 2003. In fiscal 2002, we
incurred a net loss of $20.9 million and through our third quarter in fiscal
2003 we have incurred a net loss of $20.5 million. In order to improve our
financial performance, we have determined to focus on our operating system and
controls and management's execution of our strategy.

We have, therefore, developed a four-part revitalization plan which is
designed to stabilize our business, improve cash flow, position our brand for
future growth and secure the resources we expect to be necessary for the
implementation of our long-term strategy. Our plan rests upon four pillars:

(1) building a new leadership team with extensive restaurant and
turnaround experience;

(2) developing a unified Field Operations and Support Center team
working together to ensure the best possible experience for our guests;

(3) developing a multi-unit operating discipline to improve our
operational execution, establish strong cost controls and develop a
replicable business model;

(4) securing financing, including through this rights offering.

We believe we have made substantial progress in the implementation of our
revitalization plan. We have:

- secured a new management team comprised of executive officers with
industry knowledge and restaurant operating and turnaround experience;

- improved our deteriorating margins in costs of goods sold by adjusting
(A) our menu selections, to reduce inventory stock keeping units and
eliminate slow moving menu items, and (B) pricing, including increasing
our salad prices late in the second quarter of 2003;

- improved the profitability of each of our five day-parts by eliminating
breakfast offerings at 22 locations which were not generating positive
cash flow during that daypart and closing eight under-performing
restaurants, and we have another 13 restaurants on our watch list.
Operation improvement plans at these locations have been implemented, and
we will continue to review these locations quarterly;

- implemented new operational standards to reduce labor costs in
restaurants where labor expenses were and continue to be above our
average for restaurants of the same volume. Our labor scheduling is now
approved by a district manager and unit-level performance is reviewed
weekly by a regional district manager, which increases monitoring and
control over labor while shortening the time it takes us to react and
respond to locations that deviate from our operational standards. In the
related area of manager and support expense, we now have fixed dollar
budgets by line item which improves expenditure planning, tracking and
accountability; and

- completed a concept audit, developed brand position plans and detailed
concept design principles and retained leading concept design and
development consultants to assist us with prototype development. We have
also refined our brand-positioning program, which will serve as our
compass for future product, design and marketing efforts.

Lastly, we are taking steps to secure additional financing. These steps
include this offering and the other transactions we have negotiated with funding
parties, which are described more fully herein.

RECENT DEVELOPMENTS

We believe that our revitalization plan is beginning to have a positive
impact on our operating performance. In our third fiscal quarter net revenues
were $27.5 million, which represented an increase of $5.4 million, or 24.7%,
from net revenues of $22.1 million in the same period last year. This increase
was primarily due to the full period contribution of sales from 20 restaurants
opened during fiscal 2002, subsequent to the second quarter of fiscal 2002, from
sales of six restaurants opened in the first quarter of 2003, and from an
increase of 4.4% in comparable restaurant sales for the third quarter. We
include a restaurant in our comparable restaurant base after it has been in
operation for 15 full months. At the end of the third quarter, there were 66
restaurants in our comparable restaurant base. In addition to our positive
performance in comparable restaurant sales, we have seen improvement in our
restaurant operating margins. For the third fiscal quarter, our cost of goods
sold decreased to 27.3% of sales from 28.4% of sales for the first half of the
year. In October, that improvement continued, with cost of goods sold decreasing
to 26.7% of sales. We have also seen improvement in our labor cost components.
For the third quarter store-level labor expenses were 35.5% of sales, and in
October, store-level labor expenses further decreased to 32.0% of sales. We have
also seen reductions in spending in our total controllables. Total

controllables are comprised of expenses unrelated to food and labor, including
paper supplies, cleaning supplies, restaurant repairs and maintenance and office
supplies. In October spending on total controllables decreased to 8.8% of sales.
The combination of these improvements has resulted in improvements in our
restaurant cash flow margin. Restaurant cash flow margin is calculated by
dividing the difference between our net sales and our total cost of sales by net
sales. Restaurant cash flow margin was 8.2% for the first half of fiscal 2003,
9.4% in the third fiscal quarter of 2003 and 13.8% in October 2003.

We can not assure you, however, that these recent results will be
indicative of our future performance or results.

THE OFFERING

The Rights.................... We will issue to each holder of Cosi common
stock, at no cost, one non-transferable right
to purchase our common stock for each share of
common stock owned by that holder on the record
date, which is November 24, 2003. We will not
issue fractional shares, but will round down
any fractional shares to the next whole number.

Basic Subscription
Privilege..................... You are entitled to purchase, at the
subscription price, a number of shares of
common stock with a value equal to the product
of $0.6776 multiplied by the total number of
rights you hold.

Over-Subscription Privilege... If you fully exercise your basic subscription
privilege and our stockholders subscribe for an
aggregate of less than $7.5 million pursuant to
their basic subscription privilege, you also
will have an over-subscription right to
subscribe, at the subscription price, to
purchase additional shares of common stock that
are not otherwise purchased by other
stockholders in this offering, up to an
aggregate offering of $7.5 million.

Subscription Price............ The subscription price is the lesser of (i)
$1.50 per share and (ii) 85% of the weighted
average price per share of our common stock as
reported on the Nasdaq National Market for the
15-trading-day period ending three business
days prior to December 19, 2003. However, we
will not consummate the rights offering if we
would be required to issue more than 19,166,946
shares.

Maximum Offering.............. We expect to sell shares of our common stock
with a maximum aggregate offering price of
$9,583,473. However, we will not consummate the
rights offering unless our stockholders (other
than the Funding Parties) subscribe for a
minimum of $2.0 million pursuant to the basic
subscription privilege and the
over-subscription privilege. In the event that
we do not consummate the rights offering we
will promptly return any amount you delivered
to us as payment of the subscription price.

Proration of Over-Subscription
Rights........................ The maximum number of shares for which you will
be able to subscribe pursuant to your
over-subscription privilege will equal your pro
rata share of the total amount of shares
available for over-subscription. The total
value of shares available for over-subscription
will equal $7.5 million reduced by the total
value of shares subscribed for pursuant to all
stockholders' basic subscription privileges.
Your pro rata share will be based upon the
total number of shares of our common stock and
warrants to purchase shares of our common stock
you own compared to the total number of shares
of our common stock and warrants to purchase
shares of our common stock owned by all
stockholders who exercised their
over-subscription privilege and the Funding
Parties. If there is an insufficient number of
shares of our common stock remaining unsold
after holders have exercised their basic
subscription rights to satisfy in full all
subscriptions that we receive for additional
shares, we will allocate the available shares
among the holders who execute their
over-subscription privilege on a pro rata basis
according to their respective holdings, up to
the amount such holder has subscribed for
through the exercise of such holder's
over-subscription privilege.

Shares of Common Stock
Outstanding After the Rights
Offering.................... As of November 24, 2003, we had 17,733,224
shares of common stock outstanding. This does
not include 5,361,381 shares that may be issued
upon exercise of outstanding options and
warrants (excluding any anti-dilution
adjustments). Assuming a subscription price of
$1.50, an aggregate of up to approximately
6,388,982 shares of common stock may be issued
pursuant to the basic subscription privilege.
If the subscription price is less than $1.50 we
would be required to issue additional shares.
If the rights offering is fully subscribed
pursuant to the basic subscription privilege,
assuming a subscription price and a note
conversion price of $1.50 (excluding accrued
and unpaid interest), a total of up to
27,126,939 shares of common stock will be
outstanding after consummation of the offering,
based on the number of shares outstanding on
November 24, 2003. We will not consummate the
rights offering if we would be required to
issue more than 19,166,946 shares.

Record Date................... November 24, 2003.

Expiration Time............... 5:00 p.m., Eastern Standard time, December 19,
2003, unless otherwise extended by us to a
later date.

Transferability of Rights..... Subscription rights are only being issued to
holders of our common stock on the record date
and are not transferable.

Procedure for Exercising
Rights........................ You may exercise your basic subscription
privilege and your over-subscription privilege
by properly completing the rights certificate
and forwarding it to the subscription agent
with payment of the subscription price. The
subscription agent must actually receive the
rights certificate and payment at or prior to
the expiration time. If you send rights
certificates by mail, you are urged to use
insured, registered mail.

You will be deemed to have exercised the basic
subscription privilege to purchase shares to
the full extent of the payment you tender. If
the aggregate subscription price you pay
exceeds the amount necessary to purchase the
number of shares you are entitled to purchase
pursuant to your basic subscription privilege,
then you will be deemed to have exercised the
over-subscription privilege to the full extent
of the excess payment tendered.

ONCE YOU HAVE EXERCISED YOUR BASIC SUBSCRIPTION
PRIVILEGE OR, IF ELIGIBLE, YOUR
OVER-SUBSCRIPTION PRIVILEGE, YOU MAY NOT REVOKE
YOUR EXERCISE.

Any rights you have not exercised prior to the
expiration time will expire.

Persons Holding Common Stock
or Wishing to Exercise Rights
Through Others.............. If you hold shares of common stock and are
receiving the rights through a broker, dealer
commercial bank, trust company or other
nominee, or if you hold certificates for common
stock but would prefer to have institutions
effect transactions relating to the rights on
your behalf, you should contact the appropriate
institution or nominee and request it to effect
those transactions for you. You will need to
have your broker, bank or other nominee act for
you. To indicate your decision, you should
complete and return to your broker, bank or
other nominee the form entitled "Beneficial
Owner Election Form," together with full
payment of the subscription price for each
5

share subscribed for under your subscription
rights (including shares subscribed for through
the exercise of your over-subscription right).
You should receive this form from your broker,
bank or other nominee with the other rights
offering materials.

Issuance of Common Stock...... Certificates representing shares of common
stock you have purchased pursuant to the basic
subscription privilege will be delivered to
holders of record as soon as practicable after
the expiration date. If you purchase shares
pursuant to the over-subscription privilege,
delivery of certificates will occur as soon as
practicable after we make all prorations and
adjustments contemplated by the terms of the
rights offering.

Certain Federal Income Tax
Consequences................ You will not recognize taxable income upon the
receipt of the rights for United States federal
income tax purposes. Your basis in the rights
with respect to your common stock will be zero,
unless either:

(i) the fair market value of the rights on the
date of issuance is 15% or more of the fair
market value of the common stock with respect
to which they are received, or

(ii) you elect, on your federal income tax
return for the taxable year in which the rights
are received, to allocate part of the basis of
the stock to the rights.

In either case, upon exercise of the rights,
your basis in that common stock will be
allocated between the common stock and the
rights in proportion to their relative fair
market values.

You will not recognize any gain or loss upon
the exercise of rights for common stock. Your
basis in the common stock acquired through
exercise of the rights will be equal to the sum
of the exercise price to acquire our stock and
your basis in the rights. If you allow the
rights to expire unexercised, you will not
recognize any loss, and the basis of your
common stock will not be reduced.

Subscription Agent............ The subscription agent is American Stock
Transfer & Trust Company. The subscription
agent's telephone number is (718) 921-8200.

Funding Commitment............ We have entered into an Investment Agreement
with Eric J. Gleacher, Charles G. Phillips,
LJCB and ZAM Holdings, L.P., collectively, the
"Funding Parties". Pursuant to the Investment
Agreement, subject to certain conditions, the
Funding Parties have agreed to provide funding
to us in an aggregate amount up to $8.5 million
reduced by the amount outstanding under the $3
Million Note and the $1.5 Million Note. At the
option of the Funding Parties, the Funding
Parties may fund such greater amount permitted
by the Investment Agreement to allow the
Funding Parties to maintain certain relative
ownership levels. If our stockholders (other
than the Funding Parties) subscribe for at
least $2.0 million worth of shares in this
rights offering, the Funding Parties would,
subject to certain conditions, provide this
funding in the form of an investment in our
common stock at the subscription price and the
Funding Parties who hold the senior secured
promissory notes would convert the notes into
shares of our common stock. If our stockholders
(other than the Funding Parties) do not
subscribe for at least $2.0 million worth of
shares in this rights offering, we will not
consummate this offering
6

and the Funding Parties will, subject to
certain conditions, provide this funding to us
in the form of, at their option, a purchase of
shares of our common stock at the subscription
price or the purchase of a senior secured note
which is convertible into shares of our common
stock. In addition, the Funding Parties will
not be required to convert the $3 Million Note
and the $1.5 Million Note into shares of our
common stock. Furthermore, if the Funding
Parties, pursuant to the Investment Agreement,
elect to provide funding in the form of a
senior secured convertible note, such note,
along with the $3 Million Note and the $1.5
Million Note, will be secured by all of our
tangible and intangible property (other than
equipment pledged to secure our equipment loan
credit facility). Therefore, our stockholders'
equity interest in Cosi will be effectively
subordinate to the senior secured position of
the Funding Parties. The Funding Parties have
agreed not to exercise their basic subscription
privilege or over-subscription privilege in
this rights offering. The $8.5 million in
funding is allocated as follows: (a) Mr.
Gleacher, $2,000,000; (b) Mr. Phillips,
$750,000; (c) LJCB, $750,000 and (d) ZAM
Holdings, $5,000,000.

See "The Rights Offering" for a description of
the Investment Agreement.

Use of Proceeds............... The amount of proceeds we raise in this
offering will depend on the total value of
shares subscribed for by our stockholders. We
will receive a minimum of approximately $2
million and a maximum of approximately $9.5
million in gross proceeds through this offering
(which excludes any amounts provided by the
Funding Parties), before deducting expenses
payable by us, estimated to be $750,000. We
expect that the proceeds will be used for
general corporate purposes, including, but not
limited to, funding our operating loss, funding
costs associated with developing and
incorporating a franchising and area developer
model into our growth strategy, and funding
costs associated with closing under-performing
restaurants.

Risk Factors.................. Investing in our common stock involves a number
of risks, which are described under "Risk
Factors" in this prospectus.

No Underwriter; No Board
Recommendation.............. The subscription price was determined by our
board of directors and reviewed and approved by
a special committee of our board of directors,
comprised solely of disinterested directors,
and represents a discount to the market price
of our common stock on the date the
subscription price was determined on March 31,
2003. The subscription price is the same as the
price at which the Funding Parties agreed to
provide their funding commitment, which price
was determined through negotiations between the
special committee and the Funding Parties. The
offering is not the subject of any underwriting
agreement with any investment bank.
Accordingly, an investment in our common stock
must be made based on your evaluation of your
best interests. Neither our board of directors
nor any financial advisor makes any
recommendation to you regarding your decision
whether to exercise your subscription rights.

Nasdaq National Market Symbol
for Common Stock.............. COSI.

SUMMARY FINANCIAL DATA

The following table shows our summary historical financial data as, at and
for the periods indicated. You should read this Summary Financial Data together
with "Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," our consolidated financial statements and
accompanying notes and the other financial data included elsewhere in this
prospectus. Our fiscal year ends on the Monday closest to December 31. Fiscal
years 2000, 2001 and 2002 ended on January 1, 2001, December 31, 2001, and
December 30, 2002, respectively. Fiscal years 2000, 2001 and 2002 each contained
52 weeks.

<Table>
<Caption>
NINE MONTHS ENDED
FISCAL YEAR -----------------------------
------------------------------------ SEPTEMBER 30, SEPTEMBER 29,
2000 2001 2002 2002 2003
---------- ---------- ---------- ------------- -------------
(AUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

STATEMENT OF OPERATIONS DATA:
Net sales........................... $ 51,222.8 $ 70,184.1 $ 84,424.2 $ 61,057.4 $ 82,130.2
Costs and expenses:
Cost of goods sold................ 13,844.0 18,791.7 22,697.5 16,360.5 23,004.5
Restaurant operating expenses..... 32,172.9 45,114.5 50,852.7 36,654.1 52,062.3
---------- ---------- ---------- ---------- ----------
Total costs of sales.............. 46,016.9 63,906.2 73,550.2 53,014.6 75,066.8
---------- ---------- ---------- ---------- ----------
General and administrative
expenses....................... 14,774.2 18,361.5 17,811.7 12,899.6 15,862.7
Depreciation and amortization..... 6,158.1 6,690.0 5,851.2 4,147.9 5,815.8
Restaurant pre-opening expenses... 1,409.5 1,438.8 1,845.1 939.8 381.4
Provision for losses on asset
impairments and disposals...... 5,847.5 8,486.3 1,056.5 7.3 5,698.6
Lease termination costs........... 477.3 6,410.7 (1,165.0) -- (345.7)
---------- ---------- ---------- ---------- ----------
Operating income (loss)............. (23,460.7) (35,109.4) (14,525.5) (9,951.8) (20,349.4)
---------- ---------- ---------- ---------- ----------
Other income (expense):
Interest income..................... 441.4 340.5 98.3 82.3 39.7
Interest expense.................... (210.7) (527.5) (1,192.6) (779.5) (155.2)
Amortization of Deferred Financing
Costs............................. -- (126.9) (549.0) (379.3) (84.6)
Loss on Extinguishment of debt...... -- -- (5,083.2) -- --
Other income (expense).............. -- -- 380.9 380.4 99.0
---------- ---------- ---------- ---------- ----------
Total other income (expense), net... 230.7 (313.9) (6,345.6) (696.1) (101.1)
---------- ---------- ---------- ---------- ----------
Net income (loss)................... (23,230.0) (35,423.3) (20,871.1) (10,647.9) (20,450.5)
Preferred stock dividends........... (4,219.7) (6,678.1) (8,193.6) (6,776.8) --
---------- ---------- ---------- ---------- ----------
Net income (loss) attributable to
common stockholders............... $(27,449.7) $(42,101.4) $(29,064.7) $(17,424.7) $(20,450.5)
========== ========== ========== ========== ==========
Net income (loss) per common share:
Basic and diluted................... $ (6.09) $ (9.34) $ (5.04) $ (3.84) $ (1.20)
========== ========== ========== ========== ==========
Shares used in computing net income
(loss) per common share (in
thousands) Basic and diluted...... 4,504 4,507 5,763 4,536 17,036
---------- ---------- ---------- ---------- ----------
Cash flow from operating
activities........................ $ (8,539.1) $(12,382.2) $ (5,812.7) $ (7,799.7) $(10,031.5)
Cash flow from investing
activities........................ (18,347.7) (20,267.9) (27,464.2) (12,248.4) (3,281.1)
Cash flow from financing
activities........................ 24,964.0 32,056.8 41,839.7 18,972.5 3,519.3
SELECTED OPERATING DATA:
Restaurants open at end of period... 52 67 91 79 91
</Table>

<Table>
<Caption>
AS OF SEPTEMBER 29, 2003
-------------------------
ACTUAL PRO FORMA (A)
--------- -------------

SELECTED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 3,239.0 $ 12,072.5
Total assets................................................ 47,976.2 56,809.7
Total debt and capital lease obligations.................... 5,167.9 660.8
Total common stockholders' equity........................... 19,412.6 32,753.2
</Table>

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

(a) Reflects net proceeds of $13.25 million raised through the combination of
(i) a net amount of $8.75 million raised through this offering and (ii)
conversion of each of the $3 Million Note and the $1.5 Million Note
(excluding accrued and unpaid interest), all at a subscription price and
conversion price equal to $1.50 per share.

RISK FACTORS

You should carefully consider the following risks, as well as the other
information contained in this prospectus, before deciding whether to invest in
shares of our common stock. If any of the following risks actually occur, our
business could be harmed. In that case, the trading price of our common stock
could decline and you might lose all or part of your investment. You should
refer to the information set forth in this prospectus and our financial
statements and the related notes included elsewhere in this prospectus.

RISKS PARTICULAR TO COSI

IF WE ARE UNABLE TO EXECUTE OUR BUSINESS STRATEGY, WE COULD BE MATERIALLY
ADVERSELY AFFECTED.

- our ability to generate positive cash flow from operations;

- identification and availability of suitable restaurant sites;

- competition for restaurant sites and customers;

- negotiation of favorable leases;

- identification of under-performing restaurants and our ability to
efficiently close under-performing restaurants, including securing
favorable lease termination terms;

- management of construction and development costs of new restaurants;

- securing required governmental approvals and permits;

- the rate of our internal growth, and our ability to generate increased
revenue from existing restaurants;

- recruitment and retention of qualified operating personnel;

- successful operating execution in new markets;

- our ability to incorporate a franchising and area developer model into
our strategy;

- competition in new and existing markets;

- our ability to effectively manage our business with a reduced general and
administrative staff;

- the cost of our principal food products and supply and delivery shortages
or interruptions; and

- general economic conditions.

In addition, we contemplate entering new markets in which we have no
operating experience. These new markets may have different demographic
characteristics, competitive conditions, consumer tastes and discretionary
spending patterns than our existing markets, which may cause our new restaurants
to be less successful in these new markets than in our existing markets.

WE HAVE A LIMITED OPERATING HISTORY AND WE MAY BE UNABLE TO ACHIEVE
PROFITABILITY.

The first Xando Coffee and Bar was opened in October 1994 and the first
Cosi Sandwich Bar was opened in February 1996. As of November 24, 2003, we are
operating 89 restaurants, 17 of which have been open for less than one year.
Accordingly, you have limited information with which to evaluate our business
and prospects. As a result, forecasts of our future revenues, expenses and
operating results may not be as accurate as they would be if we had a longer
history of operations and of combined operations. Since we were formed, we have
incurred net losses of approximately $124 million through the end of fiscal
2002, and approximately $20.5 million through the

third fiscal quarter of 2003, primarily due to the costs of hiring and employing
senior management, funding operating losses, new restaurant opening expenses,
impairment charges, the cost of our merger in 1999, and restructuring our senior
management team. We intend to continue to expend significant financial and
management resources on the development of additional restaurants, both
company-owned and franchised restaurants. We cannot predict whether we will be
able to achieve or sustain revenue growth, profitability or positive cash flow
in the future. See "Management's Discussion and Analysis of Financial Conditions
and Results of Operations" and the financial statements included in this
prospectus for information on the history of our losses.

IF INTERNALLY GENERATED CASH FLOW FROM OUR RESTAURANTS DOES NOT MEET OUR
EXPECTATIONS, OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION
COULD BE MATERIALLY ADVERSELY AFFECTED.

We plan to use the proceeds from this offering, the senior secured notes
and expected internally generated cash flow projected to be produced by our
existing restaurants to fund the operations, maintenance and growth of our
restaurants. Our cash resources, and therefore our liquidity, are highly
dependent upon the level of internally generated cash from operations and upon
future financing transactions, including this rights offering and the
transactions we have negotiated with the Funding Parties. If cash flows from our
existing restaurants or cash flow from new restaurants that we open do not meet
our expectations or are otherwise insufficient to satisfy our cash needs or
expansion plans, we may have to seek additional financing from external sources
to continue funding our operations and close underperforming restaurants or
reduce or cease our plans to open or franchise new restaurants. We cannot
predict whether such financing will be available on terms acceptable to us, or
at all.

WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE AND IT MAY NOT BE AVAILABLE ON
ACCEPTABLE TERMS.

Our business may require significant additional capital in the future to,
among other things, fund our operations, increase the number of company-owned or
franchised restaurants, expand the range of services we offer and finance future
acquisitions and investments. There is no assurance that financing will be
available on terms favorable to us, or at all. Our ability to obtain additional
financing will be subject to a number of factors, including market conditions,
our operating performance and investor sentiment. These factors may make the
timing, amount, terms and conditions of additional financings unattractive to
us. If we are unable to raise additional capital, our business, results of
operations and financial condition could be materially adversely affected.

WE MAY NOT BE ABLE TO SUCCESSFULLY INCORPORATE A FRANCHISING AND AREA
DEVELOPER MODEL INTO OUR STRATEGY.

We plan to incorporate a franchising and area developer model into our
business strategy in certain selected markets. We have not used a franchising or
area developer model in the past and may not be successful in attracting
franchisees and developers to the Cosi concept or identifying franchisees and
developers that have the business abilities or access to financial resources
necessary to open our restaurants or to successfully develop or operate our
restaurants in a manner consistent with our standards. Incorporating a
franchising and area developer model into our strategy will also require us to
devote significant management and financial resources to support the franchise
of our restaurants. If we are not successful in incorporating a franchising or
area developer model into our strategy, we may experience delays in our growth,
or may not be able to expand and grow our business.

ANY INABILITY TO MANAGE OUR GROWTH EFFECTIVELY COULD MATERIALLY ADVERSELY
AFFECT OUR OPERATING RESULTS.

Failure to manage our growth effectively could harm our business. We have
grown significantly since our inception and intend to grow substantially in the
future both through a franchising strategy and opening new company-owned
restaurants. We have increased the number of our restaurants from 36 restaurants
as of December 31, 1999 to 89 restaurants as of November 24, 2003. Our existing
restaurant management systems, financial and management controls and information
systems may not be adequate to support our planned expansion. Our ability to
manage our growth effectively will require us to continue to enhance these
systems, procedures and controls and to locate, hire, train and retain operating
personnel. We cannot assure you that we will be able to respond on a timely
basis to all of the changing demands that our planned expansion will impose

on management and on our existing infrastructure. If we are unable to manage our
growth effectively, our business, results of operations and financial condition
could be materially adversely impacted.

OUR RESTAURANTS ARE CURRENTLY CONCENTRATED IN THE NORTHEASTERN AND
MID-ATLANTIC REGIONS OF THE UNITED STATES, PARTICULARLY IN THE NEW YORK CITY
AREA. ACCORDINGLY, WE ARE HIGHLY VULNERABLE TO NEGATIVE OCCURRENCES IN THESE
REGIONS.

We currently operate 64 restaurants in Northeastern and Mid-Atlantic
states, of which 19 are located in the New York City area, the majority of which
are located in New York Central Business Districts. As a result, we are
particularly susceptible to adverse trends and economic conditions in these
areas. In addition, given our geographic concentration, negative publicity
regarding any of our restaurants could have a material adverse effect on our
business and operations, as could other regional occurrences impacting the local
economies in these markets.

YOU SHOULD NOT RELY ON PAST INCREASES IN OUR AVERAGE UNIT VOLUMES AS AN
INDICATION OF OUR FUTURE RESULTS OF OPERATIONS BECAUSE THEY MAY FLUCTUATE
SIGNIFICANTLY.

A number of factors have historically affected, and will continue to
affect, our average unit sales, including, among other factors:

- introduction of new menu items;

- unusually strong initial sales performance by some new restaurants;

- competition;

- general regional and national economic conditions;

- weather conditions;

- consumer trends; and

- our ability to execute our business strategy effectively.

It is not reasonable to expect our average unit volumes to increase at
rates achieved over the past several years. Furthermore, the under-performance
of units we opened in the latter part of 2002 and in 2003 will reduce our
average unit volumes. Changes in our average sales results could cause the price
of our common stock to fluctuate substantially.

OUR RESTAURANT EXPANSION STRATEGY FOCUSES PRIMARILY ON FURTHER PENETRATING
EXISTING MARKETS. THIS STRATEGY CAN CAUSE SALES IN SOME OF OUR EXISTING
RESTAURANTS TO DECLINE, WHICH COULD RESULT IN RESTAURANT CLOSURES.

In accordance with our expansion strategy, we intend to open new
restaurants primarily in our existing markets. Since we typically draw customers
from a relatively small radius around each of our restaurants, the sales
performance and customer counts for restaurants near the area in which a new
restaurant opens may decline due to cannibalization, which could result in
restaurant closures.

INCLEMENT WEATHER MAY ADVERSELY AFFECT OUR SALES AND RESULTS OF OPERATIONS.

Our business is subject to seasonal and weather influences on consumer
spending and dining out patterns. Inclement weather may result in reduced
frequency of dining at our restaurants. Customer counts (and consequently
revenues) are generally highest in spring and summer months and lowest during
the winter months because of the high proportion of our restaurants located in
the Northeast where inclement weather affects customer visits.

OUR QUARTERLY RESULTS MAY FLUCTUATE AND COULD FALL BELOW EXPECTATIONS OF
SECURITIES ANALYSTS AND INVESTORS DUE TO SEASONALITY AND OTHER FACTORS,
RESULTING IN A DECLINE IN OUR STOCK PRICE.

Our business is subject to significant seasonal fluctuations. Revenues in
our restaurants have historically been higher in the summer months of each year
and lower during the winter months. As a result, our quarterly and yearly
results have varied in the past, and we believe that our quarterly operating
results will vary in the future. Other factors such as inclement weather and
unanticipated increases in labor, commodity, energy, insurance or other
operating costs may cause our quarterly results to fluctuate. For this reason,
you should not rely upon our quarterly operating results as indications of
future performance.

OUR OPERATIONS DEPEND ON GOVERNMENTAL LICENSES AND WE MAY FACE LIABILITY UNDER
"DRAM SHOP" STATUTES.

We are subject to extensive federal, state and local government
regulations, including regulations relating to alcoholic beverage control, the
preparation and sale of food, public health and safety, sanitation, building,
zoning and fire codes. Our business depends on obtaining and maintaining
required food service and/or liquor licenses for each of our restaurants. If we
fail to hold all necessary licenses, we may be forced to delay or cancel new
restaurant openings and close or reduce operations at existing locations. In
addition, our sale of alcoholic beverages subjects us to "dram shop" statutes in
some states. These statutes allow an injured person to recover damages from an
establishment that served alcoholic beverages to an intoxicated person. Although
we take significant precautions to ensure that all employees are trained in the
responsible service of alcohol and maintain insurance policies in accordance
with all state regulations regarding the sale of alcoholic beverages, the misuse
of alcoholic beverages by customers may create considerable risks for us. If we
are the subject of a judgment substantially in excess of our insurance coverage,
or if we fail to maintain our insurance coverage, our business, financial
condition, operating results or cash flows could be materially and adversely
affected. See "Business -- Government Regulation" for a discussion of the
regulations with which we must comply.

OUR FAILURE OR INABILITY TO ENFORCE OUR TRADEMARKS OR OTHER PROPRIETARY RIGHTS
COULD ADVERSELY AFFECT OUR COMPETITIVE POSITION OR THE VALUE OF OUR BRAND.

We own certain common law trademark rights and a number of federal and
international trademark and service mark registrations, and proprietary rights
to certain of our core menu offerings. We believe that our trademarks and other
proprietary rights are important to our success and our competitive position.
We, therefore, devote appropriate resources to the protection of our trademarks
and proprietary rights. The protective actions that we take, however, may not be
enough to prevent unauthorized usage or imitation by others, which might cause
us to incur significant litigation costs and could harm our image or our brand
or competitive position.

We also cannot assure you that third parties will not claim that our
trademarks or offerings infringe the proprietary rights of third parties. Any
such claim, whether or not it has merit, could be time-consuming, result in
costly litigation, cause product delays or require us to enter into royalty or
licensing agreements. As a result, any such claim could have a material adverse
effect on our business, results of operations and financial condition.

WE HOLD SIGNIFICANT AMOUNTS OF RELATIVELY ILLIQUID ASSETS AND MAY HAVE TO
DISPOSE OF THEM ON UNFAVORABLE TERMS.

A certain portion of our assets, such as leasehold improvements and
equipment, is relatively illiquid. These assets cannot be converted into cash
quickly and easily. We may be compelled to dispose of these illiquid assets on
unfavorable terms, which could have an adverse effect on our business.

WE FACE LITIGATION THAT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS,
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

similar allegations were later filed. These actions have been consolidated in In
re Cosi, Inc. Securities Litigation (collectively, the "Securities Act
Litigation"). On July 7, 2003, lead plaintiffs filed a Consolidated Amended
Complaint, alleging on behalf of a purported class of purchasers of our stock
allegedly traceable to our November 22, 2002 IPO, that at the time of the IPO,
our offering materials failed to disclose that the funds raised through the IPO
would be insufficient to implement our expansion plan; that it was improbable
that we would be able to open 53 to 59 new restaurants in 2003; that at the time
of the IPO, we had negative working capital and therefore did not have available
working capital to repay certain debts; and that the principal purpose for going
forward with the IPO was to repay certain existing shareholders and members of
the Board of Directors for certain debts and to operate our existing
restaurants.

The plaintiffs in the Securities Act Litigation generally seek to recover
recessionary damages, expert fees, attorneys' fees, costs of Court and pre- and
post-judgment interest. The underwriter is seeking indemnification from us for
any damages assessed against it in the Securities Act Litigation. On August 22,
2003, lead plaintiffs filed a Second Consolidated Amended Complaint, which was
substantially similar to the Consolidated Amended Complaint. The Securities Act
Litigation is at a preliminary stage, and we believe that we have meritorious
defenses to these claims, and intend to vigorously defend against them.

On September 22, 2003, defendants filed motions to dismiss the Second
Consolidated Amended Complaint in the Securities Act Litigation. Plaintiffs
filed their opposition to defendants' motion to dismiss on October 23, 2003.
Defendants filed reply briefs on November 12, 2003.

We cannot predict what the outcome of these lawsuits will be. It is
possible that we may be required to pay substantial damages or settlement costs
in excess of our insurance coverage, which could have a material adverse effect
on our financial condition or results of operations. We could also incur
substantial legal costs, and management's attention and resources could be
diverted from our business.

WE HAVE A NEW MANAGEMENT TEAM THAT DOES NOT HAVE PROVEN SUCCESS WITH THE
COMPANY.

A significant portion of our senior management team, including our
Executive Chairman, Chief Executive Officer and Chief Financial Officer, has
been in place for only a relatively short period of time. The new executives do
not have previous experience with us and we cannot assure you that they will
fully integrate themselves into our business or that they will effectively
manage our business affairs. Our failure to assimilate the new executives, or
the failure of the new executives to perform effectively, or the loss of any of
the new executives, could have a material adverse effect on our business,
financial condition and results of operations.

WE MAY BE EXPOSED TO POTENTIAL LIABILITY UNDER THE SECURITIES LAWS AS A RESULT
OF HAVING MORE THAN 500 OPTIONHOLDERS.

We have sought to create a culture in which each employee has a shared
sense of ownership in our business. Part of this effort was the establishment of
an extensive employee option plan, in which each employee, including
hourly-level employees, is given the opportunity to participate. As we have
grown, we have issued stock options to an increasing number of our employees.
When the number of our optionholders exceeded 500, we inadvertently failed to
register our options pursuant to Section 12(g) of the Securities Exchange Act of
1934, as amended, as required by Securities and Exchange Commission regulations.
Our failure to so register our options may expose us to potential liability
under the securities laws. However, we believe that any such liability would not
be material to our financial condition or results of operations.

RISKS RELATING TO THE FOOD SERVICE INDUSTRY

OUR BUSINESS IS AFFECTED BY CHANGES IN CONSUMER PREFERENCES.

Our success depends, in part, upon the popularity of our food products and
our ability to develop new menu items that appeal to consumers. Shifts in
consumer preferences away from our restaurants or cuisine, our inability to
develop new menu items that appeal to consumers or changes in our menu that
eliminate items popular with some consumers could harm our business.

GENERAL ECONOMIC CONDITIONS AND THE EFFECTS OF THE WAR ON TERRORISM MAY CAUSE
A DECLINE IN DISCRETIONARY SPENDING, WHICH WOULD NEGATIVELY AFFECT OUR
BUSINESS.

Our success depends to a significant extent on discretionary consumer
spending, which is influenced by general economic conditions and the
availability of discretionary income. Accordingly, we may experience declines in
sales during economic downturns or during periods of uncertainty like that which
followed the September 11, 2001 terrorist attacks on the United States and the
possibility of further terrorist attacks. In addition, economic uncertainty due
to military action overseas, such as the situation in Iraq and post-war
military, diplomatic or financial responses, may lead to further declines in
sales. Any material decline in the amount of discretionary spending could have a
material adverse effect on our sales, results of operations, business and
financial condition.

OUR SUCCESS DEPENDS ON OUR ABILITY TO COMPETE WITH MANY FOOD SERVICE
BUSINESSES.

The restaurant industry is intensely competitive and we compete with many
well-established food service companies on the basis of taste, quality and price
of product offered, customer service, atmosphere, location and overall guest
experience. We compete with other sandwich retailers, specialty coffee
retailers, bagel shops, fast-food restaurants, delicatessens, cafes, bars,
take-out food service companies, supermarkets and convenience stores. Our
competitors change with each of the five dayparts (breakfast, lunch, afternoon
coffee, dinner and dessert), ranging from coffee bars and bakery cafes to casual
dining chains. Aggressive pricing by our competitors or the entrance of new
competitors into our markets could reduce our sales and profit margins.

Many of our competitors or potential competitors have substantially greater
financial and other resources than we do, which may allow them to react to
changes in pricing, marketing and the quick service restaurant industry better
than we can. As competitors expand their operations, we expect competition to
intensify. We also compete with other employers in our markets for hourly
workers and may be subject to higher labor costs.

FLUCTUATIONS IN COFFEE PRICES COULD ADVERSELY AFFECT OUR OPERATING RESULTS.

The price of coffee, one of our main products, can be highly volatile.
Although most coffee trades on the commodity markets, coffee of the quality we
seek tends to trade on a negotiated basis at a substantial premium above
commodity coffee pricing, depending on supply and demand at the time of the
purchase. Supplies and prices of green coffee can be affected by a variety of
factors, such as weather, politics and economics in the producing countries. Two
organizations, the Association of Coffee Producing Countries and the
International Coffee Organization, have sought with mixed success to coordinate
production and pricing of coffee among certain countries and to maintain pricing
quotas among coffee producers. An increase in pricing of specialty coffees could
have a significant adverse effect on our profitability. To mitigate the risks of
increasing coffee prices and to allow greater predictability in coffee pricing,
we typically enter into fixed price purchase commitments for a portion of our
green coffee requirements. We cannot assure you that these activities will be
successful or that they will not result in our paying substantially more for our
coffee supply than we would have been required to pay absent such activities.

CHANGES IN FOOD AND SUPPLY COSTS COULD ADVERSELY AFFECT OUR RESULTS OF
OPERATIONS.

Our profitability depends in part on our ability to anticipate and react to
changes in food and supply costs. We rely on a single primary distributor of our
food and paper goods. Although we believe that alternative distribution sources
are available, any increase in distribution prices or failure by our distributor
to perform could adversely affect our operating results. In addition, we are
susceptible to increases in food costs as a result of factors beyond our
control, such as weather conditions and government regulations. Failure to
anticipate and adjust our purchasing practices to these changes could negatively
impact our business.

THE FOOD SERVICE INDUSTRY IS AFFECTED BY LITIGATION AND PUBLICITY CONCERNING
FOOD QUALITY, HEALTH AND OTHER ISSUES, WHICH CAN CAUSE CUSTOMERS TO AVOID OUR
PRODUCTS AND RESULT IN LIABILITIES.

Food service businesses can be adversely affected by litigation and
complaints from customers or government authorities resulting from food quality,
illness, injury or other health concerns or operating issues
15

stemming from one restaurant or a limited number of restaurants. Adverse
publicity about these allegations may negatively affect us, regardless of
whether the allegations are true, by discouraging customers from buying our
products. We could also incur significant liabilities if a lawsuit or claim
results in a decision against us or litigation costs, regardless of the result.

OUR BUSINESS COULD BE ADVERSELY AFFECTED BY INCREASED LABOR COSTS OR LABOR
SHORTAGES.

Labor is a primary component in the cost of operating our business. We
devote significant resources to recruiting and training our managers and
employees. Increased labor costs, due to competition, increased minimum wage or
employee benefits costs or otherwise, would adversely impact our operating
expenses. In addition, our success depends on our ability to attract, motivate
and retain qualified employees, including restaurant managers and staff, to keep
pace with our needs. If we are unable to do so, our results of operations may be
adversely affected.

RISKS RELATING TO THE OFFERING

IF OUR STOCKHOLDERS (OTHER THAN THE FUNDING PARTIES) DO NOT SUBSCRIBE FOR $2
MILLION IN THE RIGHTS OFFERING, WE MAY ISSUE SENIOR DEBT.

If our stockholders (other than the Funding Parties) do not subscribe for a
minimum of $2 million pursuant to the basic subscription privilege and the
over-subscription privilege, we will not consummate the rights offering and the
Funding Parties may elect, pursuant to the Investment Agreement, to provide
funding in the form of a senior secured note convertible into shares of our
common stock. Additionally, the Funding Parties will not be required to convert
the outstanding amount of the $3 Million Note and the $1.5 Million Note into
shares of our common stock. Such notes may remain outstanding and be payable
upon maturity in December 2004, which could have an adverse effect on our near
term working capital. In this event, we may need to secure additional financing
upon the maturity of the $3 Million Note, the $1.5 Million Note and any notes
issued pursuant to the Investment Agreement. There can be no assurance that we
will be able to obtain such financing on favorable terms or at all. Furthermore,
if the Funding Parties elect to provide funding in the form of a purchase of a
senior secured convertible note, such note, along with the $3 Million Note and
the $1.5 Million Note, will be secured by all of our tangible and intangible
property (other than equipment pledged to secure our equipment loan credit
facility). Therefore, our stockholders' equity interest in Cosi will be
effectively subordinate to the senior secured position of the Funding Parties.

YOUR PERCENTAGE INTEREST IN OUR COMMON STOCK COULD BE REDUCED, EVEN IF YOU
FULLY SUBSCRIBE FOR YOUR BASIC SUBSCRIPTION PRIVILEGE.

If you fully subscribe for your basic subscription amount and our
stockholders subscribe for an aggregate of more than $7.5 million pursuant to
their basic subscription amount, your percentage ownership of our equity will be
reduced. If you fully subscribe for your basic subscription amount and our
stockholders subscribe for an aggregate of less than $7.5 million but more than
$2 million, your percentage ownership of our equity will not be reduced;
however, your ownership percentage relative to certain of the Funding Parties
will be reduced.

Additionally, if you fully subscribe for your basic subscription privilege
but do not exercise your over-subscription privilege, if any, your percentage
ownership of Cosi may be reduced relative to other stockholders who exercise
their over-subscription privilege.

ONCE YOU EXERCISE YOUR SUBSCRIPTION RIGHTS, YOU MAY NOT REVOKE THE EXERCISE
EVEN IF YOU NO LONGER DESIRE TO INVEST IN US.

Once you exercise your subscription rights, you may not revoke the
exercise. Therefore, even if circumstances arise after you have subscribed in
the offering that eliminate your interest in investing in our

common stock, you will be required to purchase the common stock for which you
subscribed. The public trading market price of our common stock may decline
after the subscription price has been determined. In such event, you may be
committed to purchase shares of common stock above the prevailing market price.
Similarly, because the subscription price is based on a trailing average, the
prevailing market price at any time, including the closing of the rights
offering, may be less than the subscription price.

The subscription price was determined by our board of directors and
reviewed and approved by a special committee of our board of directors,
comprised solely of disinterested directors, and represents a discount to the
market price of our common stock on the date the subscription price was
determined on March 31, 2003. The subscription price is the same as the price at
which the Funding Parties agreed to provide their funding commitment, which
price was determined through negotiations between the special committee and the
Funding Parties. The subscription price bears no direct relationship to the
value of our assets, financial condition or other established criteria for
value. Our common stock may trade at prices above or below the subscription
price.

YOU MAY NOT BE ABLE TO EXERCISE YOUR SUBSCRIPTION RIGHTS IF YOU DO NOT ACT
PROMPTLY AND FOLLOW THE SUBSCRIPTION INSTRUCTIONS CAREFULLY.

If you wish to purchase shares in this offering, you must act promptly to
ensure that all required forms and payments are actually received by the
subscription agent prior to the expiration date. If you fail to properly
complete and sign the required subscription forms, send an insufficient payment
amount or otherwise fail to follow the subscription procedures that apply to
your intended purchase, the subscription agent may, at its discretion, reject
your subscription or accept it to the full extent of payment received. Neither
the subscription agent nor Cosi has any obligation to contact you concerning, or
to attempt to correct, an incomplete or incorrect subscription form.

OUR STOCK PRICE IS VOLATILE, AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES AT
OR ABOVE THE PRICE YOU PAY FOR THEM.

The market price of our common stock has experienced, and may continue to
experience, substantial volatility. Between November 2002 and November 2003, the
closing price of our common stock has ranged from a low of $0.95 to a high of
$10.93 per share. The market price of our common stock may continue to fluctuate
significantly in response to a variety of factors, including quarterly
fluctuations in results of operations, and changes in or failure to meet
earnings estimates by securities analysts. The market price of our common stock
may also fluctuate significantly in response to factors over which we have no
control and that may not be directly related to us. The stock market has from
time to time experienced extreme price and volume fluctuations, which have often
been unrelated or disproportionate to the operating performance of particular
companies. Such fluctuations could have a material adverse effect on the market
price of our common stock, regardless of our financial condition or operating
results.

Fluctuations or decreases in the market price of our common stock may
adversely affect your ability to trade your shares. In addition, these
fluctuations could adversely affect our ability to raise capital through future
equity financings.

YOU MAY HAVE TO WAIT TO RESELL THE SHARES YOU PURCHASE IN THE RIGHTS OFFERING.

Until certificates are delivered, you may not be able to sell the shares of
common stock that you have purchased in the rights offering. This means that you
may have to wait until you (or your broker or other nominee) have received a
stock certificate. We will endeavor to prepare and issue the appropriate
certificates as soon as practicable after the expiration of the offering. We
cannot assure you, however, that the market price of the common stock purchased
pursuant to the exercise of rights will not decline below the subscription price
you paid before we are able to deliver your certificates. For shares purchased
pursuant to the over-subscription privilege, delivery of certificates will occur
as soon as practicable after all prorations and adjustments contemplated by the
terms of the offering have been effected.

USE OF PROCEEDS

The amount of proceeds we raise in this offering will depend on the total
value of shares subscribed for by our stockholders. We will receive a minimum of
approximately $2 million and a maximum of approximately $9.5 million in gross
proceeds through this offering (which excludes any amounts provided by the
Funding Parties), before deducting expenses payable by us, estimated to be
$750,000. We intend to use the net proceeds from the rights offering for general
corporate purposes, including, but not limited to, funding our operating losses,
funding costs associated with the development, and incorporation into our growth
strategy, of a franchising and area developer model, and funding costs
associated with closing under-performing restaurants.

Although we do not contemplate any changes in our use of proceeds, we may
use some proceeds for other purposes in the event the specified uses require
less or more capital than expected.

Pending application of the net proceeds as described above, we will invest
the net proceeds in interest-bearing investment grade securities.

PRICE RANGE OF COMMON STOCK

Our common stock is listed on the Nasdaq National Market under the symbol
"COSI." The following table summarizes the high and low sales prices for our
common stock as reported by the Nasdaq National Market for the periods indicated
through November 24, 2003.

<Table>
<Caption>
2003 2002
--------------- ----------------
HIGH LOW HIGH LOW
----- ----- ------ -----

First Quarter................................... $6.08 $1.66 -- --
Second Quarter.................................. $2.22 $0.95 -- --
Third Quarter................................... $3.79 $1.30 -- --
Fourth Quarter.................................. $3.31(1) $1.82(1) $10.93(2) $5.47(2)
</Table>

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

(1) Through November 24, 2003.

(2) Beginning November 22, 2002, the date of our initial public offering.

On November 24, 2003, the last reported sale price of our common stock on
the Nasdaq National Market was $2.01 per share. As of November 24, 2003, there
were 225 holders of record (including holders who are nominees for an
undetermined number of beneficial owners) of our common stock.

DIVIDEND POLICY

We have not paid cash dividends in the past and do not anticipate paying
cash dividends in the foreseeable future. Any future determination regarding
cash dividend payments will be made by our board of directors and will depend
upon our earnings, capital requirements, financial condition, restrictions in
financing agreements and other factors deemed relevant by the board of
directors.

CAPITALIZATION

The following table shows, as of September 29, 2003, on a consolidated
basis, our cash and cash equivalents, short-term debt and capitalization, both
actual and as adjusted. The as adjusted amounts give effect to the sale of
common stock (assuming net proceeds of $13.25 million is raised through the
combination of (i) a net amount of $8.75 million raised through this offering
and (ii) conversion of each of the $3 Million Note and the $1.5 Million Note,
all at a subscription price and conversion price equal to $1.50 per share).

You should read the following capitalization data in conjunction with "Use
of Proceeds," "Selected Financial Data," "Management's Discussion and Analysis
of Financial Condition and Results of Operations," the consolidated financial
statements and accompanying notes and the other financial data included
elsewhere in this prospectus.

<Table>
<Caption>
SEPTEMBER 29, 2003
--------------------------
ACTUAL PRO FORMA(A)
----------- ------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT
SHARE DATA)

Cash and cash equivalents.................................. $ 3,239.0 12,072.5
Short-term debt............................................ 430.9 430.9
Long-term debt
Senior Secured Promissory Notes due December 31, 2004.... 4,507.1 --
Other long term debt..................................... 229.9 229.9
Stockholders' equity:......................................
Common stock, $.01 par value; 100,000,000 shares
authorized; 17,732,081 and 27,103,818 shares issued,
respectively............................................. 177.3 271.0
Additional Paid in Capital................................. 190,836.2 203,833.1
Deferred stock compensation................................ (1,056.6) (1,056.6)
Treasury stock:............................................ (250.0) --
Stock subscriptions receivable............................. (2,724.8) (2,724.8)
Accumulated deficit........................................ (167,569.5) (167,569.5)
----------- -----------
Total common stockholders' equity (deficit)................ 19,412.6 32,753.2
----------- -----------
Total capitalization....................................... 24,580.5 33,414.0
=========== ===========
</Table>

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

(a) Reflects net proceeds of $13.25 million raised through the combination of
(i) a net amount of $8.75 million raised through this offering and (ii)
conversion of the senior secured promissory notes (excluding any accrued and
unpaid interest), all at a subscription price and conversion price of $1.50.

DILUTION

Our net tangible book value as of September 29, 2003 was $18,919.8, or
$1.07 per share of common stock. Net tangible book value per share is the amount
by which total tangible assets exceeds total liabilities, divided by the total
number of shares of common stock outstanding. Our adjusted net tangible book
value as of September 29, 2003 would have been $32,260.4 or $1.19 per share,
after giving effect to the sale of 9,393,715 shares of common stock offered by
this prospectus at an offering price of $1.50 per share and including conversion
of the senior secured notes at a conversion price of $1.50, and after deducting
estimated offering expenses. This represents an immediate increase in the net
tangible book value of $0.12 per share to existing shareholders, and an
immediate decrease of $0.31 per share to investors in this offering, all of whom
will be existing shareholders. The decrease per share represents the difference
between the price per share to be paid by

investors in this offering and the net tangible book value per share immediately
after this offering. The following table illustrates the per share decrease:

<Table>
<Caption>
ACTUAL PRO FORMA
------ ---------

Assumed offering price...................................... $1.50
Net tangible book value per share as of September 29,
2003................................................... $1.07
Increase attributable to the sale of shares offered
hereby.................................................... $0.12
Adjusted net tangible book value after this offering........ $1.19
Decrease in the net tangible book value to new
Investors.............................................. $0.31
</Table>

The following table sets forth, as of September 29, 2003, the differences
between the total consideration paid and the average price per share paid by
existing investors and by investors purchasing shares in this offering:

<Table>
<Caption>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------

Existing Stockholders......... 17,710,103 65% $132,782,909 90% $7.50
Conversion of $3 Million Note
and $1.5 Million Note....... 3,004,733 11% 4,507,100 3% $1.50
Investors in this Offering.... 6,388,982 24% 9,583,473 7% $1.50
---------- --- ------------ --- -----
Total....................... 27,103,818 100% 146,873,482 100% $5.42
========== === ============ === =====
</Table>

The foregoing table does not reflect (A) 4,333,880 shares of common stock
issuable upon the exercise of stock options outstanding under our stock option
plans as of September 29, 2003, of which 2,127,755 were then exercisable at a
weighted average exercise price of $8.71; (B) warrants to purchase (i) 104,702
shares of our common stock at an exercise price of $.01 per share (or any
antidilution adjustments thereon); (ii) 2,070,004 shares of our common stock at
an exercise price of $6.00 per share; (iii) 33,279 shares of our common stock at
an exercise price of $14.88 per share and (iv) 2,526 shares of our common stock
at an exercise price of $16.63 per share and (C) 1,156,407 shares of restricted
stock issued to William D. Forrest on June 26, 2003 and any additional shares
that may be issued to Mr. Forrest pursuant to his employment agreement.

SELECTED FINANCIAL DATA

The following selected consolidated financial data as of December 31, 2001,
and December 30, 2002 and for each of the three years ended December 30, 2002
have been derived from, and are qualified by reference to, our Consolidated
Financial Statements audited by Ernst & Young LLP, independent auditors,
included elsewhere in this prospectus and should be read in conjunction with
those Consolidated Financial Statements and Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
selected consolidated financial data as of January 3, 2000, have been derived
from our Consolidated Financial Statements audited by Ernst & Young LLP,
independent auditors, not included herein. The selected consolidated financial
data as of and for the fiscal year ended December 28, 1998, have been derived
from our Consolidated Financial Statements audited by Ernst & Young LLP, and
other auditors, not included herein. The selected financial data presented below
as of September 30, 2002 and September 29, 2003 and for the fiscal nine months
ended September 30, 2002 and September 29, 2003 have been derived from our
unaudited financial statements also appearing herein, which have been prepared
on the same basis as our audited consolidated financial statements and, in the
opinion of management, contain all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of the results of
operations for such periods. The results of operations for the fiscal nine
months ended September 29, 2003 are not necessarily indicative of results to be
expected for any subsequent period.
<Table>
<Caption>

FISCAL YEAR
------------------------------------------------------------------------
1998 1999 2000 2001 2002
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

STATEMENT OF OPERATIONS DATA:
Net sales....................... $ 20,686.7 $ 37,262.2 $ 51,222.8 $ 70,184.1 $ 84,424.2
Costs and expenses:
Cost of goods sold............ 6,332.9 10,838.5 13,844.0 18,791.7 22,697.5
Restaurant operating
expenses.................... 11,386.5 22,236.2 32,172.9 45,114.5 50,852.7
------------ ------------ ------------ ------------ ------------
Total costs of sales.......... 17,719.4 33,074.7 46,016.9 63,906.2 73,550.2
------------ ------------ ------------ ------------ ------------
General and administrative
expenses.................... 7,728.7 14,024.3 14,774.2 18,361.5 17,811.7
Depreciation and
amortization................ 1,196.6 3,155.2 6,158.1 6,690.0 5,851.2
Restaurant pre-opening
expenses.................... 720.9 661.4 1,409.5 1,438.8 1,845.1
Provision for losses on asset
impairments and disposals... -- 4,208.7 5,847.5 8,486.3 1,056.5
Lease termination costs....... -- 3,437.1 477.3 6,410.7 (1,165.0)
Merger costs and related
expenses.................... -- 8,958.7 -- -- --
Stock compensation............ -- 4,512.6 -- -- --
------------ ------------ ------------ ------------ ------------
Operating income (loss)......... (6,678.9) (34,770.5) (23,460.7) (35,109.4) (14,525.5)
Other income (expense):
Interest income............... 406.6 478.6 441.4 340.5 98.3
Interest expense.............. (94.6) (206.1) (210.7) (527.5) (1,192.6)
Amortization of Deferred
Financing Costs............... -- -- -- (126.9) (549.0)
Loss on Extinguishment of
debt.......................... -- -- -- -- (5,083.2)
Other income (expense)........ -- -- -- -- 380.9
------------ ------------ ------------ ------------ ------------
Total other income (expense),
net......................... 312.0 272.5 230.7 (313.9) (6,345.6)
------------ ------------ ------------ ------------ ------------
Net income (loss)............... (6,366.9) (34,498.0) (23,230.0) (35,423.3) (20,871.1)
Preferred stock dividends....... (1,064.4) (2,561.3) (4,219.7) (6,678.1) (8,193.6)
------------ ------------ ------------ ------------ ------------
Net income (loss) attributable
to common stockholders........ $ (7,431.3) $(37,059.3) $(27,449.7) $(42,101.4) $(29,064.7)
============ ============ ============ ============ ============

<Caption>
NINE MONTHS ENDED
-----------------------------
SEPTEMBER 30, SEPTEMBER 29,
2002 2003
------------- -------------

STATEMENT OF OPERATIONS DATA:
Net sales....................... $ 61,057.4 $ 82,130.2
Costs and expenses:
Cost of goods sold............ 16,360.5 23,004.5
Restaurant operating
expenses.................... 36,654.1 52,062.3
------------ ------------
Total costs of sales.......... 53,014.6 75,066.8
------------ ------------
General and administrative
expenses.................... 12,899.6 15,862.7
Depreciation and
amortization................ 4,147.9 5,815.8
Restaurant pre-opening
expenses.................... 939.8 381.4
Provision for losses on asset
impairments and disposals... 7.3 5,698.6
Lease termination costs....... -- (345.7)
Merger costs and related
expenses.................... -- --
Stock compensation............ -- --
------------ ------------
Operating income (loss)......... (9,951.8) (20,349.4)
Other income (expense):
Interest income............... 82.3 39.7
Interest expense.............. (779.5) (155.2)
Amortization of Deferred
Financing Costs............... (379.3) (84.6)
Loss on Extinguishment of
debt.......................... -- --
Other income (expense)........ 380.4 99.0
------------ ------------
Total other income (expense),
net......................... (696.1) (101.1)
------------ ------------
Net income (loss)............... (10,647.9) (20,450.5)
Preferred stock dividends....... (6,776.8) --
------------ ------------
Net income (loss) attributable
to common stockholders........ $(17,424.7) $(20,450.5)
============ ============
</Table>

NET INCOME (LOSS) PER COMMON
SHARE:
Basic and diluted............. $ (2.18) $ (8.79) $ (6.09) $ (9.34) $ (5.04)
------------ ------------ ------------ ------------ ------------
Shares used in computing net
income (loss) per common share
(in thousands) Basic and
diluted....................... 3,406 4,215 4,504 4,507 5,763
------------ ------------ ------------ ------------ ------------
SELECTED BALANCE SHEET DATA
Cash and cash equivalents....... 6,494.6 6,985.7 5,062.9 4,469.6 13,032.3
Total assets.................... 24,982.8 25,856.6 32,065.8 35,388.4 66,243.1
Total debt and capital lease
obligations................... 989.4 1,645.6 4,435.8 11,180.0 1,648.5
Mandatorily redeemable preferred
stock......................... 16,680.5 35,020.5 61,695.3 92,289.3 --
Total common stockholder's
equity (deficit).............. 3,378.7 (20,825.7) (48,275.3) (88,979.9) 39,327.0
SELECTED STATEMENT OF CASH FLOW
DATA:
Cash flow from operating
activities.................... $ (3,146.9) $ (8,539.7) $ (8,539.1) $(12,382.2) $ (5,812.7)
Cash flow from investing
activities.................... (11,704.6) (14,742.3) (18,347.7) (20,267.9) (27,464.2)
Cash flow from financing
activities.................... 18,510.6 23,773.2 24,964.0 32,056.8 41,839.7
Selected Operating Data:
Restaurants open at end of
period........................ 25 36 52 67 91

<Caption>
NINE MONTHS ENDED
-----------------------------
SEPTEMBER 30, SEPTEMBER 29,
2002 2003
------------- -------------

NET INCOME (LOSS) PER COMMON
SHARE:
Basic and diluted............. $ (3.84) $ (1.20)
------------ ------------
Shares used in computing net
income (loss) per common share
(in thousands) Basic and
diluted....................... 4,536 17,036
------------ ------------
SELECTED BALANCE SHEET DATA
Cash and cash equivalents....... 3,393.9 3,239.0
Total assets.................... 48,178.7 47,976.2
Total debt and capital lease
obligations................... 10,027.7 5,167.9
Mandatorily redeemable preferred
stock......................... 118,305.7 --
Total common stockholder's
equity (deficit).............. (101,500.5) 19,412.6
SELECTED STATEMENT OF CASH FLOW
DATA:
Cash flow from operating
activities.................... $ (7,799.7) $(10,031.5)
Cash flow from investing
activities.................... (12,248.4) (3,281.1)
Cash flow from financing
activities.................... 18,972.5 3,519.3
Selected Operating Data:
Restaurants open at end of
period........................ 79 91
</Table>

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

The following discussion of our financial condition and results of
operations should be read in conjunction with our financial statements and their
notes appearing elsewhere in this prospectus.

OVERVIEW

Our objective is to build a nationwide system of distinctive restaurants
that generate attractive unit economics by appealing to a broad range of
customers. During the first nine months of fiscal 2003, we experienced lower
sales and operating profits than we had projected, mostly related to
underperformance at new restaurants opened in the second half of 2002 and in the
first quarter of 2003 and severe winter weather in the Northeast. In addition,
our cash position has been adversely impacted by the payment of costs associated
with restaurants in our development pipeline that we decided not to open. As a
result, the Company incurred a loss of $20.5 million and used cash in operating
activities of $10.0 million for the nine months ended September 29, 2003. Cash
and cash equivalents were $3.2 million and working capital was a deficit of $7.6
million. Liquidity and Capital Resources describes management's plans to address
these issues.

In 2003, we announced our intention to incorporate a franchising and area
developer model into our business strategy.

We operate our restaurants in two formats: Cosi and Cosi Downtown. The
majority of our restaurants offer our signature bread and coffee products for
breakfast, lunch and afternoon coffee in a counter service format. After 5 p.m.,
our Cosi restaurants add table service and offer dinner and dessert in a casual
dining format. Cosi Downtown restaurants, which are located in non-residential
central business districts, close for the day in the early evening. The
atmosphere of Cosi is appropriately managed for each daypart by changing the
music and lighting throughout the day. Our restaurants are located in a wide
range of markets and trade areas, including business districts and residential
communities in both urban and suburban locations. By operating in multiple
dayparts, we believe we are able to maximize revenues and leverage both
development and operating costs.

We opened 17 new restaurants in fiscal 2000, 17 new restaurants in fiscal
2001, 25 new restaurants in fiscal 2002 and six new restaurants in the first
quarter of fiscal 2003. No new restaurants were opened in the second and third
quarters of fiscal 2003. We closed one restaurant and our mini-training
restaurant associated with the Xando Coffee and Bar former headquarters in
fiscal 2000 and closed one restaurant in addition to our World Trade Center
restaurant, our World Trade Center kiosk and our World Financial Center
restaurant, which were closed due to the events of September 11th in fiscal
2001. We closed one restaurant in the first quarter of fiscal 2002, which was
not suited for remodeling to our current prototype, and we closed six
under-performing restaurants in the first nine months of fiscal 2003, three in
the first quarter of fiscal 2003 and three in the third quarter of 2003.
Subsequent to September 29, 2003 we closed two underperforming restaurants and
have identified 13 additional units, eight of which were opened in late 2002 and
early 2003, which we believe can improve performance. If such improvements do
not occur, we may close some or all of these restaurants which would result in
additional impairment charges. Our World Financial Center restaurant re-opened
on September 9, 2002 and as of November 24, 2003, we operate 89 restaurants.

<Table>
<Caption>
NINE MONTHS
FISCAL YEAR ENDED
---------------------- SEPTEMBER 29,
2000 2001 2002 2003
---- ------ ---- -------------

Restaurants open at beginning of period................. 38(a) 53(a) 67 91
Restaurants opened...................................... 17 17 25(b) 6
Restaurants closed...................................... 2 3(a)(b) 1 6
Restaurants open at end of period....................... 53(a) 67 91 91
</Table>

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

(a) Includes Kiosk location formerly operated in World Trade Center Plaza.

(b) Excludes World Financial Center location, which closed September 11, 2001,
and re-opened September 9, 2002.

Our financial performance in fiscal 2001 and fiscal 2002 was adversely
affected by the results of the 16 restaurants that we operated in New York
Central Business District locations. These restaurants have high, market
specific, fixed expenses and were disproportionately impacted by the economic
recession in 2001 and 2002 and the events of September 11, 2001.

CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements and the notes to our consolidated
financial statements contain information that is pertinent to management's
discussion and analysis of financial conditions and results of operations. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities. We believe the following
critical accounting policies involve additional management judgment due to the
sensitivity of the methods, assumptions and estimates necessary in determining
the related asset and liability amounts.

Statement of Financial Accounting Standards ("SFAS") 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets," supercedes SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," and APB Opinion No. 30, "Reporting Results of Operations
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions." SFAS 144 retains
the fundamental provisions of SFAS 121 for recognition and measurement of
impairment, but amends the accounting and reporting standards for segments of a
business to be disposed of. We adopted the provisions of this statement
beginning in fiscal 2002. SFAS 144 requires management judgments regarding the
future operating and disposition plans for marginally performing assets, and
estimates of expected realizable values for assets to be sold. Actual results
may differ from those estimates. The application of SFAS 144, and previously
SFAS 121, has affected the amount and timing of charges to operating results
that have been significant in recent years. We evaluate possible impairment at
the individual restaurant level and record an impairment loss whenever we
determine impairment factors are present. We have developed and implemented an
operational improvement plan, and we undertake impairment reviews periodically.
We consider a history of restaurant operating losses to be the primary indicator
of potential impairment for individual restaurant locations. We have identified
certain units that have been impaired and recorded charges of approximately $3.5
million (related to eight restaurants) in the statement of operations for the
nine months ended September 29, 2003, and $1.1 million (related to two
restaurants), $7.2 million (related to 14 restaurants, including one damaged in
the events of September 11, 2001), and $5.8 million (related to ten restaurants)
in the statements of operations for 2002, 2001 and 2000, respectively. A lack of
improvement at the 13 restaurants we are monitoring, or deteriorating results at
other restaurants, could result in additional impairment changes. Historically,
we have not recorded material additional impairment charges subsequent to the
initial determination of impairment.

For all exit activities prior to December 31, 2002, we estimated our likely
liability under contractual leases for restaurants that have been, or will be,
closed. Such estimates have affected the amount and timing of charges to
operating results that have been significant in recent years and are impacted by
management's judgments about

the time it may take to find a suitable subtenant or assignee, or the terms
under which a termination of the lease agreement may be negotiated with the
landlord.

In June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which addresses accounting for restructuring,
discontinued operation, plant closing or other exit or disposal activity. SFAS
146 requires companies to recognize costs associated with exit or disposal
activities when they are incurred, rather than at the date of a commitment to an
exit or disposal plan. SFAS 146 has been applied prospectively to exit or
disposal activities initiated after December 31, 2002.

In December 2002, the FASB issued SFAS 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure." SFAS 148 amends SFAS 123,
"Accounting for Stock-Based Compensation," to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, SFAS 148 amends the
disclosure requirements of SFAS 123 to require more prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The additional disclosure requirements of SFAS 148 are effective for
fiscal years ending after December 15, 2002, and have been incorporated into the
accompanying financial statements and footnotes. We have elected to continue to
follow the intrinsic value method of accounting as prescribed by APB 25 to
account for employee stock options.

We have recorded a full valuation allowance to reduce our deferred tax
assets related to net operating loss carry forwards. A positive adjustment to
income will be required in future years if we determine that we could realize
these deferred tax assets.

NET SALES

Our sales are composed almost entirely of food and beverage sales.

COMPARABLE RESTAURANT SALES

In calculating comparable restaurant sales, we include a restaurant in the
comparable restaurant base after it has been in operation for 15 full months. At
fiscal year end 2000, there were 34 restaurants in the comparable restaurant
base. At fiscal year end 2001, there were 40 restaurants in the comparable
restaurant base. At fiscal year end 2002, there were 57 restaurants in our
comparable restaurant base. At September 29, 2003, and September 30, 2002, there
were 66 and 55 restaurants in the comparable restaurant base, respectively.

COSTS AND EXPENSES

Cost of goods sold. Cost of goods sold is composed of food and beverage
costs. Food and beverage costs are variable and increase with sales volume.

Restaurant operating expenses. Restaurant operating expenses include
direct hourly and management wages, bonuses, taxes and benefits for restaurant
employees, and other direct restaurant level operating expenses including the
cost of supplies, restaurant repairs and maintenance, utilities, rents and
related occupancy costs.

General and administrative expenses. General and administrative expenses
include all corporate and administrative functions that support our restaurants
and provide an infrastructure to facilitate our future growth. Components of
these expenses include executive management; supervisory and staff salaries,
bonuses and related taxes and employee benefits; travel; information systems;
training; support center rent and related occupancy costs and professional and
consulting fees. The salaries, bonus and employee benefits costs included as
general and administrative expenses are generally more fixed in nature and do
not vary directly with the number of restaurants we operate.

Depreciation and amortization. Depreciation and amortization principally
includes depreciation on restaurant assets.

Restaurant pre-opening expenses. Restaurant pre-opening expenses, which
are expensed as incurred, include the costs of recruiting, hiring and training
the initial restaurant work force, travel, the cost of food and

labor used during the period before opening, the cost of initial quantities of
supplies and other direct costs related to the opening of, or remodeling of, a
restaurant.

Our fiscal year ends on the Monday falling nearest to December 31st. Fiscal
years 2000, 2001 and 2002 each included 52 weeks.

RESULTS OF OPERATIONS

Our operating results for fiscal years 2000, 2001 and 2002, and for the
nine months ended September 30, 2002 and September 29, 2003, expressed as a
percentage of sales, were as follows:

<Table>
<Caption>
NINE MONTHS ENDED
FISCAL YEAR -----------------------------
--------------------- SEPTEMBER 30, SEPTEMBER 29,
2000 2001 2002 2002 2003
----- ----- ----- ------------- -------------

Net Sales........................... 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and Expenses
Cost of goods sold.................. 27.0% 26.8% 26.9% 26.8% 28.0%
Restaurant operating expenses....... 62.8% 64.3% 60.2% 60.0% 63.4%
----- ----- ----- ----- -----
Total costs of sales................ 89.8% 91.1% 87.1% 86.8% 91.4%
General and administrative
expenses.......................... 28.8% 26.2% 21.1% 21.1% 19.3%
Depreciation and amortization....... 12.0% 9.5% 6.9% 6.9% 7.1%
Restaurant pre-opening expenses..... 2.8% 2.1% 2.2% 1.5% 0.5%
Provision for losses on asset
impairments and disposals......... 11.4% 12.1% 1.3% -- 6.9%
Lease termination costs............. 0.9% 9.1% (1.4)% -- (0.4)%
----- ----- ----- ----- -----
Operating income (loss)............. (45.8)% (50.0)% (17.2)% (16.3)% (24.8)%
Other income (expense)
Interest income..................... 0.9% 0.5% 0.1% 0.1% 0.0%
Interest expense.................... (0.4)% (0.9)% (1.4)% (1.2)% (0.1)%
Amortization of deferred financing
costs............................. -- (0.1)% (0.7)% (0.1)% (0.1)%
Loss on early extinguishment of
debt.............................. -- -- (6.0)% -- --
Other income (expense).............. -- -- 0.5% 0.1% 0.1%
----- ----- ----- ----- -----
Total other income (expense),
net....................... 0.5% (0.4)% (7.5)% (1.1)% (0.1)%
----- ----- ----- ----- -----
Net income (loss)................... (45.4)% (50.5)% (24.7)% (17.4)% (24.9)%
</Table>

The following table contains selected unaudited statement of operations
information for each quarter of fiscal 2002 and 2001 and the first three fiscal
quarters of fiscal 2003. The Company believes that the following information
reflects all normal recurring adjustments necessary for a fair presentation of
the information for the periods presented. The operating results for any quarter
are not necessarily indicative of results for any future period. Unaudited
quarterly results were as follows:
<Table>
<Caption>
2001 2002
---------------------------------------------- ---------------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3
--------- --------- --------- ---------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Net sales............... $15,855.9 $18,463.8 $18,217.0 $ 17,647.4 $18,052.1 $20,919.9 $22,085.5
Cost of goods sold...... 4,205.6 4,871.7 4,817.3 4,897.1 4,853.4 5,645.6 5,861.5
Restaurant operating
expenses............... 9,976.1 11,586.2 11,984.7 11,567.5 11,127.0 12,366.5 13,160.6
Total costs of sales.... 14,181.7 16,457.9 16,802.0 16,464.6 15,980.4 18,012.1 19,022.1
General and
administrative
expenses............... 3,735.2 4,534.5 4,528.4 5,563.4 4,620.3 4,227.6 4,051.7
Depreciation and
amortization........... 2,021.9 2,126.9 1,243.0 1,298.2 1,210.3 1,335.5 1,602.2
Restaurant pre-opening
expenses............... 253.6 320.0 407.9 457.3 111.4 286.1 542.3
Provision for losses on
asset impairments and
disposals.............. 90.4 -- 1,561.9 6,834.0 -- 7.3 --
Lease termination
costs.................. 578.3 -- 1,647.1 4,185.3 -- -- --
Operating
income(loss)........... (5,005.2) (4,975.5) (7,973.3) (17,155.4) (3,870.3) (2,948.7) (3,132.8)
Interest income......... 60.8 105.9 146.9 26.9 29.9 32.4 20.0
Interest expense........ (75.5) (92.1) (84.0) (276.0) (301.4) (245.6) (232.5)
Amortization of deferred
financing cost & debt
discount............... (22.9) (22.9) (22.9) (58.1) (86.4) (62.4) (230.5)
Loss on Early
Extinguishment of
Debt................... -- -- -- -- -- -- --
Other income(expense)... -- -- -- -- -- -- 380.4
Net income (loss)....... (5,042.8) (4,984.6) (7,933.3) (17,462.6) (4,228.2) (3,224.3) (3,195.4)
Preferred stock
dividends.............. (1,312.7) (1,639.4) (1,836.0) (1,890.0) (1,960.5) (2,383.4) (2,432.8)
Net income
(loss)attributable to
common stockholders.... (6,355.5) (6,624.0) (9,769.3) (19,352.6) (6,188.7) (5,607.7) (5,628.2)
Net income (loss) per
common share........... (1.41) (1.47) (2.17) (4.29) (1.37) (1.23) (1.24)
Shares used in computing
net loss per common
share (in thousands)... 4,504 4,505 4,508 4,511 4,527 4,544 4,545

<Caption>
2002 2003
---------- ----------------------------------
Q4 Q1 Q2 Q3
---------- ---------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Net sales............... $ 23,366.7 $ 25,654.4 $28,936.4 $27,539.3
Cost of goods sold...... 6,337.0 7,316.5 8,172.5 7,515.4
Restaurant operating
expenses............... 14,198.6 16,801.2 17,818.9 17,442.3
Total costs of sales.... 20,535.6 24,117.7 25,991.4 24,957.7
General and
administrative
expenses............... 4,912.1 7,925.2 4,435.4 3,502.1
Depreciation and
amortization........... 1,703.2 1,958.6 1,994.4 1,862.8
Restaurant pre-opening
expenses............... 905.3 349.1 -- 32.2
Provision for losses on
asset impairments and
disposals.............. 1,049.2 2,568.0 2,790.8 339.9
Lease termination
costs.................. (1,165.0) (257.1) -- (602.8)
Operating
income(loss)........... (4,573.7) (11,521.3) (6,275.6) (2,552.6)
Interest income......... 16.0 25.2 10.4 4.2
Interest expense........ (413.1) (47.0) (50.9) (87.1)
Amortization of deferred
financing cost & debt
discount............... (169.7) (25.0) (29.8) --
Loss on Early
Extinguishment of
Debt................... (5,083.2) -- -- --
Other income(expense)... .5 -- -- 99.0
Net income (loss)....... (10,223.2) (11,568.1) (6,345.9) (2,536.5)
Preferred stock
dividends.............. (1,416.9) -- -- --
Net income
(loss)attributable to
common stockholders.... (11,640.1) (11,568.1) (6,345.9) (2,536.5)
Net income (loss) per
common share........... (1.23) (0.70) (0.38) (0.14)
Shares used in computing
net loss per common
share (in thousands)... 9,434 16,573.8 16,824 17,710
</Table>

NINE MONTHS ENDED SEPTEMBER 29, 2003 VS. NINE MONTHS ENDED SEPTEMBER 30, 2002

Net Sales

Sales increased $21.0 million, or 34.5%, to $82.1 million in the first nine
months of fiscal 2003, from $61.1 million in the first nine months of fiscal
2002. This increase was primarily due to the full period contribution of sales
from the 20 restaurants opened during fiscal 2002, from sales of six restaurants
opened during the first quarter of fiscal 2003 and from an increase in
comparable restaurant sales. Management estimates that in the current quarter,
the combination of our closing of 22 restaurants for the breakfast daypart, a
blackout in the northeast and a hurricane in the Mid Atlantic region resulted in
a sales decrease of $0.5 million.

For the first nine months of fiscal 2003, comparable restaurant sales
increased 5.0%. In our comparable restaurants, in the first 9 month of fiscal
2003, our transaction count increased 3.7% and our average check increased 1.2%
compared to the first nine months of last year.

During the third quarter of 2003, we identified 22 restaurants that had
insufficient profit contribution from the breakfast daypart. As a result, we
closed those restaurants during the breakfast daypart. While these breakfast
closures will have a negative impact on our sales growth going forward, we
believe that the closures will improve our future profitability. However, there
can be no assurances that this action will have a positive impact on our
profitability.

Costs and Expenses

Cost of goods sold. Year-to-date, cost of goods sold increased $6.6
million, or 40.6% to $23.0 million, from $16.4 million in the first nine months
of fiscal 2002. As a percentage of sales, cost of goods sold increased to 28.0%
of sales in the first nine months of fiscal 2003, from 26.8% in the first nine
months of fiscal 2002. The increase in cost of goods sold as a percentage of
sales this year was primarily due to a shift in our sales mix in 2003 when
compared to 2002 as a percentage of sales. During the first nine months of
fiscal 2003, food sales increased to 75.1% of total sales, from 68.9% during the
first nine months of fiscal 2002, with an offsetting reduction in our beverage
sales, which were 24.9% of total sales during the first nine months of fiscal
2003, compared to 31.1% during the first nine months of fiscal 2002. Our food
sales have a higher cost of sales when compared to our beverage sales.
Additionally, for most of the first quarter of fiscal 2002 our menu prices were
higher than they were in 2003, contributing to lower cost of goods sold, as a
percentage of sales in 2002, when compared to 2003.

Also, within the food category, we have seen an increase in the percentage
of sales of salads this year. Produce costs were higher in the second quarter
this year when compared to last year due to the adverse weather conditions this
spring and increased demand for produce. These higher produce costs, combined
with the disproportionate increase in our salad sales also contributed to the
increase in cost of goods sold. Late in the second quarter we adjusted our menu
prices for salads upward in order to more appropriately price our salad products
versus our competitors' prices.

Restaurant operating expenses. Year-to-date, restaurant operating expenses
increased by $15.4 million, or 42.0%, to $52.1 million in the first nine months
of fiscal 2003, from $36.7 million in the first nine months of fiscal 2002. This
increase is primarily due to the increase in the number of restaurants in
operation this year vs. last year. As a percentage of sales, restaurant
operating expenses increased to 63.4% of sales in the first nine months of
fiscal 2003, from 60.0% in the first nine months of fiscal 2002. This increase,
as a percentage of sales, was primarily due to increases in labor costs as a
percentage of sales due to sales performance of new stores opened subsequent to
the second quarter of 2002 that was less than management anticipated.

General and administrative costs. Year-to-date, general and administrative
costs increased by $3.0 million, or 23%, to $15.9 million in the first nine
months of fiscal 2003, from $12.9 million in the first nine months of fiscal
2002. This increase is primarily due to a $3.0 million employee severance charge
recorded in the current year. As a percentage of sales, general and
administrative costs decreased to 19.3% of sales in the first half of fiscal
2003, from 21.1% of sales in the first nine months of fiscal 2002. The decrease
as a percentage of sales was entirely due to sales leverage against these costs.
Excluding the employee severance charge, general and administrative costs
decreased to 15.7% of sales in this fiscal year's first nine months, compared
with 21.1% for the same period last year.

Depreciation and amortization. Year-to-date, depreciation and amortization
increased $1.7 million, or 40.2%, to $5.8 million in the first nine months of
fiscal 2003, from $4.1 million in the first nine months of fiscal 2002. This
increase was primarily due to additional depreciation expense for restaurants
opened subsequent to the third quarter of fiscal 2002. As a percentage of
restaurant sales, depreciation and amortization increased to 7.1% of sales in
the first nine months of fiscal 2003, compared to 6.8% of sales in the first
nine months of fiscal 2002. This increase, as a percentage of sales, is
primarily due to the lower per unit sales performance in restaurants opened
since the second quarter of fiscal 2002.

Restaurant pre-opening expenses. Year-to-date, restaurant pre-opening
expenses decreased $0.5 million to $0.4 million in the first nine months of
fiscal 2003, from $0.9 million in the first nine months of fiscal 2002. As a
percentage of restaurant sales, restaurant pre-opening expenses decreased to
0.5% of sales in the first nine months of fiscal 2003, from 1.5% of sales in the
first nine months of fiscal 2002. This decrease is due to the decrease in
28

the number of new restaurants opened or remodeled in the first nine months of
fiscal 2003. Six new restaurants were opened in the first nine months of fiscal
2003 compared to five new restaurants and five remodeled restaurants opened in
the first nine months of fiscal 2002.

Loss on impairment of property and equipment and restaurant
disposals. Year-to-date, we have recognized $5.7 million of asset impairment
and store disposal costs. Of this, approximately $0.6 million represents charges
related to the closure of three under performing restaurants during the first
quarter, approximately $1.3 million were charges taken on twenty-five locations
which were in our development pipeline but have been cancelled, and
approximately $3.8 million represents impairment charges taken on nine
underperforming restaurants, three of which have been identified for closure in
the future. We have identified thirteen additional units, eight of which were
opened in late 2002 and early 2003, in which we believe that performance
improvements can be achieved. However, if such improvements are not realized
additional impairment charges will be necessary.

Lease termination costs. Year-to-date in fiscal 2003, we have recognized
$0.3 million of lease termination income related to the reversal of some lease
termination accruals where we were able to exit the lease on a more favorable
basis than previously anticipated offset by costs incurred to exit five leases.
No such charges or income were recognized during the first nine months of fiscal
2002.

We announced previously that our Board of Directors had concluded that the
Company's financial performance would be strengthened by closing in an orderly
fashion as many as 13 of the Company's restaurants, three of which were closed
in the first quarter of fiscal 2003 with another three closed in the third
quarter of fiscal 2003. Future closings are dependent on our ability to
negotiate acceptable terms with our landlords to terminate the leases for those
units, or on our ability to locate acceptable sub-tenants or assignees for the
leases at those locations. Moreover, future closings may result in additional
lease termination costs. Subsequent to the end of the third quarter we closed
two additional locations, and have assigned the leases to those locations to new
tenants. However, we remain liable under our prime lease. There can be no
assurances that we will be successful in negotiating terms that will enable us
to close additional underperforming units.

Interest income and expense. During the first nine months of fiscal 2003
and first nine months of fiscal 2002, interest income was less than $0.01
million. Year-to-date interest expense has decreased $0.6 million to $0.2
million in the first nine months of fiscal 2003 from $0.8 million in the first
nine months of fiscal 2002. The decrease in interest expense is primarily due to
the repayment of borrowings under our 13% senior subordinated notes due 2006,
which were outstanding during the first nine months of fiscal 2002. Those notes
were repaid in December 2002 with proceeds from our initial public offering.

Amortization of deferred financing costs. During the first nine months of
fiscal 2002, we recorded $0.4 million in amortization of deferred financing
costs, and accretion of debt discount on our senior secured credit facility, our
senior subordinated credit facility and on our equipment loan credit facility.
This compares to $0.1 million recorded in the first nine months of fiscal 2003,
primarily related to our equipment loan credit facility. The decrease is due to
the repayment of our senior subordinated notes in connection with our initial
public offering in November 2002.

Other income. In the first nine months of fiscal 2002, we recorded $0.4
million of other income, principally the receipt of business interruption
proceeds related to our World Financial Center restaurant, which was closed from
September 11, 2001 until early September 2002.

FISCAL YEAR 2002 VS. FISCAL YEAR 2001

Net Sales

Sales increased $14.2 million, or 20.3%, to $84.4 million in 2002, from
$70.2 million in fiscal 2001. This increase was primarily due to the full period
contribution of sales from restaurants opened in fiscal 2001, from sales of
restaurants opened in 2002 and from an increase in comparable restaurant sales
of 4%. This was partially offset by the loss of our World Trade Center
restaurant and the closure of our World Financial Center restaurant due to the
events of September 11, 2001. Our World Financial Center restaurant reopened in
September 2002. Additionally, one restaurant was not suited for remodeling to
our current prototype and was closed during the period. Comparable restaurant
sales were adversely affected by the effect of the economic downturn on our New
29

York City Central Business District restaurants, the effect of September 11,
2001, on all of our restaurants and the reduction of our menu pricing during the
first quarter of fiscal 2002. Excluding the New York City Central Business
District restaurants, comparable restaurant sales increased 9% for the year.
This increase was driven by the sales performance of the six remodeled
restaurants that were open for the full period and the eight restaurants that
were remodeled during the period, all of which were remodeled to incorporate our
full product line.

Costs and Expenses

Cost of goods sold. Cost of goods sold increased $3.9 million, or 20.8%,
to $22.7 million in fiscal 2002, from $18.8 million in fiscal 2001. As a
percentage of sales, cost of goods sold increased to 26.9% of sales in fiscal
2002, from 26.8% in fiscal 2001. The increase in cost of goods sold as a
percentage of sales was primarily due to the reduction in our menu pricing
during the first quarter of fiscal 2002 and to a shift in our sales mix due to
the expansion of our food offering in 2002. During the year, food sales
increased to 70.7% of total sales, from 66.2% last year, with an offsetting
reduction in our beverage sales, which were 29.3% of total sales, compared to
33.8% last year. Our food sales have a higher cost of sales when compared to our
beverage sales. These increases were partially offset by improvements in our
food costs, as a percentage of food sales, as we were able to reduce our
ingredient costs through better purchasing and through menu changes.

Restaurant operating expenses. Restaurant operating expenses increased by
$5.7 million, or 12.7%, to $50.8 million in fiscal 2002, from $45.1 million in
fiscal 2001. This increase is primarily due to the increase in the number of
restaurants in operation this year. As a percentage of sales, restaurant
operating expenses decreased to 60.2% of sales in fiscal 2002, from 64.3% in
fiscal 2001. This reduction was primarily due to reductions in our labor costs.

General and administrative costs. General and administrative costs
decreased by $0.6 million, or 3.0%, to $17.8 million in fiscal 2002, from $18.4
million in fiscal 2001. As a percentage of sales, general and administrative
costs decreased to 21.1% of sales in fiscal 2002, from 26.2% of sales in fiscal
2001. The decrease as a percentage of sales was primarily due to sales leverage
against these costs. General and administrative costs in 2001 included
approximately $0.8 million of one-time expenses, including severance payments
related to the continued enhancement of our management team. Excluding these
one-time costs from 2001, our general and administrative costs were essentially
held flat in 2002.

Depreciation and amortization. Depreciation and amortization decreased
$0.8 million, or 12.5%, to $5.9 million in fiscal 2002, from $6.7 million in
fiscal 2001. This decrease was primarily due to additional depreciation expense
in the first half of fiscal 2001 on assets to be disposed of in connection with
restaurant remodels, as well as reduced depreciation in fiscal 2002 on assets
for which impairment write-downs were taken in fiscal 2001. As a percentage of
restaurant sales, depreciation and amortization decreased to 6.9% of sales in
fiscal 2002, compared to 9.5% of sales in fiscal 2001. During 2002, our
restaurant opening program was weighted toward the latter part of the year, with
12 of the 25 new restaurants opening in the last quarter. Therefore, only a
limited amount of depreciation expense was recorded for these new restaurants in
2002.

Restaurant pre-opening expenses. Restaurant pre-opening expenses increased
to $1.8 million in fiscal 2002, from $1.4 million in fiscal 2001. As a
percentage of restaurant sales, restaurant pre-opening expenses increased to
2.2% of sales in fiscal 2002, from 2.1% of sales in fiscal 2001. This increase
as a percentage of sales is due to the limited amount of sales recorded by our
restaurants opened in 2002. As noted above, 12 of the 25 new restaurants were
opened in the last quarter. Including restaurants that were remodeled in each
year, restaurant pre-opening costs were reduced from approximately $63,000 per
restaurant in 2001 to $54,000 in 2002.

Loss on impairment of property and equipment and restaurant
closures. During fiscal 2002, we recognized $1.1 million of asset impairment
costs (related to two under performing restaurants) compared to $7.2 million
(related to 14 restaurants) in 2001. In 2001, we also recorded restaurant
closure costs of $1.3 million related to the loss of our World Trade Center
restaurant.

Lease termination costs. During 2002, we recorded a credit of $1.2
million, as we revised our estimates of the expected cost to terminate leases on
locations that are closed, or are expected to close. Of this amount,

$0.4 million was related to a reserve we had established last year for our
restaurant in the World Financial Center, which had been closed due to the
terrorist attacks on September 11, 2001. That restaurant was reopened in
September of 2002, and has been performing satisfactorily since then. The
remaining $0.8 million of adjustments to our lease termination reserves
represent revisions to our estimated liabilities related to ten other locations
that are closed, or are expected to close. During fiscal 2001, we recorded $6.4
million of these costs.

Interest income and expense. During fiscal 2002, interest income was $0.1
million, down from $0.3 million from the same period a year ago. This was due to
a decrease in the average investable cash balance during the period and lower
interest rates available on short-term investments. Interest expense increased
$0.6 million to $1.2 million from $0.6 million in fiscal 2001. The increase in
interest expense is due to borrowings under our 12% senior secured notes due
2004 and our 13% senior subordinated notes due 2006, neither of which were
outstanding during the first nine months of fiscal 2001. Those notes were repaid
in December 2002 with proceeds from our initial public offering.

Amortization of deferred financing costs and debt discount. During fiscal
2002, we recorded $0.5 million in amortization of deferred financing costs, and
accretion of debt discount on our senior secured credit facility, our senior
subordinated credit facility and on our equipment loan credit facility. This
compares to $0.1 million recorded in 2001, primarily related to our equipment
loan credit facility. The increase is due to amortization of debt discount
related to our senior subordinated credit facility, which was in place for 11
months of the year and due to amortization of deferred financing costs and debt
discount related to our senior secured credit facility, which was in place for a
portion of the third and fourth quarters in fiscal 2002.

Loss on early extinguishment of debt. In the fourth quarter of fiscal
2002, we repaid our senior subordinated and senior secured credit facilities. At
the time of repayment, we wrote off $5.1 million in unamortized deferred
financing costs and debt discount related to these credit facilities.

Other income. During fiscal 2002, we recorded $0.4 million of other
income, principally the receipt of business interruption insurance proceeds
related to our World Financial Center restaurant, which was closed from
September 11, 2001 until early September 2002.

FISCAL YEAR 2001 VS. FISCAL YEAR 2000

Net Sales

Sales increased $19.0 million, or 37.1%, to $70.2 million in fiscal 2001,
from $51.2 million in fiscal 2000. This increase was primarily due to sales from
the 17 new restaurants opened in fiscal 2001 and the full year contribution of
sales from restaurants opened in fiscal 2000. This increase was partially offset
by a 2% decrease in sales of the restaurants in our comparable restaurant base
at the end of the period, the closure of our World Financial Center restaurant
due to the events of September 11, 2001, the closure of the mini-training
restaurant associated with the Xando Coffee and Bar former headquarters and one
additional restaurant closure. The decrease in comparable restaurant sales was
primarily due to the especially acute effect of the economic downturn on our New
York Central Business District restaurants as well as the significant impact of
the events of September 11th. Excluding the New York Central Business District
restaurants, comparable restaurant sales increased 7% in fiscal 2001, including
an 11% increase in the fourth quarter of fiscal 2001. This increase was
partially due to comparable restaurant sales in six restaurants that were
remodeled during the year to incorporate our full product line.

Costs and Expenses

Cost of goods sold. Cost of goods sold increased $5.0 million, or 35.7%,
to $18.8 million in fiscal 2001, from $13.8 million in fiscal 2000. As a
percentage of sales, cost of goods sold decreased to 26.8% of sales in fiscal
2001, from 27.0% in fiscal 2000. The decrease in cost of goods sold was
primarily due to the full year benefit of the elimination of our commissary
during fiscal 2000.

Restaurant operating expenses. Restaurant operating expenses increased
$12.9 million, or 40.2%, to $45.1 million in fiscal 2001, from $32.2 million in
fiscal 2000. As a percentage of sales, restaurant operating expenses increased
to 64.3% of sales in fiscal 2001, from 62.8% in fiscal 2000. This increase,
which was
31

primarily labor costs, was due to the development of the Cosi and Cosi Downtown
prototypes, and the related restaurant operating systems. These prototypes are
expected to be the basis for the future expansion of both the Cosi and Cosi
Downtown concepts. Additionally, sales were adversely affected by the events of
September 11, 2001, which resulted in the fixed components of restaurant
operating expenses increasing as a percentage of sales.

General and administrative expenses. General and administrative expenses
increased $3.6 million, or 24.3%, from $14.8 million in fiscal 2000 to $18.4
million in fiscal 2001. The increase was primarily due to the development of the
support systems associated with our growth strategy and $0.8 million of one-time
expenses, including severance payments related to the continued enhancement of
our management team. As a percentage of sales, general and administrative
expenses decreased to 26.2% of sales in fiscal 2001, from 28.8% of sales in
fiscal 2000, due to leveraging of our existing infrastructure.

Depreciation and amortization. Depreciation and amortization increased
$0.5 million, or 8.6%, to $6.7 million in fiscal 2001, from $6.2 million in
fiscal 2000. This increase was due to depreciation on restaurants opened in 2001
and a full year's depreciation on restaurants opened in 2000 of $1.4 million.
These increases were offset by a $0.9 million reduction from asset impairment
write-downs in connection with continued refinement of our restaurant prototype.

Restaurant pre-opening expenses. Restaurant pre-opening expenses remained
constant at $1.4 million in fiscal 2001, despite an increase in the number of
restaurants opened or remodeled. We opened or remodeled 23 restaurants in 2001
versus 18 in 2000. Both labor and travel costs were reduced in our average
pre-opening expenses per restaurant as we continued the refinement of our
training programs and penetrated existing markets.

Loss on impairment of property and equipment and restaurant closures. Loss
on impairment of property and equipment and restaurant closures increased $2.6
million to $8.5 million in fiscal 2001, from $5.8 million in fiscal 2000. These
costs were due to asset impairment write-downs, the loss of our World Trade
Center restaurant, World Trade Center kiosk and World Financial Center
restaurant and the closure of a restaurant.

Lease termination costs. Lease termination costs increased $5.9 million to
$6.4 million in fiscal 2001, compared to $0.5 million in fiscal 2000. These
costs were primarily due to lease terminations in connection with restaurants
closed or planned to close in connection with the continued refinement of our
restaurant prototype in fiscal 2001.

Interest income and expense. Interest income decreased $0.1 million to
$0.3 million in fiscal 2001, from $0.4 million in fiscal 2000. Interest expense
increased $0.4 million to $0.6 million in fiscal 2001, from $0.2 million in
fiscal 2000. The increase is due to interest on our term loans drawn down in
late fiscal 2000, which were outstanding for all of fiscal 2001, and interest on
our senior subordinated debt, which was issued in November 2001.

Amortization of Deferred Financing Costs and Debt Discount. During 2001,
we recorded $0.1 million in amortization of deferred financing costs and debt
discount primarily related to our Equipment Loan Credit Facility.

POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS AND SEASONALITY

Our quarterly operating results may fluctuate significantly as a result of
a variety of factors, including the timing of new restaurant openings and
related expenses, profitability of new restaurants, increases or decreases in
comparable restaurant sales, general economic conditions, consumer confidence in
the economy, consumer preferences, competitive factors, unanticipated increases
in food, labor, commodity, energy, insurance and other operating costs, weather
conditions and seasonal fluctuations.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents were $3.2 million on September 29, 2003, compared
with $13.0 million on December 30, 2002, $4.5 million at December 31, 2001 and
$5.1 million at January 1, 2001. Our working capital was a deficit of $7.6
million on September 29, 2003, compared with working capital of $0.8 million as
of December 30, 2002, a deficit of $5.3 million at December 31, 2001 and a
deficit of $2.8 million at January 1,

2001. Our principal requirements for cash are funding operations, maintaining or
remodeling existing restaurants and funding the incorporation of a franchising
and area developer model into our business strategy. During the first nine
months of fiscal 2003, we financed our requirements for capital with the
proceeds from the initial public offering of our common stock which was
completed in November of 2002 and from the proceeds of the $3 Million Note and
the $1.5 Million Note described below.

Net cash used in operating activities for the nine months ended September
29, 2003 was $10.0 million, compared to $7.8 million for the nine months ended
September 30, 2002. Funds used in operating activities in the first nine months
of 2003 increased primarily as a result of an increase in our net loss compared
to the first nine months of 2002, and from our payment of accounts payable that
were outstanding at the end of the year. Net cash used in operating activities
for the 52 weeks ended December 30, 2002, was $5.8 million, compared to $12.4
million for the 52 weeks ended December 31, 2001 and $8.5 million for the 52
weeks ended January 1, 2001. Funds used in operating activities in 2002
decreased primarily as a result of a reduction in our net loss compared to 2001,
and an increase in our accounts payable at year-end. Accounts payable were
unusually high at year-end due to the high level of purchases associated with
our new restaurants opened in the fourth quarter of 2002, and those opened in
the first quarter of 2003.

Total capital expenditures for the nine months ended September 29, 2003
were $3.6 million, compared to expenditures of $12.2 million for the nine months
ended September 30, 2002. These expenditures were primarily related to the
opening of six new restaurants during the first half of fiscal 2003, and
remodeling five existing restaurants and constructing five new restaurants
during the first half of fiscal 2002. Total capital expenditures for the 52
weeks ended December 30, 2002 were $27.2 million, compared to expenditures of
$20.4 million for the 52 weeks ended December 31, 2001. These expenditures were
primarily related to the opening of 25 new restaurants and remodeling of nine
restaurants, including the reopening of our World Financial Center restaurant,
during the 52 weeks ended December 30, 2002, and the opening of 17 new
restaurants and remodeling of six existing restaurants in 2001. Total capital
expenditures were $18.2 million for fiscal 2000, and were primarily related to
the opening of 17 new restaurants and for remodeling of one existing restaurant.

Net cash provided by financing activities was $3.5 million for the nine
months ended September 29, 2003. During the period, we borrowed approximately
$4.5 million under the $3 Million Note and the $1.5 Million Note and made
scheduled repayments of $0.9 million and $0.1 million related to our outstanding
long-term debt and capital lease obligations, respectively. Net cash provided by
financing activities was $41.8 million for the 52 weeks ended December 30, 2002,
$32.1 million for the 52 weeks ended December 31, 2001, and $25.0 million for
the 52 weeks ended January 1, 2001.

During fiscal 2002, we issued approximately 1.1 million shares of Series C
preferred stock and received approximately $19.3 million, net of offering costs.
Of this, approximately $3.6 million represented the exchange of approximately
$3.5 million face amount of our 13% Senior Subordinated Notes and accrued
interest. We also issued approximately 5.6 million shares of our common stock in
our initial public offering and received approximately $32.8 million, net of
offering costs. Prior to our initial public offering, we issued approximately
$0.5 million of additional Senior Subordinated Notes and accrued $0.8 million of
interest on these notes, and issued approximately $9.5 million face amount of
our 12% Senior Secured notes and accrued $0.2 million of interest on these
notes. During the fiscal 2002 period, we made scheduled repayments of $0.9 and
$0.4 million related to our other outstanding long-term debt and capital lease
obligations, respectively. Approximately $6.6 million of the proceeds from our
initial public offering were used to repay our outstanding 13% Senior
Subordinated notes, including accrued interest and pre-payment premium, and
approximately $7.5 million of proceeds and approximately $2.1 million of
available cash were used to repay our outstanding 12% Senior Secured notes,
including accrued interest. In fiscal 2001, we sold approximately 1.4 million
shares of Series C Preferred Stock and received approximately $24.1 million, net
of offering costs. In November 2001, we entered into Senior Subordinated Note
and Warrant purchase agreements with a group of investors, pursuant to which we
received approximately $9.3 million in proceeds. During 2001, we entered into
other financing agreements totaling approximately $0.4 million and repaid
approximately $1.4 million on existing loans and capital leases. There is one
note payable outstanding under our equipment loan credit facility that is due
December 1, 2003 at an interest rate of 8.5%.

During the first nine months of fiscal 2003, we experienced lower sales and
operating profits than we had projected, mostly related to underperformance at
new restaurants opened in the second half of 2002 and in the first quarter of
2003 and severe winter weather in the Northeast. In addition, our cash position
has been adversely impacted by the payment of costs associated with restaurants
in our development pipeline that we determined not to open. Primarily because of
these developments, we determined that it was prudent to seek additional
financing. Consequently, we obtained a $3 million line of credit from a bank to
be used for general corporate purposes and borrowed the full amount on April 1,
2003. In addition, we announced our intention to pursue a rights offering to
raise approximately $14 million. In connection therewith, we announced that a
group of our shareholders (the "Funding Parties," defined below) indicated that
they will commit to provide funding in the amount of up to $8.5 million of the
rights offering. This commitment is subject to, among other things, our
stockholders approving the conversion feature of the $3 Million Note and the
$1.5 Million Note (described below). On November 24, 2003, our stockholders
approved the conversion feature of the $3 Million Note and $1.5 Million Note.
The $3 Million Note and the $1.5 Million Note bear interest at 75 basis points
over Bank of America's prime lending rate and are each secured by all of our
tangible and intangible property, other than equipment pledged to secure our
equipment loan credit facility. We paid the bank fees and expenses of
approximately $22,000 upon funding of the $3 Million Note. The $3 Million Note
was guaranteed, jointly and severally, by Eric J. Gleacher, one of our
stockholders and one of our former directors; Charles G. Phillips, one of our
stockholders, and Ziff Investors Partnership, L.P. II, an entity related to ZAM
Holdings, L.P., our largest stockholder. On October 30, 2003, the bank assigned
the $3 Million Note to these persons or their designees, and the maturity date
was extended to December 31, 2004. Upon assignment of the note, we issued
amended and restated promissory notes in the amount of $1,943,068.74,
$759,397.00 and $304,634.26 (collectively, the "$3 Million Note"). Each holder
has the right to convert, in whole or in part, their pro rata share of the note
plus accrued and unpaid interest into shares of our common stock at a conversion
price equal to the lesser of $1.50 or 85% of the weighted average price per
share of our common stock for the fifteen trading day period ending three
trading days before the conversion date. Upon consummation of the rights
offering, the $3 Million Note and the $1.5 Million Note will be converted by the
holders.

On August 5, 2003, we entered into an Investment Agreement (the "Investment
Agreement") with Eric J. Gleacher, Charles G. Phillips, LJCB Nominees Pty Ltd,
and ZAM Holdings, L.P. (together, the "Funding Parties"). Pursuant to the
Investment Agreement, subject to certain conditions, the Funding Parties have
agreed to provide funding to us in an aggregate amount up to $8.5 million
reduced by the amount outstanding under the $3 Million Note and the $1.5 Million
Note. At the option of the Funding Parties, the Funding Parties may fund such
greater amount permitted by the Investment Agreement to allow the Funding
Parties to maintain certain relative ownership levels. If our stockholders
(other than the Funding Parties) subscribe for at least $2.0 million worth of
shares in this rights offering, the Funding Parties would, subject to certain
conditions, provide this funding in the form of an investment in our common
stock at the subscription price. If our stockholders (other than the Funding
Parties) do not subscribe for at least $2.0 million worth of shares in this
rights offering, we will not consummate this offering and the Funding Parties
will, subject to certain conditions, provide this funding in the form of, at
their option, a purchase of shares of our common stock at the subscription price
or the purchase of a senior secured note which is convertible into shares of our
common stock. The Funding Parties agreed not to exercise their basic
subscription privilege or over-subscription privilege in the rights offering. If
our stockholders (other than the Funding Parties) subscribe for at least $7.5
million worth of shares in this rights offering, the Funding Parties are not
obligated to provide any additional funding to us (other than the $3 Million
Note and the $1.5 Million Note). The $8.5 million in funding described above is
allocated as follows: (a) Mr. Gleacher, $2,000,000; (b) Mr. Phillips, $750,000;
(c) LJCB, $750,000 and (d) ZAM Holdings, L.P. $5,000,000.

In order to ensure that we would have sufficient cash resources pending
consummation of the rights offering, on August 5, 2003, Mr. Gleacher and ZAM
Holdings provided $1,348,042.50 of the Funding Parties' $8.5 million commitment
in the form of two senior secured promissory notes, and on August 6, 2003, Mr.
Phillips provided $151,957.50 of the Funding Parties' commitment in the form of
a senior secured promissory note. All three notes equal an aggregate of $1.5
million (collectively, the "$1.5 Million Note"). The terms of the $1.5 Million
Note are substantially similar to the terms of the $3 Million Note, and the $1.5
Million Note matures on December 31, 2004. The $1.5 Million Note is convertible
into shares of our common stock, at the option of the holders thereof, at a
conversion price equal to the lesser of $1.50 or 85% of the weighted average
price per

share of our common stock for the fifteen trading day period ending three
trading days before the conversion date. Upon consummation of the rights
offering, the $3 Million Note and the $1.5 Million Note will be converted by the
holders.

We currently estimate that our current cash resources will be sufficient
until the completion of the rights offering.

We currently estimate that our capital expenditures during 2003 will be
approximately $3.7 million, principally for the opening of the six new
restaurants that have already been opened, and for maintaining and remodeling
existing restaurants. Most of these expenditures have been paid. The remainder
will be funded through existing cash balances and from the proceeds from the
$1.5 Million Note. We anticipate that our capital expenditures for the remainder
of the year will be minimal.

We plan to fund the operations, maintenance and growth of our restaurants
primarily through the rights offering (including the senior secured notes and
any other securities issued pursuant to the Investment Agreement) and internally
generated cash flows produced by our existing restaurants. Our cash resources,
and therefore our liquidity, are highly dependent upon the level of internally
generated cash from operations and upon future financing transactions, including
the transactions we have negotiated with the Funding Parties and the rights
offering. If cash flows from our existing restaurants or cash flow from new
restaurants that we open do not meet our expectations or are otherwise
insufficient to satisfy our cash needs or expansion plans, we may have to seek
additional financing from external sources to continue funding our operations,
close underperforming restaurants or reduce or cease our plans to open or
franchise new restaurants. We cannot predict whether such financing will be
available on terms acceptable to us, or at all.

In the event that our stockholders, other than the Funding Parties,
subscribe for at least $2 million in the rights offering, we will, subject to
certain conditions, secure a minimum of $10.5 million of funding in the form of
purchases of our common stock, including the conversion of the $3 Million Note
and the $1.5 Million Note. We anticipate that this funding (approximately $6
million of new cash proceeds), our current cash balances and expected internally
generated cash flows will be sufficient to fund our cash requirements for the
next twelve months.

In the event that our stockholders, other than the Funding Parties, do not
subscribe for a minimum of $2 million in the rights offering, we will not
consummate the rights offering and we will, subject to certain conditions,
obtain a maximum of $8.5 million in funding (including the $3 Million Note and
the $1.5 Million Note already received) in the form of, at the option of the
Funding Parties, a purchase of shares of our common stock at the subscription
price or the purchase of a senior secured note which is convertible into shares
of our common stock. In addition, the $3 Million Note and the $1.5 Million Note
may remain outstanding and payable at maturity in December 2004, which could
have an adverse effect on our expected near term working capital. In this event,
we anticipate that this funding, our current cash balances and expected
internally generated cash flows will be sufficient to fund our cash requirements
for the next twelve months. However, we may need to secure additional financing
upon the maturity of the $3 Million Note, the $1.5 Million Note and any notes
issued pursuant to the Investment Agreement. There can be no assurance that such
financing will be available on terms acceptable to us, or at all.

CONTRACTUAL OBLIGATIONS
AS OF SEPTEMBER 29, 2003

<Table>
<Caption>
DUE OCTOBER -
DECEMBER DUE IN 2004 DUE IN 2006 DUE AFTER
CONTRACTUAL OBLIGATIONS TOTAL 2003 AND 2005 AND 2007 2007
- ----------------------- -------------- ------------- ----------- ----------- ---------
(IN THOUSANDS)

Notes payable.................... $ 5,166.4 $ 394.9 $ 4,639.4 $ 100.8 $ 31.3
Employee severance obligations... 1,858.6 356.0 1,502.6
Employment agreement.............
Capital lease obligations........ 1.5 1.5
Operating lease obligations
(a)(b)......................... 103,020.6 3,153.0 26,158.7 25,859.8 47,849.0
</Table>

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

(a) Amounts shown are net of $2.5 million of sublease rental income due under
non-cancelable subleases.

(b) Includes approximately $11.6 million of obligations on leases for
restaurants that have either been closed or are planned to be closed.

We are obligated under non-cancelable operating leases for our restaurants
and our administrative offices. Lease terms are generally for ten years with
renewal options and generally require us to pay a proportionate share of real
estate taxes, insurance, common area and other operating costs. Some restaurant
leases provide for contingent rental payments.

PURCHASE COMMITMENT

During fiscal year 1999, we entered into an exclusive coffee supply
agreement with an unrelated third party ("Supplier"). The agreement calls for
minimum purchases, in terms of both quantity and price, to be made by us of
coffee beans and related products. The agreement is in effect through December
2003 but may be terminated by us or the Supplier provided 180 days notice is
given in advance of such termination. We are obligated to purchase approximately
$0.7 million of roasted coffee between now and fiscal year end 2003 under the
terms of that agreement.

During fiscal year 2002, we entered into a beverage marketing agreement
with the Coca-Cola Company. Under the agreement, we are obligated to purchase
approximately 2.0 million gallons of fountain syrups at the then-current
annually published national chain account prices.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In April 2002, the FASB approved SFAS 145, "Rescission of FASB Statements
No. 4, 44 and 54, Amendment of SFAS 13, and Technical Corrections." SFAS 145
rescinds previous accounting guidance, which required all gains and losses from
extinguishment of debt be classified as an extraordinary item. Under SFAS 145,
classification of debt extinguishment depends on the facts and circumstances of
the transaction. SFAS 145 is effective for fiscal years beginning after May 15,
2002. SFAS 145 did not have a material impact on our financial position or
results of our operations.

In June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which addresses accounting for restructuring,
discontinued operation, plant closing, or other exit or disposal activity. SFAS
146 requires companies to recognize costs associated with exit or disposal
activities when they are incurred rather than at the date of a commitment to an
exit or disposal plan. SFAS 146 is to be applied prospectively to exit or
disposal activities initiated after December 31, 2002. The adoption of SFAS 146
did not have a significant impact on our financial position or results of our
operations.

accounting for stock-based employee compensation and the effect of the method
used on reported results. The additional disclosure requirements of SFAS 148 are
effective for fiscal years ending after December 15, 2002 and have been
incorporated into the accompanying financial statements and footnotes. We have
elected to continue to follow the intrinsic value method of accounting as
prescribed by APB 25 to account for employee stock options.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN 46"), which clarifies the application of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements." FIN 46
defines variable interest entities and how an enterprise should assess its
interests in a variable interest entity to decide whether to consolidate that
entity. The interpretation requires certain minimum disclosures with respect to
variable interest entities in which an enterprise holds significant variable
interest but which it does not consolidate. FIN 46 applies immediately to
variable interest entities created after January 31, 2003, and to variable
interest entities in which an enterprise obtains an interest after that date. It
applies in the first fiscal year or interim period beginning after June 15, 2003
to variable interest entities in which an enterprise holds a variable interest
that it acquired before February 1, 2003. FIN 46 applies to public enterprises
as of the beginning of the applicable interim or annual period, and it applies
to nonpublic enterprises as of the end of the applicable annual period. FIN 46
may be applied prospectively with a cumulative-effect adjustment as of the date
on which it is first applied or by restating previously issued financial
statements for one or more years with a cumulative-effect adjustment as of the
beginning of the first year restated. The Company has not yet determined the
impact on its consolidated results of operations or financial condition that may
result from the application of FIN 46. In October 2003, FASB deferred the
effective date for applying the provisions of FIN 46 provided that conditions
are met. FIN 46 will now be effective December 31, 2003 for the Company.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risk exposures are related to our cash, cash equivalents,
investments and interest that we pay on our debt. We have no derivative
financial instruments or derivative commodity instruments in our cash, cash
equivalents and investments. We invest our excess cash in investment grade,
highly liquid, short-term investments. These investments are not held for
trading or other speculative purposes. Changes in interest rates affect the
investment income we earn on our investments and, therefore, impact our cash
flows and results of operations.

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

INFLATION

The primary inflationary factors affecting our business are food and labor
costs. A large number of our restaurant personnel are paid at rates based on the
applicable minimum wage, and increases in the minimum wage will directly affect
our labor costs. Many of our leases require us to pay taxes, maintenance,
repairs, insurance and utilities, all of which are generally subject to
inflationary increases. We believe that inflation has not had a material impact
on our results of operations in recent years.

THE RIGHTS OFFERING

THE RIGHTS

We are offering our stockholders the right to subscribe for and purchase a
number of shares of our common stock with an aggregate value equal to
$9,583,473, at the subscription price (as defined below). Only stockholders of
record as of the close of business on the record date of November 24, 2003, will
receive from us, without charge, non-transferable subscription rights to
purchase common stock in this offering. You are a record holder for this purpose
only if your name is registered as a stockholder with our transfer agent,
American Stock Transfer and Trust Company. We will not consummate the rights
offering if our stockholders subscribe for a number of shares with a value less
than $2.0 million pursuant to the basic subscription privilege and
over-subscription privilege.

You will receive one right for each share of common stock that you owned as
of the close of business on November 24, 2003. The total number of shares you
receive pursuant to the exercise of your rights will be rounded down to the
nearest whole number, so that you will not receive any fractional shares. You
will not receive rights with respect to any unexercised options or warrants that
you may hold to buy shares of our common stock.

EXPIRATION TIME

The rights will expire at 5:00 p.m., Eastern Standard time, on December 19,
2003, unless we extend the expiration date. We may extend the expiration date by
issuing a public announcement no later than 9:00 a.m. Eastern Standard Time on
the next business day after the expiration date. We do not currently intend to
extend the expiration time. Rights not exercised by the expiration time will
automatically expire and become null and void. We are not obligated to honor any
purported exercise of rights that the subscription agent receives after the
expiration of this offering, regardless of when you sent the documents relating
to that exercise.

SUBSCRIPTION PRIVILEGES

Your rights entitle you to the basic subscription privilege and the
over-subscription privilege.

Basic Subscription Privilege. Each right you hold will entitle you to
purchase a number of shares of our common stock with a value equal to an
aggregate of $0.6776, at the subscription price. You are entitled to subscribe
for all, or any portion of, the shares that may be acquired through the exercise
of your rights. We will deliver certificates representing shares of common stock
purchased pursuant to the basic subscription privilege as soon as practicable
after the expiration time.

Over-subscription Privilege. If you fully exercise your basic subscription
privilege and our stockholders subscribe for an aggregate of less than $7.5
million pursuant to their basic subscription privilege, you also will have an
over-subscription right to subscribe, at the subscription price, to purchase
additional shares of common stock that are not otherwise purchased by other
stockholders in this offering, up to an aggregate offering of $7.5 million. You
will only be entitled to the over-subscription privilege if you exercise your
basic subscription privilege in full.
38

Shares will be available for purchase pursuant to the over-subscription
privilege only to the extent that other stockholders do not exercise their basic
subscription privileges in an aggregate amount of less than $7.5 million. The
maximum number of shares for which you will be able to subscribe pursuant to
your over-subscription privilege will equal your pro rata share of the total
amount of shares available for over-subscription. The total value of shares
available for over-subscription will equal $7.5 million reduced by the total
value of shares subscribed for pursuant to all stockholders' basic subscription
privilege. Your pro rata share will be based upon the total number of shares of
our common stock and warrants to purchase shares of our common stock you own
compared to the total number of shares of our common stock and warrants to
purchase shares of our common stock held by all stockholders who exercise their
over-subscription privilege and the Funding Parties. If the shares available are
not sufficient to satisfy all subscriptions pursuant to the over-subscription
privilege, those excess shares will be allocated on a pro rata basis among those
record date holders exercising the over-subscription privilege in proportion to
the number of shares of common stock and warrants to purchase shares of common
stock owned by each such holder on the record date relative to the number of
shares of common stock and warrants to purchase shares of common stock owned on
the record date by all holders exercising the over-subscription privilege and
the Funding Parties. If the pro rata allocation would result in your being
allocated a greater number of excess shares than you subscribed for pursuant to
your over-subscription privilege, then you will be allocated only the number of
excess shares for which you over-subscribed. The remaining excess shares will be
allocated among all other holders exercising the over-subscription privilege on
the same pro rata basis outlined above.

Payments for over-subscriptions will be deposited upon receipt by the
subscription agent and held in escrow pending a final determination of the
number of underlying shares to be issued pursuant to such over-subscription
privilege. If a proration of the excess shares results in your receiving excess
shares with a value less than you subscribed for pursuant to the
over-subscription privilege, then the excess funds you paid as the subscription
price for shares not issued will be returned to you without interest or
deduction. Certificates representing underlying shares purchased pursuant to the
over-subscription privilege will be delivered to subscribers or their nominee
record holders as soon as practicable after the expiration time and after we
have completed all prorations and adjustments contemplated by the terms of the
rights offering.

Banks, brokers and other nominee record holders who exercise the
over-subscription privilege on behalf of beneficial owners of rights will be
required to certify to the subscription agent and to us the aggregate number of
rights as to which the over-subscription privilege has been exercised and the
aggregate value of underlying shares thereby subscribed for by each beneficial
owner of rights on whose behalf the nominee holder is acting.

MAXIMUM OFFERING

We expect to sell shares of our common stock with a maximum aggregate
offering price of $9,583,473.

SUBSCRIPTION PRICE

NO FRACTIONAL SHARES OR CASH IN LIEU THEREOF

We will not issue fractional shares in this offering and we will not pay
cash for any fractional shares to which you might otherwise be entitled. We will
accept any subscription indicating a purchase of fractional shares by rounding
down to the nearest whole share and refunding as promptly as practicable,
without interest, any payment received for a fractional share.

FUNDING PARTIES

We have entered into an Investment Agreement with Eric J. Gleacher, Charles
G. Phillips, LJCB, and ZAM Holdings, L.P., collectively the "Funding Parties".
Pursuant to the Investment Agreement, subject to certain
39

conditions, the Funding Parties have agreed to provide funding to us in an
aggregate amount up to $8.5 million reduced by the amount outstanding under the
$3 Million Note and the $1.5 Million Note. At the option of the Funding Parties,
the Funding Parties may fund such greater amount permitted by the Investment
Agreement to allow the Funding Parties to maintain certain relative ownership
levels. If our stockholders (other than the Funding Parties) subscribe for at
least $2.0 million worth of shares in this rights offering, the Funding Parties
would, subject to certain conditions, provide this funding in the form of an
investment in our common stock at the subscription price. Following consummation
of this rights offering the Funding Parties who hold the senior secured
promissory notes would convert the notes into shares of our common stock. If our
stockholders (other than the Funding Parties) do not subscribe for at least $2.0
million worth of shares in this rights offering, we will not consummate this
offering and the Funding Parties will, subject to certain conditions, provide
this funding to us in the form of, at their option, a purchase of shares of our
common stock at the subscription price or the purchase of a senior secured note
which is convertible into shares of our common stock. In addition, the Funding
Parties will not be required to convert the $3 Million Note and the $1.5 Million
Note into shares of our common stock. Furthermore, if the Funding Parties,
pursuant to the Investment Agreement, elect to provide funding in the form of a
senior secured convertible note, such note, along with the $3 Million Note and
the $1.5 Million Note, will be secured by all of our tangible and intangible
property (other than equipment pledged to secure our equipment loan credit
facility). Therefore, our stockholders' equity interest in Cosi will be
effectively subordinate to the senior secured position of the Funding Parties.
The Funding Parties have agreed not to exercise their basic subscription
privilege or over-subscription privilege in this rights offering. If our
stockholders (other than the Funding Parties) subscribe for at least $7.5
million worth of shares in this rights offering, the Funding Parties are not
obligated to provide any additional funding to us (other than the $3 Million
Note and the $1.5 Million Note). The $8.5 million in funding described above is
allocated as follows: (a) Mr. Gleacher, $2,000,000; (b) Mr. Phillips, $750,000;
(c) LJCB, $750,000 and (d) ZAM Holdings, $5,000,000.

The terms of the senior secured convertible note to be issued by us if our
stockholders, other than the Funding Parties, do not subscribe for $2 million in
the Rights Offering and the Funding Parties elect to purchase a convertible
note, will be substantially similar to those of the $3 Million Note and the $1.5
Million Note.

REPRESENTATIONS AND WARRANTIES

Under the Investment Agreement we have made representations and warranties
to the Funding Parties relating to (among other things):

- Our organization, good standing, qualification to do business and other
corporate matters;

- Our power and authority to execute, deliver and perform our obligations
in connection with the Investment Agreement;

- Required consents and approvals, and absence of violations of laws;

- Our compliance with the reporting requirements of the SEC; and

- The due authorization of the issuance of shares of our common stock
pursuant to the Investment Agreement.

The Funding Parties have made representations and warranties to us,
relating to (among other things):

- Their organization, good standing, and other corporate, personal or
partnership matters;

- Their power and authority to execute, deliver and perform their
obligations in connection with the Investment Agreement;

- Required consents and approvals, and absence of violations of laws; and

- The fact that each Funding Party is an accredited investor within the
meaning of Rule 501(a) promulgated under the Securities Act of 1933, as
amended.

CONDITIONS TO CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THE INVESTMENT
AGREEMENT. The obligations of the Funding Parties under the Investment
Agreement are subject to the fulfillment of the following conditions (among
others):

- The accuracy of our representations and warranties;

- No legal or judicial barriers to the transactions contemplated by the
Investment Agreement;

- Receipt of required consents, approvals, authorizations, waivers and
amendments;

- Execution of a supplemental Registration Rights Agreement;

- Approval of the common stock issuable under the Investment Agreement for
quotation on Nasdaq; and

- Receipt of the opinion of our outside counsel with respect to the
Investment Agreement and the transactions contemplated thereby.

TERMINATION OF THE INVESTMENT AGREEMENT. The Investment Agreement may be
terminated, and the transactions contemplated thereby abandoned, by a Funding
Party prior to the closing of the transactions contemplated thereby (among
others):

1. At any time after December 31, 2003;

2. If a court or governmental entity has issued a final and
non-appealable order permanently enjoining or prohibiting the transactions
contemplated by the Investment Agreement;

3. If any of our representations, warranties, covenants or agreements
are breached or, if any of our representations or warranties fails to be
true and correct, in either case such that any condition to closing can not
be satisfied on or before the date specified in Item 1, above;

4. If there has occurred a material adverse change with respect to us;

5. If we change our jurisdiction of incorporation, merge with another
entity, dispose of all or substantially all of our assets, file for
bankruptcy, or incur additional indebtedness in excess of $3 million; or

6. If we default on the $3 Million Note or the $1.5 Million Note.

INDEMNIFICATION. We have agreed to indemnify each Funding Party and all of
its representatives from and against any liability and expenses incurred by each
Funding Party and all of its representatives in connection with or arising from
the Investment Agreement and any other transactions related thereto, except to
the extent of any willful misconduct or gross negligence of the Funding Parties.

The foregoing description of the Investment Agreement is qualified in its
entirety by the text of the Investment Agreement which is an exhibit to the
registration statement that includes this prospectus.

NON-TRANSFERABILITY OF THE RIGHTS

Both the basic subscription privilege and over-subscription privileges are
non-transferable and non-assignable. Only the person to whom the rights are
issued may exercise those rights.

PROCEDURE TO EXERCISE RIGHTS

You may exercise your subscription rights by delivering to the subscription
agent, American Stock Transfer & Trust Company, the properly completed and
executed rights certificate(s) at or prior to the expiration time, with any
signatures guaranteed as required, together with payment in full of the
aggregate value of shares which you elect to purchase. You may make payment only
by check or bank draft drawn upon a U.S. bank, or postal, telegraphic or express
money order. Make your check, draft or money order payable to American Stock
Transfer & Trust Company, as Subscription Agent.

The subscription price will be deemed to have been received by the
subscription agent only upon (i) clearance of any uncertified check or (ii)
receipt by the subscription agent of any certified check or bank draft drawn
upon a U.S. bank or of any postal, telegraphic or express money order. Funds
paid by uncertified personal
41

check may take at least seven business days to clear. Accordingly, if you wish
to pay the aggregate value of shares which you elect to purchase by means of
uncertified personal check, you are urged to make payment sufficiently in
advance of the expiration time to ensure that such payment is received and
clears by such time and are urged to consider in the alternative payment by
means of certified or cashier's check or money order.

All funds received in payment of the aggregate value of shares which you
elect to purchase will be held by the subscription agent and may be invested at
our discretion in short-term certificates of deposit, short-term obligations of
the United States, any state or agency thereof, or money market mutual funds
investing in the foregoing instruments. The account in which such funds will be
held is not insured by the Federal Deposit Insurance Corporation. We will retain
any interest earned on such funds.

The subscription agent's address, which is the address to which the rights
certificates and payment of the aggregate value of shares which you elect to
purchase should be delivered, whether by mail, by hand, or by overnight courier,
is: American Stock Transfer & Trust Co.; 59 Maiden Lane, Plaza Level, New York,
New York 10038.

The subscription agent's telephone number is (718) 921-8200. We will pay
the fees and expenses of the subscription agent. We also have agreed to
indemnify the subscription agent from certain liabilities that it may incur in
connection with the rights offering.

If you do not indicate the number of rights you are exercising, or do not
forward full payment of the aggregate value of shares which you elect to
purchase, then you will be deemed to have exercised the basic subscription
privilege with respect to the maximum number of rights that may be exercised for
the subscription price payment that you delivered. If you are a record date
holder, to the extent that the aggregate value of shares which you elect to
purchase exceeds the product of the subscription price multiplied by the number
of rights evidenced by the rights certificate(s) you delivered, you will be
deemed to have exercised the over-subscription privilege to purchase, to the
extent available, that number of whole excess shares equal to the quotient
obtained by dividing the excess price paid by the subscription price. Any amount
remaining after application of these procedures will be returned to you as soon
as practicable by mail without interest or deduction.

Until we issue certificates representing shares of common stock, we will
hold any funds as described above. If shares are not issued pursuant to the
basic subscription privilege, or if you are allocated less than all of the
shares for which you subscribed pursuant to the over-subscription privilege,
then the funds held in escrow you paid as the subscription price for shares not
issued or for excess shares not allocated to you will be returned by mail
without interest or deduction as soon as practicable after the expiration time
and after all prorations and adjustments contemplated by the terms of the rights
offering have been effected.

We will mail the certificates representing shares of our common stock
subscribed for and issued pursuant to the basic subscription privilege as soon
as practicable after the expiration time. We will mail the certificates
representing shares of common stock subscribed for and issued pursuant to the
over-subscription privilege as soon as practicable after all prorations and
adjustments contemplated by the terns of the rights offering have been effected.
Certificates for shares of common stock issued pursuant to the exercise of
rights will be registered in the name of the rights holder exercising such
rights.

If you hold shares of common stock for the account of others, such as in
your capacity as a broker, trustee or depository for securities, you should
contact the respective beneficial owners of such shares as soon as possible to
ascertain those beneficial owners' intentions and to obtain instructions with
respect to their rights. If a beneficial owner so instructs, you should complete
appropriate rights certificates and submit them to the subscription agent with
the proper payment. In addition, beneficial owners of common stock or rights
held through such a nominee holder should contact the nominee holder and request
the nominee holder to effect transactions in accordance with the beneficial
owner's instructions.

The instructions accompanying the rights certificates should be read
carefully and followed in detail. Rights certificates should be sent with
payment to the subscription agent at the address provided above. Please do not
send rights certificates or payment to us.

The method of payment of the subscription price to the subscription agent
will be at your own election and risk. If you send rights certificates and
payments by mail, you are urged to send the materials by registered mail,
properly insured, with return receipt requested, and are urged to allow a
sufficient number of days to ensure delivery to the subscription agent and
clearance of payment prior to the expiration time.

We will determine all questions concerning the timeliness, validity, form
and eligibility of any exercise of rights and our determinations will be final
and binding. In our sole discretion, we may waive any defect or irregularity, or
permit a defect or irregularity to be corrected within such time as we may
determine, or reject the purported exercise of any right. Neither we nor the
subscription agent will be under any duty to give notification of any defect or
irregularity in connection with the payment of the subscription price or incur
any liability for failure to give such notification. We reserve the right to
reject any exercise if such exercise is not in accordance with the terms of the
rights offering or not in proper form or if the acceptance thereof or the
issuance of shares of common stock pursuant thereto could be deemed unlawful.

If you have any questions or requests for assistance concerning the
exercise of your rights or requests for additional copies of this prospectus,
you should contact American Stock Transfer & Trust Company at (718) 921-8200.

NO REVOCATION OF YOUR SUBSCRIPTION EXERCISE

Once you have exercised your basic subscription privilege or
over-subscription privilege, you may not revoke that exercise. You should not
exercise your subscription rights unless you are certain that you wish to
purchase additional shares of common stock.

COMMISSIONS AND FEES

Except for the fees charged by the subscription agent (which we will pay),
all commissions, fees and other expenses (including brokerage commissions)
incurred in connection with the exercise of rights will be for the account of
the holder of the rights and none of such commissions, fees or expenses will be
paid by us or by the subscription agent.

NO BOARD OR FINANCIAL ADVISOR RECOMMENDATION

Our board of directors makes no recommendation to you about whether you
should exercise any or all of the rights that are being distributed to you. We
have not retained a financial advisor to make any recommendation to you about
whether you should exercise your rights. Whether or not you intend to invest in
our common stock, you should read, among other things, the risks that are
described in the section "Risk Factors" and make your decision based on your own
assessment of your best interests.

TERMINATION OF THIS OFFERING

If our stockholders (other than the Funding Parties) do not subscribe for
at least $2.0 million worth of shares in the rights offering, we will not
consummate this offering. We reserve the right to terminate this offering at any
time and for any reason. If this offering is terminated, all subscription funds
received from stockholders will be refunded without interest. We will not
consummate the rights offering if we would be required to issue more than
19,166,946 shares.

CONSEQUENCES OF A FAILURE TO EXERCISE RIGHTS

You will retain your current number of shares of our common stock even if
you do not exercise your subscription rights. However, if other stockholders
exercise their subscription rights or the Funding Parties otherwise purchase
shares of our common stock pursuant to the Investment Agreement or convert their
notes and you do not exercise your subscription rights, your relative percentage
ownership of our common stock will decrease, and your relative voting rights and
economic interests will be diluted. If you fully subscribe for your basic
subscription amount and our stockholders subscribe for an aggregate of more than
$7.5 million pursuant to their basic subscription amount, your percentage
ownership of our equity will be reduced. If you fully subscribe

for your basic subscription amount and our stockholders subscribe for an
aggregate of less than $7.5 million but more than $2 million, your percentage
ownership of our equity will not be reduced; however, your ownership percentage
relative to certain of the Funding Parties will be reduced.

If our stockholders (other than the Funding Parties) do not subscribe for a
minimum of $2 million pursuant to the basic subscription privilege and the
over-subscription privilege we will not consummate the rights offering and the
Funding Parties may elect, pursuant to the Investment Agreement, to provide
funding in the form of a senior secured note convertible into shares of our
common stock. Additionally, the Funding Parties will not be required to convert
the outstanding amount of the $3 Million Note and the $1.5 Million Note into
shares of our common stock. Such notes may remain outstanding and be payable
upon maturity in December 2004, which could have an adverse effect on our near
term working capital. In this event, we may need to secure additional financing
upon the maturity of the $3 Million Note, the $1.5 Million Note and any notes
issued pursuant to the Investment Agreement. There can be no assurance that we
will be able to obtain such financing on favorable terms or at all. Furthermore,
if the Funding Parties elect to provide funding in the form of a purchase of a
senior secured convertible note, such note, along with the $3 Million Note and
the $1.5 Million Note, will be secured by all of our tangible and intangible
property (other than equipment pledged to secure our equipment loan credit
facility). Therefore, our stockholders' equity interest in Cosi will be
effectively subordinate to the senior secured position of the Funding Parties.

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

This section describes the material United States federal income tax
consequences relating to the receipt and exercise of rights. This section
applies to you only if you acquire your rights in the distribution and hold your
rights as capital assets for tax purposes. This section does not apply to you if
you are a member of a special class of holders subject to special rules,
including:

- a broker or dealer in securities or currencies;

- a trader in securities that elects to use a mark-to-market method of
accounting for your securities holdings;

- a tax-exempt organization;

- a financial institution;

- a life insurance company;

- a person liable for alternative minimum tax;

- a person that holds rights as part of a straddle, hedge, conversion,
"synthetic security" or other integrated or risk-reduction transaction;

- a United States expatriate; or

- a person whose functional currency is not the U.S. dollar.

This section is based on the Internal Revenue Code of 1986, as amended, its
legislative history, existing and proposed Treasury regulations, administrative
rulings and court decisions, all as currently in effect as of the date of this
prospectus, and all of which are subject to change, possibly on a retroactive
basis. This summary does not discuss all of the aspects of United States federal
income taxation that may be relevant to you in light of your particular
circumstances. In addition, this summary does not discuss any state, local or
foreign tax consequences. RIGHTS HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS
AS TO THE FEDERAL INCOME TAX CONSEQUENCES OF THE OFFERING THAT ARE RELEVANT TO
THEIR PARTICULAR SITUATIONS, AS WELL AS THE EFFECTS OF STATE, LOCAL AND NON-U.S.
TAX LAWS.

You are a "U.S. holder" for the purposes of this discussion if you are the
beneficial owner of rights and you are any one of the following:

- a citizen or resident of the United States;

- a domestic corporation or other entity, not including a partnership, that
is created or organized in or under the laws of the United States or of
any political subdivision thereof and is subject to United States
taxation;

- an estate the income of which is subject to United States federal income
tax regardless of its source; or

- a trust if a United States court can exercise primary supervision over
the trust's administration and one or more United States persons are
authorized to control all substantial decisions of the trust.

A "non-U.S. holder" is any holder of rights that is not a U.S. holder.

If a partnership receives rights, the tax treatment of a partner generally
will depend upon the status of the partner and the activities of the
partnership. If you are a partnership, or a partner in a partnership, that will
receive rights, you should consult your tax advisor regarding the particular tax
consequences to you.

DISTRIBUTION OF RIGHTS

Under the United States federal income tax laws, the distribution of rights
to you will be treated as a tax-free stock dividend, and you will not be
required to include any amount in income with respect to such distribution.

U.S. HOLDERS

BASIS AND HOLDING PERIOD OF THE RIGHTS

If the fair market value of a right on the date of distribution is less
than 15% of the fair market value of a share of our common stock on that date
(with the fair market value for shares based upon the average of the high and
low trading prices for shares on that date), your tax basis in a right will be
zero unless you elect to allocate your tax basis in our common stock between the
common stock and the rights in proportion to their relative fair market values.
This election would need to be made for all the rights distributed to you, in
the form of a statement attached to your United States federal income tax return
for the year in which you receive the rights. If made, this election would be
irrevocable. If the fair market value of a right on the date of distribution is
15% or more of the fair market value of a share of our common stock, you will be
required to allocate your tax basis in our common stock between the rights and
the common stock in proportion to their relative fair market values. Your
holding period for your rights will include your holding period for the shares
of common stock with respect to which the rights were distributed.

EXPIRATION OF RIGHTS

If the rights expire without exercise, no basis will be allocated to the
rights and no loss will be recognized upon their expiration. In this case, your
basis in our common stock would not be reduced as a result of the distribution
of the rights.

EXERCISE OF RIGHTS

If you are a U.S. holder, you will not recognize gain or loss upon exercise
of a right.

TAX BASIS OF COMMON STOCK ACQUIRED UPON EXERCISE OF A RIGHT

The tax basis of each share of our common stock acquired by an exercise of
a right will equal the sum of the exercise price to acquire our stock and the
tax basis, if any, with respect to the right. The holding period of any share of
our common stock acquired as a result of your exercise of a right will begin
with and include the date of the right exercise.

NON-U.S. HOLDERS

If you are a non-U.S. holder, you will generally not be subject to United
States federal income tax in respect of any gain you recognize on the sale or
other taxable disposition of common stock, unless:

1. the gain is effectively connected with your conduct of a trade or
business within the United States or, if a tax treaty applies, is
attributable to your United States permanent establishment;

2. if you are an individual and you hold our stock as a capital asset,
you are present in the United States for 183 or more days in the taxable
year of the disposition and certain other tests are met; or

3. you are subject to tax under the provisions of United States
federal income tax law applicable to certain United States expatriates.

If you are a non-U.S. holder, gain you derive from the sale or other
disposition of common stock that is effectively connected with your conduct of a
trade or business within the United States is generally taxed at the graduated
rates applicable to United States persons. If you are a corporation, such
effectively connected income may also be subject to the United States branch
profits tax. If you are described under clause (2) of the preceding paragraph,
you will be subject to a flat 30% tax on the gain derived in the disposition,
which may be offset by certain U.S.-source capital losses recognized within the
same taxable year as such disposition.

NON-U.S. HOLDERS ARE URGED TO CONSULT THEIR UNITED STATES TAX ADVISORS
REGARDING THE TAX CONSEQUENCES OF INVESTING IN OUR STOCK.

BACKUP WITHHOLDING AND INFORMATION REPORTING

If you are a non-U.S. holder, your sale, exchange or other disposition of
our common stock acquired through the exercise of a right may be subject to
information reporting to the IRS. Copies of these information returns also may
be made available under the provisions of a specific treaty or agreement to the
tax authorities of the country in which the you reside. Backup withholding may
apply to "reportable payments" if you fail to provide a correct taxpayer
identification number and certain other information, fail to provide a
certification of exempt status or fail to report your full dividend and interest
income.

Payment to or through the United States office of any broker, U.S. or
foreign, of the proceeds of the disposition of our common stock acquired through
the exercise of a right generally will be subject to information reporting and
backup withholding unless you certify as to your non-U.S. status under penalties
of perjury or otherwise establish that you qualify for an exemption, provided
that the broker does not have actual knowledge that you are a U.S. holder or
that the conditions of any other exemption are not in fact satisfied. Payment to
or through a foreign office of a broker of the proceeds of the disposition of
our common stock acquired through the exercise of a right generally will not be
subject to information reporting or backup withholding; however, if such broker
has certain connections to the United States, then information reporting, but
not backup withholding, will apply unless you establish your non-U.S. status.

Backup withholding is not an additional tax; any amounts withheld under the
backup withholding rules will be allowed as a refund or credit against your
United States federal income tax liability provided the required information is
furnished to the IRS. The information reporting requirements may apply
regardless of whether backup withholding is required.

The foregoing discussion of U.S. federal income and estate tax
considerations is not tax advice. Accordingly, each prospective Non-U.S. Holder
of our common stock should consult that holder's own tax adviser with respect to
the federal, state, local and non-U.S. tax consequences of the acquisition,
ownership and disposition of our common stock.

PLAN OF DISTRIBUTION

We will distribute by mail a copy of this prospectus and the rights
certificates evidencing the rights to our holders of record as of November 24,
2003, on or about November 25, 2003. We expect that the holders of record who
hold shares of our common stock on behalf of beneficial owners will forward a
copy of this prospectus and the related subscription information and forms to
those beneficial holders in adequate time to permit beneficial owners to
complete and deliver any subscription instructions to those banks, brokers or
other nominees. However, we cannot assure you that this will be the case.

As discussed above, we have engaged American Stock Transfer & Trust Company
as our subscription agent to assist in the distribution of the rights, this
prospectus and the related subscription information and forms. American Stock
Transfer & Trust Company, as our subscription agent, will receive and process
all rights certificates from our holders of record and will distribute
certificates for the shares of our common stock purchased by holders of record
upon the expiration of this offering. We have not engaged an underwriter to
conduct a distribution of any shares not purchased upon the exercise of the
rights.

BUSINESS

GENERAL

We operate our restaurants in two formats: Cosi and Cosi Downtown. The
majority of our restaurants offer breakfast, lunch and afternoon coffee in a
counter service format. Cosi Downtown restaurants, which are located in
non-residential central business districts, close for the day in the early
evening, while Cosi restaurants offer dinner and dessert in a casual dining
atmosphere. The atmosphere of Cosi is appropriately managed for each daypart by
changing the music and lighting throughout the day. Our restaurants are located
in a wide range of markets and trade areas, including business districts and
residential communities in both urban and suburban locations. All of our
restaurants are designed to be welcoming and comfortable, featuring oversized
sofas, chairs and tables, and faux painted walls. The atmosphere of Cosi is
appropriately managed for each daypart by changing the music, both style and
volume, and lighting throughout the day. The design scheme of our counters and
bars, menu boards as well as condiment counters and server stations incorporate
warm colors and geometric patterns, intended to create a visual vocabulary that
can be easily identified by our customers.

Our restaurants are located in a wide range of markets and trade areas,
including business districts and residential communities in both urban and
suburban locations. We believe that we have created significant brand equity in
our markets and that we have demonstrated the appeal of our concept to a wide
variety of customers. In 2003, we announced our intention to incorporate a
franchising and area developer model into our business strategy. We expect that
restaurants we own will always be an important part of our new restaurant
growth, and we believe that incorporating a franchising and area developer model
into our strategy will position us to maximize the market potential for the Cosi
brand and concept consistent with our available capital and thus maximize
stockholder value.

HISTORY

Cosi Sandwich Bar. The Cosi Sandwich Bar concept was created in Paris in
the early 1990s and brought to the United States by us in 1996. Cosi Sandwich
Bar's signature "crackly crust" flatbread, derived from a generations-old
Italian recipe, was prepared daily at each restaurant where fresh loaves were
baked throughout the day. Cosi Sandwich Bar focused on selling sandwiches in
high-density central business districts in New York, Washington DC, Boston and
Philadelphia.

Xando Coffee and Bar. Xando Coffee and Bar, founded in 1994, was an
innovative concept that went beyond the traditional specialty coffee bar. Xando
Coffee and Bar locations were open for five dayparts. The 5 p.m. "unveiling" of
a full liquor bar featured coffee cocktails and was intended to create a dynamic
evening environment. The atmosphere of Xando Coffee and Bar was adjusted
appropriately for each daypart by changing the music and lighting throughout the
day. The evening environment was completed by the addition of table service.

CONCEPT AND BUSINESS STRATEGY

Our objective is to build a nationwide system of distinctive restaurants
that generate attractive unit economics by appealing to a broad range of
customers. In 2003, we announced our intention to incorporate a franchising and
area developer model into our business strategy. We expect that company-owned
restaurants will always be an important part of our new restaurant growth, and
we believe that incorporating a franchising and area developer model into our
strategy will position us to maximize the market potential for the Cosi brand
and concept consistent with our available capital and thus maximize stockholder
value.

PROPERTIES

All of our restaurants are located on leased properties. Each lease
typically has a 10-year base rent period, with various renewal options. Each
lease requires a base rent, and some locations provide for contingent rental
payments. At most locations, we reimburse the landlords for a proportionate
share of either the landlord's taxes or yearly increases in the landlord's
taxes. The following table depicts existing restaurants, by region as of
November 24, 2003:

<Table>
<Caption>
STREET ADDRESS CITY DATE OPENED FORMAT
- -------------- -------------------- -------------- --------------

NORTHEAST
103 Pratt Street........................ Hartford, CT October 1994 Cosi(a)
338 Elm Street.......................... New Haven, CT March 1996 Cosi
970 Farmington Avenue................... W. Hartford, CT August 1999 Cosi
133 Federal Street...................... Boston, MA October 1998 Cosi Downtown
53 State Street......................... Boston, MA May 1999 Cosi Downtown
14 Milk Street.......................... Boston, MA July 1999 Cosi Downtown
2160 Broadway........................... New York, NY May 1997 Cosi
504 Avenue of the Americas.............. New York, NY March 1998 Cosi
257 Park Avenue South................... New York, NY February 1999 Cosi
165 East 52nd Street.................... New York, NY February 1996 Cosi Downtown
38 East 45th Street..................... New York, NY February 1997 Cosi Downtown
11 West 42nd Street..................... New York, NY June 1997 Cosi Downtown
60 East 56th Street..................... New York, NY September 1997 Cosi Downtown
3 World Financial Center................ New York, NY January 1998 Cosi Downtown
55 Broad Street......................... New York, NY March 1998 Cosi Downtown
54 Pine Street.......................... New York, NY May 1998 Cosi Downtown
1633 Broadway........................... New York, NY July 1998 Cosi Downtown
61 West 48th Street..................... New York, NY August 1998 Cosi Downtown
685 Third Avenue........................ New York, NY June 1999 Cosi Downtown
461 Park Avenue South................... New York, NY January 2000 Cosi
50 Purchase Street...................... Rye, NY March 2000 Cosi
320 Park Avenue......................... New York, NY July 2000 Cosi Downtown
841 Broadway............................ New York, NY September 2000 Cosi
15 S. Moger Avenue...................... Mt. Kisco, NY December 2000 Cosi
545 Washington Boulevard................ Jersey City, NJ May 2001 Cosi Downtown
369 Lexington Avenue.................... New York, NY August 2001 Cosi Downtown
77 Quaker Ridge Road.................... New Rochelle, NY November 2001 Cosi
1298 Boston Post Road................... Larchmont, NY December 2001 Cosi
471 Mount Pleasant Road................. Livingston, NJ September 2002 Cosi
29 Washington St........................ Morristown, NJ December 2002 Cosi
498 7th Ave............................. New York, NY December 2002 Cosi
</Table>

<Table>
<Caption>
STREET ADDRESS CITY DATE OPENED FORMAT
- -------------- -------------------- -------------- --------------

385 West Main Street.................... Avon, CT December 2002 Cosi
51 East Pallisade....................... Englewood, NJ February 2003 Cosi
700 6th Avenue.......................... New York, NY February 2003 Cosi
MID-ATLANTIC
234 South 15th Street................... Philadelphia, PA September 1996 Cosi
325 Chestnut Street..................... Philadelphia, PA April 1997 Cosi
1128 Walnut Street...................... Philadelphia, PA December 1997 Cosi
201 South 18th Street................... Philadelphia, PA October 2000 Cosi
761 Lancaster Avenue.................... Bryn Mawr, PA September 1998 Cosi
215 Lombard Street...................... Philadelphia, PA May 1999 Cosi
1700 Market Street...................... Philadelphia, PA September 1999 Cosi Downtown
140 South 36th Street................... Philadelphia, PA August 1998 Cosi
King of Prussia Mall.................... King of Prussia, PA November 2001 Cosi
11909 Democracy Drive................... Reston, VA May 2001 Cosi
3003 N. Charles Street.................. Baltimore, MD December 1998 Cosi (a)
1350 Connecticut Avenue................. Washington, DC September 1997 Cosi
1647 20th Street NW..................... Washington, DC August 1998 Cosi
301 Pennsylvania Avenue SE.............. Washington, DC March 1999 Cosi
2050 Wilson Boulevard................... Arlington, VA April 1999 Cosi
1700 Pennsylvania Avenue................ Washington, DC August 1999 Cosi Downtown
700 King Street......................... Alexandria, VA May 2000 Cosi
700 11th Street......................... Washington, DC May 2000 Cosi
4250 Fairfax Drive...................... Arlington, VA June 2000 Cosi
1919 M Street........................... Washington, DC September 2000 Cosi
1001 Pennsylvania Avenue NW............. Washington, DC October 2000 Cosi Downtown
7251 Woodmont Avenue.................... Bethesda, MD December 2000 Cosi
177 Kentlands Blvd...................... Gaithersburg, MD January 2003 Cosi
1501 K Street NW........................ Washington, DC December 2001 Cosi Downtown
1875 K Street........................... Washington, DC July 2002 Cosi Downtown
601 Pennsylvania Ave. NW................ Washington, DC September 2002 Cosi
1275 K Street........................... Washington, DC September 2002 Cosi
295 Main St............................. Exton, PA November 2002 Cosi
5252 Wisconsin Ave, NW.................. Washington, DC December 2002 Cosi
1333 H Street, NW....................... Washington DC January 2003 Cosi Downtown
MID-WEST
116 S. Michigan Avenue.................. Chicago, IL September 2000 Cosi
55 E. Grand Street...................... Chicago, IL October 2000 Cosi
230 W. Washington Street................ Chicago, IL November 2000 Cosi Downtown
203 North LaSalle Street................ Chicago, IL May 2001 Cosi Downtown
230 West Monroe Street.................. Chicago, IL May 2002 Cosi Downtown
1101 Lake Street........................ Oak Park, IL June 2001 Cosi
25 E. Hinsdale.......................... Hinsdale, IL December 2001 Cosi
1402 Commons Drive...................... Geneva, IL September 2002 Cosi
4074 The Strand West.................... Columbus, OH October 2001 Cosi
</Table>

<Table>
<Caption>
STREET ADDRESS CITY DATE OPENED FORMAT
- -------------- -------------------- -------------- --------------

6390 Sawmill Road....................... Columbus, OH September 2002 Cosi
2212 East Main Street................... Bexley, OH September 2002 Cosi
301 South State Street.................. Ann Arbor, MI May 2001 Cosi
101 North Old Woodward Avenue........... Birmingham, MI August 2001 Cosi
301 East Grand River Avenue............. East Lansing, MI May 2002 Cosi
8775 N. Port Washington Road............ Fox Point, WI December 2001 Cosi
30995 Orchard Lake Road................. Farmington Hills, MI July 2002 Cosi
84 W. Adams Road........................ Rochester Hills, MI September 2002 Cosi
28674 Telegraph Rd...................... Southfield, MI November 2002 Cosi
1478 Bethel Rd.......................... Columbus, OH November 2002 Cosi
233 North Michigan Ave.................. Chicago, IL December 2002 Cosi Downtown
37652 Twelve Mile Road.................. Farmington Hills, MI December 2002 Cosi
15131 LaGrange Rd. ..................... Orland Park, IL December 2002 Cosi
7166 N. High Street..................... Worthington, OH December 2002 Cosi
28 East Jackson Blvd.................... Chicago, IL January 2003 Cosi Downtown
1310 Polaris Parkway.................... Polaris, OH February 2003 Cosi
</Table>

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

(a) Currently operating as a Xando Coffee and Bar location.

COSI PRODUCTS

We offer proprietary bread and coffee products for all five dayparts
- -breakfast, lunch, afternoon coffee, dinner and dessert. Our food menu includes
Cosi Squagels(R) (square bagels made from Cosi bread), sandwiches, salads,
soups, Cosi Corners(TM) and other appetizers, Warm n' Cosi Melts(TM), pizzas,
s'mores and other desserts. Our beverage menu features a full line of coffee
beverages, teas, Arctic smoothies, mochas and lattes, Screamers(R) (coffee
beverages topped with ice cream) and our signature coffee cocktails.

We periodically introduce new menu segments and products in order to keep
our product offerings relevant to consumers in each daypart. New recipes are
developed by our executive chef in conjunction with our partner suppliers. These
recipes are thoroughly evaluated, both internally and through consumer focus
groups. New products are intended to drive customer frequency and average
checks, resulting in increased average unit volumes in new locations and
positive same restaurant sales increases in existing locations.

PEOPLE

At September 29, 2003, we had 3,150 employees, 49 of which served in
administrative or executive capacities, 248 of which served as restaurant
management personnel, and 2,853 of which were hourly restaurant personnel.

None of our employees are covered by collective bargaining agreements and
we have never experienced an organized work stoppage or strike. We believe that
our working conditions and compensation packages are competitive and consider
relations with our employees to be good.

OPERATIONS

Management Structure. The restaurant operations team is built around
regional centers, led by a Regional Vice President, who reports to our Senior
Vice President of Operations. Each Regional Vice President is responsible for
all operations, training, recruiting and human resources within his or her
region. The Regional Vice Presidents are also responsible for the financial plan
for their region and for the people development plan to support the growth in
their region.

Sales Forecasting. Each of the Regional Vice Presidents and their District
Managers have real time access to sales forecast and actual sales information in
their restaurants through our web based reporting system. This allows restaurant
management teams to plan their staffing requirements on a weekly, daily and even
hourly basis to effectively serve our customers.

Product Quality. Our food and beverage quality is managed at three
critical stages: sourcing, line readiness and product preparation. Products are
delivered several times each week so that all restaurants maintain fresh,
quality products. Because our restaurants serve a different variety of products
during different dayparts, a specific line readiness checklist is completed to
ensure that the products have been rotated, prepared and staged correctly.
Finally, our partner-training program includes certification in both product
knowledge and product preparation standards.

Food and Labor Cost Controls. Our information system allows us to track
actual versus theoretical cost of goods sold. Detailed reports are available at
the restaurant level showing variances on an item-by-item basis. The system is
fully integrated into our accounts payable and general ledger systems so that
restaurant managers have control and can be held accountable for their results.

We have developed a labor management system that helps our managers control
labor and ensures that staffing levels are appropriate to meet our service
standards. This labor management system provides our multi-unit managers with
performance reports on a real time basis that help them make staffing
adjustments during the course of the week. All labor scheduling is approved by a
district manager and unit level performance is reviewed weekly. In manager and
support controllables, we have shifted our standards to fixed dollar budgets
from a percentage of revenue. This fixes dollar budgets by line item, resulting
in improved expenditure planning, tracking, and accountability, and weekly
performance measurements by our operating team.

We believe that the combination of these structured restaurant operating
systems and technologies allow our operators to focus their time more
effectively on the day-to-day drivers of our business.

SYSTEMS INFRASTRUCTURE

We use an ASP model, which allows us to have the latest in technology and
up to the minute information without continually having to re-invest in hardware
and personnel. Our strategy includes utilizing web technology to put information
into the hands of the people who need to make decisions in a timely manner.

Our point of sale, back-office modules, and our Oracle financials systems
are fully integrated. This integration allows us to all be working with the
same, accurate data with minimal staffing. All information relating to
restaurant operations is uploaded onto a secure web site five times a day for
review and pre-selected reports are distributed to our operations team via
wireless and e-mail solutions.

We have a redundancy and back-up plan in place for all data as well as a
disaster recovery plan. The plan encompasses daily back up, weekly off-site
storage and redundant facilities.

PURCHASING

We have relationships with some of the country's leading food and paper
providers to provide our restaurants with high quality proprietary food items at
competitive prices. We source and negotiate prices directly with these suppliers
and distribute these products to our restaurants through one distributor. We do
not utilize a commissary system. Our inventory control system allows each
restaurant to place orders electronically with our master distributor and then
transmit the invoice electronically to our accounts payable system. Our scalable
system eliminates duplicate work and we believe gives our management tight
control of costs while ensuring quality and consistency across all restaurants.

We purchase coffee through a single supplier. In the event of a business
interruption, our supplier is required to utilize the services of a third party
roaster to fulfill its obligations. If the services of a third party roaster are
used, our supplier will guarantee that the pricing formula and product
fulfillment standards stated in our contract will remain in effect throughout
such business interruption period. We may terminate our agreement with this
supplier upon 180 days notice.

During 2002, we received $600,000 in allowances from food and beverage
suppliers, which is being recognized ratably based on actual product purchased.
We may receive additional amounts if certain purchase levels are achieved.

Our primary suppliers and master distributor, Maines Food and Paper
Service, Inc., have parallel facilities and systems to minimize the risk of any
disruption of our supply chain.

COMPETITION

The restaurant industry is intensely competitive and we compete with many
well-established food service companies, including other sandwich retailers,
specialty coffee retailers, bagel shops, fast food restaurants, delicatessens,
cafes, bars, take-out food service companies, supermarkets and convenience
stores. The principal factors on which we compete are taste, quality and price
of product offered, customer service, atmosphere, location and overall guest
experience. Our competitors change with each of the five dayparts, ranging from
coffee bars and bakery cafes in the morning daypart, to fast food restaurants
and cafes during the lunch and afternoon dayparts, to casual dining chains
during the dinner and dessert dayparts. Many of our competitors or potential
competitors have substantially greater financial and other resources than we do
which may allow them to react to changes in pricing, marketing and the quick
service restaurant industry better than we can. We also compete with other
employers in our markets for hourly workers and may be subject to higher labor
costs. We believe that our concept, attractive price-value relationship and
quality of products and service allow us to compete favorably with our
competitors.

INTELLECTUAL PROPERTY

We have the following U.S. Trademark registrations: "COSI," "Totally
Toasted Almond Mocha," "Mocha Kiss," "Squagels," "Xando," our sun and moon logo,
"Wake Up Call to Last Call," "Symphony Blend," "King of Hearts Blend,"
"Xandwich," "Generation XO," "Screamers," "Cosi Corners," and "Warm 'n Cosi
Melts." We have a U.S. Trademark application pending for "Cosi Downtown."
"Arctic" is an unregistered trademark.

We have registered the trademark "COSI" in seven foreign jurisdictions with
respect to goods and services. We also have applications pending for
registration for the trademark "COSI" in four other foreign jurisdictions.

GOVERNMENT REGULATION

Our restaurants are subject to regulation by federal agencies and to
licensing and regulation by state and local health, sanitation, building,
zoning, safety, fire and other departments relating to the development and
operation of restaurants. These regulations include matters relating to
environmental, building, construction and zoning requirements, franchising and
the preparation and sale of food and alcoholic beverages. Our facilities are
licensed and subject to regulation under state and local fire, health and safety
codes.

Many of our restaurants are required to obtain a license to sell alcoholic
beverages on the premises from a state authority and, in certain locations,
county and/or municipal authorities. Typically, licenses must be renewed
annually and may be revoked or suspended for cause at any time. Alcoholic
beverage control regulations relate to numerous aspects of the daily operations
of each of our restaurants, including minimum age of patrons and employees,
hours of operation, advertising, wholesale purchasing, inventory control and
handling, and storage and dispensing of alcoholic beverages. We have not
encountered any material problems relating to alcoholic beverage licenses to
date. The failure to receive or retain a liquor license in a particular location
could adversely affect that restaurant and our ability to obtain such a license
elsewhere.

We are subject to "dram shop" statutes in the states in which our
restaurants are located. These statutes generally provide a person injured by an
intoxicated person the right to recover damages from an establishment that
wrongfully served alcoholic beverages to the intoxicated individual. We carry
liquor liability coverage as part
54

of our existing comprehensive general liability insurance, which we believe is
consistent with coverage carried by other entities in the restaurant industry.
Although we are covered by insurance, a judgment against us under a dram-shop
statute in excess of our liability coverage could have a material adverse effect
on us.

Our operations are also subject to federal and state laws governing such
matters as wages, working conditions, citizenship requirements and overtime.
Some states have set minimum wage requirements higher than the federal level.
Significant numbers of hourly personnel at our restaurants are paid at rates
related to the federal minimum wage and, accordingly, increases in the minimum
wage will increase labor costs. We are also subject to the Americans with
Disabilities Act of 1990, which, among other things, prohibits discrimination on
the basis of disability in public accommodations and employment. We are required
to comply with the Americans with Disabilities Act and regulations relating to
accommodating the needs of the disabled in connection with the construction of
new facilities and with significant renovations of existing facilities.

LEGAL PROCEEDINGS

From time to time, we are a defendant in litigation arising in the ordinary
course of our business, including claims resulting from "slip and fall"
accidents, claims under federal and state laws governing access to public
accommodations, employment related claims and claims from guests alleging
illness, injury or other food quality, health or operational concerns. To date,
none of such litigation, some of which is covered by insurance, has had a
material adverse effect on our consolidated financial position, results of
operations or cash flows.

On February 5, 2003, a purported shareholder class action complaint was
filed in the United States District Court for the Southern District of New York
(the "Court"), alleging that Cosi and various of our officers and directors and
the underwriter of our IPO violated Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933, as amended, by misstating, and by failing to disclose,
certain financial and other business information (Sheel Mohnot v. Cosi, Inc., et
al., No. 03 CV 812). At least eight additional class action complaints with
substantially similar allegations were later filed. These actions have been
consolidated in In re Cosi, Inc. Securities Litigation (collectively, the
"Securities Act Litigation"). On July 7, 2003, lead plaintiffs filed a
Consolidated Amended Complaint, alleging on behalf of a purported class of
purchasers of our stock allegedly traceable to our November 22, 2002 IPO, that
at the time of the IPO, our offering materials failed to disclose that the funds
raised through the IPO would be insufficient to implement our expansion plan;
that it was improbable that we would be able to open 53 to 59 new restaurants in
2003; that at the time of the IPO, we had negative working capital and therefore
did not have available working capital to repay certain debts; and that the
principal purpose for going forward with the IPO was to repay certain existing
shareholders and members of the Board of Directors for certain debts and to
operate our existing restaurants.

On September 22, 2003, defendants filed motions to dismiss the Second
Consolidated Amended Complaint in the Securities Act Litigation. Plaintiffs
filed their opposition to defendants' motions to dismiss on October 23, 2003.
Defendants filed reply briefs on November 12, 2003.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The table below sets forth the names and ages of our directors and our
current executive officers, as well as the positions and offices held by such
persons. A summary of the background and experience of each of these individuals
is set forth after the table.

<Table>
<Caption>
NAME AGE POSITION(S) WITH COSI
- ---- --- ---------------------

DIRECTORS WHOSE TERMS EXPIRE IN 2004:
Kevin Armstrong......................... 45 President, Chief Executive Officer and
Director
Creed L. Ford, III...................... 50 Director
DIRECTORS WHOSE TERMS EXPIRE IN 2005:
William D. Forrest...................... 42 Executive Chairman
D. Ian McKinnon......................... 36 Director
Jeffrey M. Stork........................ 47 Director
DIRECTORS WHOSE TERMS EXPIRE IN 2006:
Terry Diamond........................... 64 Director
Greg Woolley............................ 29 Director
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS:
Mark Stickney........................... 42 Chief Financial Officer, Treasurer and
Secretary
Charles Gray............................ 30 Vice President of Information Systems
Gilbert Melott.......................... 39 Vice President of People
Paul Seidman............................ 46 Vice President of Food & Beverage
Jay Wainwright.......................... 32 Vice President of Concept Development
David Winkel............................ 53 Vice President of Marketing
</Table>

William D. Forrest, Executive Chairman. Mr. Forrest joined our Board of
Directors and was elected Chairman of the Board on March 31, 2003. On June 26,
2003, he was appointed Executive Chairman, an officer's position with day to day
general management responsibility for our affairs. Mr. Forrest heads the
Restructuring Group at Gleacher & Co, a position he has held since 2001. Mr.
Forrest has served as a corporate restructuring professional since 1988 and, in
1997, he attained the designation Certified Turnaround Professional ("CTP"). The
CTP designation establishes stringent criteria for practical experience,
knowledge and ethical integrity for the Corporate Renewal Industry. Prior to
joining Gleacher & Co., Mr. Forrest was a Managing Director of Catterton-
Forrest LLC (a division of Catterton Partners), where he was responsible for the
acquisition and management of portfolio companies, focused exclusively on the
troubled business space. From 1997 to 1999, Mr. Forrest was crisis
manager/interim Chief Executive Officer for Fine Host Corporation, a $330
million publicly traded food service company, where he completed the successful
turnaround by negotiating a comprehensive balance sheet restructuring utilizing
a pre-negotiated Chapter 11 bankruptcy proceeding and by implementing a
strategic integration plan of acquired companies for this 23-subsidiary
operating company. Mr. Forrest received a Bachelor of Arts degree from Cornell
University. His work has been published in the American Bankruptcy Journal and
he has been a featured speaker for organizations including the Turnaround
Management Association.

Kevin Armstrong, President, Chief Executive Officer and Director. Mr.
Armstrong was appointed President and Chief Executive Officer and elected to our
Board of Directors on July 7, 2003. Mr. Armstrong has over 20 years of
experience in the restaurant industry. From November 2000 to July 2002, Mr.
Armstrong was President and Chief Operating Officer of Long John Silvers
Restaurants, Inc., where he developed successful brand strategies that reversed
two years of sales decline and resulted in three years of same store sales
growth and profitability. Mr. Armstrong was pivotal in bringing the company out
of bankruptcy, ultimately leading to its sale

to YUM Brands. From August 1999 to November 2000, he was Senior Vice President
and Chief Marketing Officer of Long John Silvers Restaurants, Inc. Prior to his
tenure at Long John Silver's, from September 1996 to August 1999, Mr. Armstrong
served as Chief Marketing Officer for Subway Franchisee Advertising Trust, an
independent arm of the $3.2 billion Subway brand. There he reengineered
marketing processes and reversed an 18 month negative sales and profit
performance period, increasing store profitability. Mr. Armstrong also served as
a consultant to PepsiCo's restaurant services division from May 1991 to
September 1996, developing brand-positioning strategies for over forty diverse
companies. From June 1989 to February 1991, Mr. Armstrong was responsible for
both domestic and international marketing strategies at Burger King.

Mark Stickney, Chief Financial Officer, Treasurer and Secretary. Mr.
Stickney was appointed Chief Financial Officer on August 18, 2003. Mr. Stickney
has over 20 years of financial management experience, 12 of which are in the
area of corporate restructuring and business revitalization. Mr. Stickney has
also served as the Chief Financial Officer of Enterix, a health service company,
and as acting Chief Financial Officer and financial advisor in numerous business
reorganization environments, including multi-unit retail and food services. Mr.
Stickney began his career in public accounting and spent five years with KPMG
Peat Marwick, where he earned his designation as a Certified Public Accountant.
Mr. Stickney has a Bachelor of Science from the University of Maine, an MBA from
the University of Southern Maine, and is currently a candidate for a Ph.D. in
Organizational Behavior from the University of Maine.

Charles Gray, Vice President of Information Systems. Mr. Gray currently
serves as our Vice President of Information Systems and has been with Cosi since
September 1998. Mr. Gray is a ten-year veteran in the food service industry,
having served as Director of Training for RANCH *1, Inc., from 1996 to 1998,
Director of Operation Services for Einstein Bros. Bagels from 1995 to 1996, and
Assistant Director of Training for Boston Market Corporation from 1992 to 1995.
Mr. Gray is a graduate of the State University of New York at Albany.

Gilbert Melott, Vice President of People. Mr. Melott has served as our
Vice President of People since December 2001. From December 1995 to November
2001, Mr. Melott was Executive Director of Training and Vice President of
People, Process and Education at Bennigan's. Prior to joining Bennigan's, Mr.
Melott was a Division Director of Human Resources at Sheraton Holding
Corporation in Boston, Massachusetts, and spent four years as Divisional
Training and Development Manager at TGI Friday's. Mr. Melott is a nationally
recognized expert in generational workplace studies and recipient of Industry of
Choice awards for achievement in training and education. Mr. Melott received a
Bachelor of Science degree in Marketing and Organizational Communication from
Fordham University in 1985.

Paul Seidman, Vice President of Food & Beverage. Mr. Seidman was appointed
Vice President of Food & Beverage on September 16, 2003. Mr. Seidman has over
twenty years of experience in the food service industry. From April 2001 to
August 2003, he served as the Senior Vice President of Marketing and Product
Development for Bertucci's Corporation, where he was responsible for the menu
engineering efforts that broadened menu appeal and aided in reducing Bertucci's
food cost and garnered awards for best children's menu and wine list. Prior to
joining Bertucci's, Mr. Seidman served as the Senior Vice President of Food &
Beverage and Procurement at Brinker International's largest franchisee, The New
England Restaurant Company, from 1996 to April 2001. During 1982 to 1996, Mr.
Seidman held similar positions at the Bayport Restaurant Group, La Madeleine and
the Club Corporation of America. Mr. Seidman is a graduate of the Whinery
Institute of America and received a Bachelor of Science degree in Hotel and
Restaurant from Florida International University. He is also a member of the
Research Chefs Association.

Jay Wainwright, Vice President of Concept Development. Mr. Wainwright, a
founder of Cosi Sandwich Bar, Inc., served as Chairman and Chief Executive
Officer of that entity from its inception in 1996 until its merger with Xando,
Incorporated, in 1999. Mr. Wainwright served as interim President and Chief
Executive Officer of Cosi from January 31, 2003 to July 7, 2003 and as a
director until August 18, 2003. He currently serves as Vice President of Concept
Development. Mr. Wainwright received a Bachelor of Arts degree from Hamilton
College.

David Winkel, Vice President of Marketing. Mr. Winkel has 20 years of
experience in the food service and consumer goods industry including his most
recent role as the Vice President of Foodservice Solutions at Synovate Research.
Synovate acquired Marketing Strategy & Planning Inc, in January 2003, where Mr.
Winkel was the Executive Vice President of Business Development focusing on
strategic marketing and consumer
57

research consulting for clients. Mr. Winkel's accomplishments include the
development of the nutrition strategy at Subway and the customer satisfaction
strategies at Ruby Tuesday's. Mr. Winkel was also instrumental in the approach
for the value turnaround at Long John Silver's. Previously, Mr. Winkel has
served as Senior Vice President of Strategy Planning at Hardee's Food Systems,
Inc, where he spent 7 years, as well as in marketing roles at Imperial Tobacco
Ltd, where he began his career. Mr. Winkel received his Bachelor of Arts and
Master of Arts degrees in Sociology from Concordia University in Montreal,
Quebec.

Terry Diamond, Director. Mr. Diamond, a director since February 2001, has
served as Chairman of Talon Asset Management, Inc. since 1994. Talon Asset
Management, Inc. is an investment management firm which manages individual
investment advisory accounts, is the sub-agent with investment responsibility
for the ABN Amro Mid-Cap Fund and operates hedge funds and a private equity
fund. Mr. Diamond also is the Managing Member of Talon Opportunity Partners LLC,
as well as the General Partner of Talon Opportunity Partners, L.P. Mr. Diamond
has acted as a consultant and board member to many private, public and
philanthropic organizations. Mr. Diamond received a Bachelor of Science degree
from the University of Michigan in 1960 and a Juris Doctor degree from the
University of Chicago Law School in 1963.

Creed L. Ford, III, Director. Mr. Ford has been a director since March
1997. Mr. Ford has been Chairman and Co-Chief Executive Officer of Fired Up,
Inc., the parent company of Johnny Carino's Country Italian restaurants and
Gumbo's Louisiana Style Cafe, since 1997, and the President of Ford Restaurant
Group, a Chili's Grill & Bar franchisee, since 1997. From 1976 through 1997, Mr.
Ford served in various capacities, including Chief Operating Officer and
Director, at Brinker International, Inc. As Chief Operating Officer and
Director, Mr. Ford oversaw all operations at Brinker for all of its restaurant
concepts. Mr. Ford serves on the boards of Rudy's BBQ, Texas Restaurant
Association Education Foundation, Texas A&M Center of Entrepreneurship, and
Fired Up, Inc.

D. Ian McKinnon, Director. Mr. McKinnon has been a director since 2000 and
is a partner of Ziff Brothers Investments, LLC. Mr. McKinnon also is the
President of ZBI Equities, LLC, ZBI's domestic public equity investment adviser
with several billion dollars under management. He currently also serves on the
Board of Trustees of Occidental College. Mr. McKinnon graduated, summa cum laude
and Phi Beta Kappa, from Occidental College, with a Bachelor of Arts degree in
Public Policy. Mr. McKinnon received a Masters Degree in Business Administration
from the Harvard Business School, with High Distinction as a George F. Baker
Scholar.

Jeffrey M. Stork, Director. Mr. Stork has been a director since March
1995. Mr. Stork was most recently President and Chief Executive Officer of The
StonCor Group from 1983 to 2000. Currently, Mr. Stork is the Managing Partner of
Forms+Surfaces, LLC, a national architectural products manufacturer. Mr. Stork
currently serves on the boards of Sequel Genetics, Inc., and Forms+Surfaces,
LLC. Mr. Stork earned a Bachelor of Science degree in Chemical Engineering from
Lehigh University.

Greg Woolley, Director. Mr. Woolley has been a director since June 2001
and is Chief Executive Officer and a director of the LJCB Investment Group. LJCB
is one of Australia's leading private investment houses. Prior to this, Mr.
Woolley practiced mergers and acquisitions with Macquarie Bank Limited. Mr.
Woolley currently serves on the boards of Issues and Images, an Australian
marketing communications company, and the Australian Museum of Contemporary Art.
Mr. Woolley received a Bachelor of Commerce degree and a Bachelor of Law degree,
with Honours, from the University of Tasmania.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors held three meetings during fiscal 2002 and took
action by written consent on three occasions. Each current director attended 75%
or more of the aggregate number of meetings of the Board of Directors and Board
committees on which he served that were held during such period, except that
Creed Ford attended fewer than 75% of the aggregate number of meetings of the
Board of Directors and Greg Woolley was unable to attend one of three Audit
Committee meetings.

The Board of Directors currently has three standing committees: the Audit
Committee, the Compensation Committee and the Nominating Committee. The Audit
Committee met three times during fiscal 2002. The

Compensation Committee met once in fiscal 2002. The Nominating Committee did not
meet in fiscal 2002, as the full Board of Directors performed the Nominating
Committee's functions during that period.

Audit Committee. The principal functions of the Audit Committee are to
review, act and report to the Board of Directors with respect to various
auditing and accounting matters, including the recommendation of our auditors,
the scope of our annual audits, fees to be paid to the auditors, evaluating the
performance of the auditors and our accounting practices. The members of the
Audit Committee are Jeffrey Stork, Creed Ford and Greg Woolley, each of whom is
deemed "independent" under Rule 4200(a)(14) of the National Association of
Securities Dealers' listing standards.

Compensation Committee. The principal functions of the Compensation
Committee are to review salaries, benefits and other compensation of our
officers, other employees and consultants, make recommendations to our Board of
Directors regarding salaries, benefits and other compensation and administer its
employee benefit plans. As of May 17, 2003, the current members of the
Compensation Committee are Ian McKinnon and Jeffrey Stork.

Nominating Committee. The Nominating Committee recommends to the Board of
Directors those individuals to be nominated as directors. As of January 31,
2003, the current members of the Nominating Committee are Messrs. Ford and
Stork.

EXECUTIVE COMPENSATION

The following table sets forth certain summary information concerning
compensation paid by us, to or on behalf of the Chief Executive Officer and to
each of our five most highly compensated executive officers other than the Chief
Executive Officer during the fiscal year ended December 30, 2002.

SUMMARY COMPENSATION TABLE

<Table>
<Caption>
LONG TERM
COMPENSATION
AWARDS
---------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS/SARS(#) COMPENSATION($)(1)
- --------------------------- ---- --------- -------- --------------- ------------------

Andy Stenzler.............................. 2002 222,115 68,750(3) -- --
Chairman and Chief Executive Officer(2) 2001 137,500 19,342 145,782 --
Kenneth S. Betuker......................... 2002 215,000 -- -- --
Chief Financial Officer, Treasurer and
Secretary(4) 2001 215,000 9,383 99,465 --
Nick Marsh................................. 2002 174,038 68,750 -- --
Chief Operating Officer(5) 2001 137,500 19,342 145,782 --
David Orwasher............................. 2002 236,539 58,000 78,573 --
Chief Development Officer(6) 2001 -- -- 14,286 --
James M. Riley, Jr......................... 2002 191,539 -- -- --
Vice President of Store Development(7) 2001 185,000 5,578 68,096 --
Jay Wainwright............................. 2002 174,038 68,750 -- --
Vice President of Concept Development(8) 2001 137,500 17,689 71,915 --
</Table>

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

(1) The value of perquisites and benefits for each named executive officer does
not exceed the lesser of $50,000 or 10% of such individual's total annual
salary and bonus.

(2) Mr. Stenzler served as Chief Executive Officer during fiscal 2002. Mr.
Stenzler resigned as Chairman and Chief Executive Officer on January 31,
2003, and Jay Wainwright served as interim Chief Executive Officer from
January 31, 2003 to July 7, 2003.

(3) This amount represents Mr. Stenzler's 2001 bonus, which was paid in 2002.

(4) Mr. Betuker resigned on August 18, 2003.

(5) Mr. Marsh served as Chief Operating Officer during fiscal 2002. Mr. Marsh's
employment terminated as of April 30, 2003.

(6) Mr. Orwasher served as Chief Development Officer during 2002. Mr. Orwasher's
employment terminated as of June 27, 2003. Cosi is currently in negotiations
with Mr. Orwasher regarding the settlement of disputes related to his
employment contract.

(7) Mr. Riley served as Vice President of Store Development during fiscal 2002.
Mr. Riley's employment terminated on July 7, 2003.

(8) Mr. Wainwright served as President during fiscal 2002. From January 31, 2003
to July 7, 2003, Mr. Wainwright served as interim President and Chief
Executive Officer. He currently serves as Vice President of Concept
Development.

STOCK OPTION GRANTS AND EXERCISES DURING THE LAST FISCAL YEAR

The following table sets forth information concerning stock option grants
made during fiscal 2002 to the executive officers named in the "Summary
Compensation Table." This information is for illustration purposes only and is
not intended to predict the future price of the common stock. The actual future
value of the options will depend on the market value of the common stock.

STOCK OPTION GRANTS IN FISCAL YEAR 2002

<Table>
<Caption>
POTENTIAL
REALIZABLE VALUE
INDIVIDUAL GRANTS AT ASSUMED
------------------------------------------------------- ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES PERCENT OF TOTAL APPRECIATION
UNDERLYING OPTIONS/SARS EXERCISE FOR OPTION TERM
OPTIONS/SARS GRANTED TO PRICE EXPIRATION ----------------
NAME GRANTED EMPLOYEES (%) ($/SH) DATE 5% ($) 10% ($)
- ---- ------------ ---------------- -------- ---------- ------ -------

Andy Stenzler.................... -- -- -- -- -- --
Kenneth S. Betuker............... -- -- -- -- -- --
Nick Marsh....................... -- -- -- -- -- --
David Orwasher................... 78,573 15.7% 12.25 01/07/2012 -- 464,068
James M. Riley, Jr. ............. -- -- -- -- -- --
Jay Wainwright................... -- -- -- -- -- --
</Table>

The following table sets forth certain summary information concerning
exercised and unexercised options to purchase Cosi's common stock held by the
executive officers named in the "Summary Compensation Table" as of December 30,
2002.

STOCK OPTION EXERCISES IN FISCAL YEAR 2002 AND
FISCAL YEAR-END OPTION VALUES

<Table>
<Caption>
SHARES OF COMMON STOCK VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS/SARS AT
FISCAL YEAR END (#) FISCAL YEAR-END ($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ----------- ------------- ----------- -------------

Andy Stenzler......................... -- -- 120,172 66,602 -- --
Chairman and Chief Executive
Officer(1)
Kenneth S. Betuker.................... -- -- 20,952 107,086 -- --
Chief Financial Officer, Treasurer
and
Secretary(1)
Nick Marsh............................ -- -- 120,172 66,602 -- --
Chief Operating Officer(1)
David Orwasher........................ -- -- -- 92,859 -- --
Chief Development Officer(1)
James M. Riley, Jr. .................. -- -- 33,905 42,764 -- --
Vice President of Store
Development(1)
Jay Wainwright........................ -- -- 379,137 62,721 401,217(2) --
Vice President of Concept
Development
</Table>

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

(1) Options owned by Messrs. Stenzler, Betuker, Marsh, Orwasher and Riley were
not in-the-money as of December 30, 2002.

(2) With respect to 81,337 exercisable options owned by Mr. Wainwright, the
value of unexercised in-the-money options is calculated by multiplying the
number of options by the difference between the exercise price, $1.56 per
share, and $5.78, the closing price of our common stock at December 30,
2002. With respect to 120,782 exercisable options owned by Mr. Wainwright,
the value of unexercised in-the-money options is calculated by multiplying
the number of options by the difference between the exercise price, $5.30
per share, and $5.78, the closing price of our common stock at December 30,
2002.

EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth certain information as of December 30, 2002,
with respect to our equity compensation plans under which shares of our common
stock may be issued.

EQUITY COMPENSATION PLAN INFORMATION

<Table>
<Caption>
NUMBER OF SECURITIES
REMAINING AVAILABLE
NUMBER OF SECURITIES FOR FUTURE ISSUANCE
TO BE ISSUED UPON WEIGHTED-AVERAGE UNDER EQUITY
EXERCISE OF EXERCISE PRICE OF COMPENSATION PLANS
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (A))
- ------------- -------------------- -------------------- ------------------------
(A) (B) (C)

Equity compensation plans approved by
security holders................... 3,406,332 $10.41 6,650,583
Equity compensation plans not
approved by security holders....... None None None
Total........................... 3,406,332 $10.41 6,650,583
</Table>

STOCK OPTION PLANS

AMENDED AND RESTATED COSI, INC. STOCK INCENTIVE PLAN

A total of 8,900,000 shares of common stock have been reserved for issuance
under the Amended and Restated Cosi, Inc. Stock Incentive Plan. Shares subject
to any unexercised options granted under the plan that have expired or
terminated become available for issuance again under the plan. The plan provides
for discretionary grants of incentive stock options, non-qualified stock options
and stock appreciation rights, or SARs, to our employees and consultants. The
exercise price per share for an incentive stock option may not be less than 100%
of the fair market value of a share of common stock on the grant date. The
exercise price per share for a non-qualified stock option may not be less than
85% of the fair market value of a share of common stock on the grant date. The
exercise price per share for an incentive stock option granted to a person
owning stock possessing more than 10% of the total combined voting power of all
classes of our stock may not be less than 110% of the fair market value of a
share of common stock on the grant date. The aggregate fair market value,
determined on the date of grant, of the shares with respect to which incentive
stock options are exercisable for the first time during any calendar year under
all Cosi plans may not exceed $100,000. The Compensation Committee has full
discretion to administer and interpret the plan, to adopt such rules,
regulations and procedures as it deems necessary or advisable and to determine
the persons eligible to receive options or SARs, the time or times at which the
options or SARs may be exercised and whether all of the options or SARs may be
exercised at one time or in increments.

We may elect at any time to cancel any option or SAR granted under the plan
and, in the case of an option, pay the holder of such option the excess of the
fair market value of the shares subject to the option as of the date of such
election to cancel over the exercise price set forth in the particular grant
agreement, or, in the case of an SAR, the value of the SAR as of the date of
such election. We also may elect at any time to convert any option granted under
the plan to a SAR.

On November 24, 2003, our stockholders approved a proposal authorizing the
board of directors, in its discretion, at any time on or prior to the date of
our 2004 Annual Meeting of Stockholders, to effect a repricing of issued and
outstanding options to purchase our common stock held by option holders who are
directors, officers, employees and consultants of the Company at the time the
repricing is effected (the "Option Repricing"). These options were issued under
the Amended and Restated Cosi Stock Incentive Plan and the Cosi Sandwich Bar
Plan (the "Cosi Plans"). As of November 24, 2003, the maximum aggregate number
of options that could be repriced in the Option Repricing is approximately 1.2
million (excluding 900,000 options issued to Kevin Armstrong on July 7, 2003 and
400,000 options issued to Mark Stickney on August 18, 2003). These options
currently have exercise prices ranging from $1.36 to $12.25, with a weighted
average exercise price of $9.41.

The Option Repricing, if effected, will likely have a dilutive effect on
the percentage ownership of the Company held by existing stockholders. As of
November 24, 2003, options to purchase an aggregate of 4,333,880 shares of our
common stock were outstanding under our compensation plans. Of these options
2,280,533 are currently exercisable with a weighted average exercise price of
$8.71. As of November 24, 2003, all outstanding options had an exercise price in
excess of the trading price of our common stock. If the Option Repricing is
effected, options to purchase approximately 1.5 million shares of our common
stock will be outstanding with an exercise price equal to the trading price of
our common stock on the date of the repricing. Following the Option Repricing,
it will be much more likely that a large number of these options will be
exercised, which may result in substantial dilution to our stockholders. In
addition, the trading price of our common stock may decline due to the potential
dilutive effects of the Option Repricing.

On November 24, 2003 our stockholders approved an amendment to the plan
extending the term through December 31, 2006.

1996 COSI SANDWICH BAR, INC. INCENTIVE STOCK OPTION PLAN

As of the date of the prospectus, options to purchase approximately 274,000
shares of common stock are outstanding under the Cosi Sandwich Bar, Inc.
Incentive Stock Plan. Shares subject to any unexercised options granted under
the plan that have expired or terminated become available for issuance again
under the plan. No stock options may be granted under the plan after October 1,
2001. The Cosi Sandwich Bar, Inc. Incentive Stock Plan provides for
discretionary grants of incentive stock options to certain key employees. The
exercise price per share for an option may not be less than 100% of the fair
market value of a share of common stock on the grant date. The exercise price
per share for an incentive stock option granted to a person owning stock
possessing more than 10% of the total combined voting power of all classes of
our stock may not be less than 110% of the fair market value of a share of
common stock on the grant date. To the extent that the aggregate fair market
value of stock with respect to which incentive stock options are exercisable for
the first time by an optionee during any calendar year (under this plan and all
of our other incentive stock option plans or those of its subsidiaries) exceeds
$100,000, such incentive stock option shall be treated as options that are not
incentive stock options. In the event that an optionee's employment is
terminated by us, other than for cause, such optionee may exercise any
exercisable options under the plan for a period of 30 days. In the event that an
optionee's employment is terminated by reason of death, such optionee may
exercise any exercisable options under the plan for a period of six months. In
the event that an optionee's employment is terminated by us for cause, all
options held by such optionee are immediately cancelled and we may require such
optionee to sell to it, at a sales price equal to the lesser of the exercise
price and the fair market value of the underlying shares, all shares owned by
the optionee that were acquired pursuant to this plan. The Cosi Sandwich Bar,
Inc. Incentive Stock Option Plan is administered and interpreted by the Board of
Directors.

COSI NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

A total of 250,000 shares of common stock have been reserved for issuance
under the Cosi Non-Employee Director Stock Option Plan. Shares subject to any
unexercised options granted under the plan that have expired or terminated
become available for issuance again under the plan. The Cosi Non-Employee
Director Stock Option Plan provides for discretionary grants of non-qualified
stock options and SARs to our non-employee directors. The Board of Directors has
full discretion to administer and interpret the plan and full discretionary
authority to determine the non-employee directors eligible to receive options or
SARs, the time or times at which the options or SARs may be exercised and
whether all of the options or SARs may be exercised at one time or in
increments;
62

provided, however, that the purchase price of shares subject to a non-qualified
stock option shall not be less than 85% of the fair market value of a share of
common stock on the grant date. Each optionee under the plan may exercise any
unexpired options or SARs following a change in control of Cosi, a sale of
substantially all of the assets of Cosi or shareholder approval of the
dissolution of Cosi.

EMPLOYEE STOCK PURCHASE PLAN

The purpose of the Employee Stock Purchase Plan is to provide employees
with an opportunity to purchase our shares through accumulated payroll
deductions. The plan provides for the grant of stock options to eligible
employees. Each employee will be eligible to participate in the plan commencing
on the first day of the offering period (as described below) occurring on or
after the date on which the employee has been employed by us for six months. The
plan is administered by the Compensation Committee.

A total of 500,000 shares of common stock are authorized for issuance under
the plan. Any eligible employee may elect to participate in the plan by
authorizing the Compensation Committee to make payroll deductions to pay the
exercise price of an option at the time and in the manner prescribed by the
Compensation Committee. The employee may designate the amount of the payroll
deduction in whole percentages, up to 10% of the employee's compensation for
each payroll period in an offering period. In no event will an employee be
granted an option under the plan that would permit an employee to purchase
shares of common stock under the plan, to the extent that, immediately after the
grant, such employee (i) would own common stock and/or hold options to purchase
common stock possessing 5% or more of the total combined voting power or value
of all classes of our stock, or (ii) has the right to purchase common stock
during any calendar year having a fair market value in excess of $25,000.
Options are granted at two six-month offering periods in each calendar year. The
date of grant and the date of exercise for the first option period under the
plan in a given calendar year will be January 1 and June 30, respectively, and
the date of grant and date of exercise for the second option period will be July
1 and December 31, respectively. As of the date of this prospectus, no options
have been granted under this plan. The price of stock purchased under the plan
will be an amount equal to the lesser of 85% of the fair market value of the
stock on the date of purchase or on the date of commencement of the applicable
offering period.

EXECUTIVE CONTRACTS AND CHANGE-IN-CONTROL AND OTHER ARRANGEMENTS

Employment Agreement with William D. Forrest. On June 26, 2003, we entered
into an employment agreement with Mr. Forrest. Pursuant to the agreement, Mr.
Forrest will serve as Executive Chairman for three years ending on March 31,
2006. In consideration for Mr. Forrest serving as Executive Chairman, on June
26, 2003, we issued 1,156,407 shares of authorized but unissued common stock,
representing 5% of our outstanding common stock on a fully diluted basis
(assuming all outstanding options and warrants are exercised). Upon completion
of the rights offering, we will issue a number of additional shares to Mr.
Forrest such that his percentage ownership of Cosi on a fully diluted basis
remains 5%, provided, however, that if the subscription price is less than $1.25
per share, we will issue Mr. Forrest a number of shares equal to the number of
shares that Mr. Forrest would have received in the offering based upon a
subscription price of $1.25 per share. These shares are not included in the
calculation of outstanding shares or potential dilution elsewhere in the
prospectus. Mr. Forrest's rights in the shares vest as follows: (i) 25% of the
shares vested upon issuance; (ii) 25% of the shares will vest on April 1, 2004,
provided the agreement is still in effect and (iii) on the last day of each
month, commencing with April 2004, and ending on March 2006, 2.08% of the shares
will vest, and an additional .08% of the shares will vest on March 31, 2006,
provided that at the end of each month the agreement is still in effect. All
shares not vested will fully vest upon the termination of this agreement by us
without cause (as defined in the agreement), or upon a change of control (as
defined in the agreement). If Mr. Forrest is terminated by us for cause (as
defined in the agreement), all unvested shares will be forfeited. Mr. Forrest
agreed that, during the term of the agreement and for a period of 12 months
thereafter, he will not compete with us or solicit our employees.

Employment Agreement with Kevin Armstrong. On July 7, 2003, we entered
into an at-will employment agreement with Kevin Armstrong. Pursuant to the terms
of his employment letter, Mr. Armstrong will serve as President, Chief Executive
Officer and a Director. We will pay Mr. Armstrong an annual salary of $300,000.
He will also have the ability to earn a bonus of up to 65% of his base salary.
In addition, we contributed up to $70,000 towards his relocation expenses, and
we will reimburse him for all travel expenses.
63

Upon the commencement of his employment, Mr. Armstrong received an initial
grant of options to purchase 900,000 shares of our common stock with an exercise
price equal to the closing trading price of our common stock on July 7, 2003.
These options vest as follows: (i) 25% vested immediately upon grant and (ii)
25% will vest at the end of each year for the next three years; provided,
however, that these options and any others granted in the future will vest and
become immediately exercisable in full upon a change of control (as defined in
the agreement).

Mr. Armstrong is entitled to health benefits and life and long-term
disability in amounts standard to all of our employees. In addition, Mr.
Armstrong may participate in our 401(k) retirement plan and we will match his
contributions at 25% up to 4% of his base salary.

Mr. Armstrong's agreement also provides for customary non-compete and
non-solicitation arrangements. We will pay Mr. Armstrong 12 months severance if
we terminate his employment.

Employment Agreement with Mark Stickney. On August 18, 2003, we entered
into an employment agreement with Mark Stickney. Pursuant to the terms of his
employment letter, Mr. Stickney will serve as Chief Financial Officer and will
be paid $30,000 per month through April 2004 and a service bonus of $30,000 at
the end of April 2004, provided that he remains employed by us at that time.
Thereafter, Mr. Stickney will be paid a base salary of $250,000, and he will
also be eligible to receive a performance bonus of 40% of his base salary based
on the attainment of mutually agreed upon performance levels. In addition to the
above compensation, we will provide Mr. Stickney with an expense allowance of
$5,650 per month.

Pursuant to our Amended and Restated Stock Incentive Plan, we issued Mr.
Stickney options to purchase 400,000 shares of our common stock with the price
set to the closing trading price on August 18, 2003. These options will vest as
follows: (i) 11,111 options will vest per month through April 30, 2004 such that
at the end of April, 88,889 options will have vested, provided that if we
terminate Mr. Stickney prior to April 30, 2004, the 11,111 options that would
have otherwise vested in the month of termination will vest on a pro rata basis
based upon the number of days worked during that month; (ii) 111,111 options
will vest on August 31, 2004, provided that Mr. Stickney remains employed by us
at that time and (iii) 100,000 options will vest in both August 2005 and August
2006, provided that Mr. Stickney remains employed by us during those time
periods.

Mr. Stickney's employment may be terminated by either party at any time for
any reason.

Employment Agreement with Jay Wainwright. On August 20, 2003, we entered
into an employment agreement with Mr. Wainwright which replaced and superceded
his prior agreement with us in its entirety. Pursuant to the agreement, Mr.
Wainwright will serve as Vice President of Concept Development for two years,
ending on August 20, 2005. Mr. Wainwright was paid a signing bonus of $75,000
upon execution of the agreement.

The agreement provides that we will pay Mr. Wainwright a base salary of
$175,000, and that he will be eligible to receive an annual bonus of up to 30%
of his base salary based on the attainment of performance parameters established
in advance by the board of directors.

The agreement may be terminated by either party at any time for any reason
upon 30 days written notice. In the event the agreement is terminated by us for
"cause", or by Mr. Wainwright for any reason other than due to his death or
disability, we will pay him his base salary, bonus and benefits that are payable
through the date of termination. In the event Mr. Wainwright's employment is
terminated due to his death or disability, we will pay him, or his estate, his
base salary, bonus and benefits that are payable through the date of termination
plus, upon his or his estate's execution of a release, an amount equal to his
base salary and benefits for a period of one year following the date of
termination and an additional amount equal to 30% of his base salary.

In the event this agreement is terminated by us other than for cause, we
will pay him his base salary, bonus and benefits payable through the date of
termination, plus, upon execution of a release, an amount equal to the excess of
$873,000 over the amount of all base salary, annual bonuses and signing bonus
paid to Mr. Wainwright under this agreement.

In the event this agreement is terminated by Mr. Wainwright for any reason,
including due to his death or disability, or by us other than for cause, all
stock options held by Mr. Wainwright will become 100% vested and
64

exercisable and will not be subject to any accelerated exercise requirements or
early termination provisions applicable thereto and will remain exercisable
through the fifth anniversary of the date of termination.

If we do not effect a re-pricing of our stock options prior to January 1,
2004, Mr. Wainwright will have the right to resign on or prior to January 15,
2004 and such resignation will be deemed to be a termination by us without
"cause".

If we do not enter into a new written employment agreement with Mr.
Wainwright prior to the expiration of the term of this agreement, we will pay
him his accrued salary, bonus and benefits payable through the term of this
agreement, plus, upon execution of a release, an amount equal to the excess of
$873,000 over the amount of all base salary, annual bonuses and signing bonus
paid under the term of the agreement. In addition, all options held by Mr.
Wainwright will become 100% vested and exercisable and will not be subject to
any accelerated exercise requirements or early termination provisions applicable
thereto and will remain exercisable through the fifth anniversary of the date of
termination.

Separation Agreement with Andy Stenzler. Andy Stenzler resigned as
Chairman and Chief Executive Officer, effective as of January 31, 2003, and
entered into a settlement agreement with us, dated February 2, 2003. Pursuant to
the agreement, Mr. Stenzler will receive his then current base salary of
$350,000 and non-incentive compensation (including automobile allowance) and his
then current benefits for two years from January 31, 2003. Mr. Stenzler will
also receive $350,000, constituting an amount equal to two times his cash bonus
calculated at 50% of his then current annual base salary, paid in equal
bi-weekly installments over the same two-year period. Additionally, all options
to purchase shares of our common stock held by Mr. Stenzler became 100% vested
as of January 31, 2003, and will remain exercisable for two years. We also
agreed to pay certain of Mr. Stenzler's legal expenses in an amount not to
exceed $35,000 and to pay for a reasonable office and secretary for Mr. Stenzler
for a period of six months. Mr. Stenzler granted us a customary release of
claims and agreed not to compete with us or solicit our employees for a period
24 months.

We agreed to indemnify Mr. Stenzler, to the fullest extent permitted by our
certificate of incorporation and by-laws, against all costs, expenses, liability
and losses reasonably incurred by him in connection with any action, suit or
proceeding arising out of the fact that he was a director, officer or employee
of Cosi. We also agreed that the promissory note issued by Mr. Stenzler to us,
dated April 28, 1998, entered into in connection with Mr. Stenzler's executive
stock agreement, will not mature until April 28, 2005.

In connection with the Agreement, Mr. Stenzler sold a total of 223,714
shares of our common stock to Eric J. Gleacher, one of our directors, and ZAM
Holdings, L.P., our largest stockholder. Mr. Stenzler agreed to use a portion of
the funds from such sales to repay advances from Cosi, made prior to March 4,
2002, of $112,500 plus interest.

Separation Agreement with Nick Marsh. Nick Marsh resigned as Chief
Operating Officer, effective as of April 30, 2003, and entered into a separation
agreement with us, dated July 9, 2003. We continued to pay Mr. Marsh's salary
through May 31, 2003. Pursuant to the separation agreement, Mr. Marsh will
receive a severance payment of $200,000 payable following the consummation of
the rights offering described in this prospectus. Alternatively, we will make
such payment if the rights offering is not consummated and we secure alternative
funding equal to at least $8.5 million. We will not make the $200,000 payment if
we do not consummate the rights offering or secure additional funding by
December 31, 2003. Mr. Marsh will receive 52 bi-weekly payments of $15,865.38
beginning June 1, 2003. However, if we make the $200,00 payment prior to January
15, 2004, the bi-weekly payments will cease after the 34th bi-weekly payment,
and the 34th bi-weekly payment will equal $1,442.46. Mr. Marsh will also receive
an automobile allowance of 24 monthly payments equal to $2000, and we will
reimburse Mr. Marsh for the cost of any excess mileage under his current
automobile lease up to $3,000. Additionally, all options held by Mr. Marsh
became 100% vested as of June 1, 2003, and will remain exercisable for two
years. We also agreed to pay certain of Mr. Marsh's legal expenses in an amount
not to exceed $10,000, and to allow Mr. Marsh to retain certain computer
equipment issued to him by us. We are required to pay Mr. Marsh's COBRA premium
for a period of 18 months following June 1, 2003. Mr. Marsh granted us a
customary release of claims.

Separation Agreement with Ken Betuker. Ken Betuker resigned as Chief
Financial Officer, effective as of August 18, 2003, and entered into a
separation agreement with us on September 17, 2003. Pursuant to the agreement,
Mr. Betuker will receive 26 bi-weekly payments of $9,615.38 and a lump sum
payment of $31,250 for accrued vacation. All options held by Mr. Betuker will
continue to vest and will become exercisable in accordance with their terms and
will not be subject to accelerated exercise requirements or early termination
provisions. We agreed to indemnify Mr. Betuker to the fullest extent permitted
by our by-laws. We also agreed to reimburse Mr. Betuker for expenses incurred
while performing his duties while employed by us and for his legal expenses
incurred in connection with the separation agreement. Mr. Betuker also granted
us a customary release of claims.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of November 24, 2003, the following are the only entities (other than
our employees as a group) known to us to be the beneficial owners of more than
5% of our outstanding common stock.

<Table>
<Caption>
SHARES OF COMMON STOCK PERCENT OF COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED(1)
- ------------------------------------ ---------------------- -----------------------

Chilton Investment Company, Inc. ........ 1,010,391(2) 5.7%
1266 East Main Street, 7th Floor
Stamford, Connecticut 06902
William D. Forrest....................... 1,156,407(3) 6.5%
c/o Cosi, Inc.
242 West 36th Street
New York, New York 10018
Eric J. Gleacher......................... 1,635,942(4) 8.8%
Gleacher Partners, LLC
660 Madison Avenue
New York, New York 10021
ZAM Holdings, L.P. ...................... 4,200,338(5) 20.9%
c/o PBK Holdings, Inc.
283 Greenwich Avenue
Greenwich, Connecticut 06830
</Table>

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

(1) Ownership percentage is based on 17,733,224 shares of common stock
outstanding as of November 24, 2003 as adjusted pursuant to the footnotes
below.

(2) According to the Schedule 13G, filed with the Securities and Exchange
Commission (the "SEC") on February 28, 2003, by Chilton Investment Company,
Inc., a Delaware corporation ("Chilton"), Chilton beneficially owns
1,010,391 shares of common stock with sole voting and sole dispositive power
over 1,010,391 shares.

(3) All shares are restricted stock issued to Mr. Forrest pursuant to an
employment agreement dated June 26, 2003. Such shares represent the sole
compensation of Mr. Forrest for serving as Executive Chairman. 25% of the
shares became fully vested upon issuance. As long as the employment
agreement is in effect on April 1, 2004, an additional 25% of the shares
will fully vest. As long as the agreement remains in effect on the last day
of each month, commencing with April 2004 and ending with March 2006, 2.08%
of the shares will fully vest on each such date.

(4) Includes (i) 202,152 shares of common stock issuable upon exercise of
outstanding warrants at an exercise price of $6.00, (ii) 14,126 shares of
common stock owned by Mr. Gleacher's wife, Anne, and (iii) 11,301 shares of
common stock owned by Mr. Gleacher's children. Additionally, includes
758,799 shares of additional common stock issuable upon conversion of two
promissory notes aggregating $1,138,199 shares at an assumed conversion
price of $1.50, which is the conversion price in effect as of November 24,
2003. These two notes represent Mr. Gleacher's proportionate ownership of
the $3 Million Note and $1.5 Million Note.

(5) ZAM Holdings, L.P. ("ZAM"), a Delaware limited partnership, filed a Schedule
13G with the SEC on February 13, 2003, on behalf of ZAM, PBK Holdings, Inc.,
a Delaware corporation ("PBK"), and Philip B. Korsant ("Korsant"). According
to the Schedule 13G, ZAM, PBK and Korsant collectively beneficially own
1,819,089 shares of common stock, with shared voting and shared dispositive
power over 1,819,089 shares. Includes 439,710 shares of additional common
stock issuable upon exercise of outstanding warrants at an exercise price of
$6.00, which are exercisable within 60 days of the date hereof.
Additionally, includes

1,941,539 shares of additional common stock issuable upon conversion of two
promissory notes aggregating $2,912,309.24, at an assumed conversion price
of $1.50, which is the conversion price in effect as of November 24, 2003.
These two notes represent ZAM Holding, L.P.'s proportionate ownership of the
$3 Million Note and $1.5 Million Note.

The determination that there were no other persons, entities or groups
known to us to beneficially own more than 5% of our common stock was based on a
review of our internal records and of all statements filed with respect to us
since the beginning of the past fiscal year with the SEC pursuant to Section
13(d) or 13(g) of the Securities Exchange Act of 1934, as amended.

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth certain information regarding ownership of
common stock as of November 24, 2003 by (i) each of the members of our Board of
Directors, (ii) each of the executive officers named in the "Summary
Compensation Table" under "Executive Compensation" above and (iii) all of our
directors and executive officers as a group. All shares were owned directly with
sole voting and investment power unless otherwise indicated.

<Table>
<Caption>
SHARES OF COMMON STOCK PERCENT OF COMMON STOCK
NAME(1) BENEFICIALLY OWNED BENEFICIALLY OWNED(2)
- ------- ---------------------- -----------------------

Andy Stenzler(3).................................. 315,797(4) 1.8%
Jay Wainwright(5)................................. 500,933(6) 2.8%
Kenneth S. Betuker(7)............................. 50,367(8) *
Terry Diamond..................................... 524,915(9) 2.9%
Creed L. Ford, III................................ 268,908 1.5%
William D. Forrest(10)............................ 1,156,407 6.5%
Nick Marsh(11).................................... 372,805(12) 2.1%
D. Ian McKinnon................................... -- *
David Orwasher(13)................................ -- *
James M. Riley, Jr. (14).......................... -- *
Jeffrey M. Stork.................................. 772,671(15) 4.4%
Greg Woolley...................................... 6,733 *
Kevin Armstrong................................... 225,000(16) 1.3%
Mark Stickney..................................... 22,222(17) *
Paul Seidman...................................... -- --
David Winkel...................................... -- --
All current directors and executive officers as a
group (13 persons)(18).......................... 3,546,917 18.3%
</Table>

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

* Represents less than 1%.

(1) Each person listed in the table is or was a director or named executive
officer of Cosi, with an address at c/o Cosi, Inc., 242 West 36th Street,
New York, New York 10018.

(2) Ownership percentages are based on 17,733,224 shares of common stock
outstanding as of November 24, 2003. With respect to each person,
percentage ownership is calculated by dividing the number of shares
beneficially owned by such person by the sum of the number of outstanding
shares at such date and the number of shares such person has the right to
acquire upon exercise of options or warrants that are currently exercisable
or are exercisable on or before January 1, 2004.

(3) Mr. Stenzler served as Chairman and Chief Executive Officer during fiscal
2002. Mr. Stenzler resigned on January 31, 2003.

(4) Includes (i) 314 shares of common stock issuable upon exercise of
outstanding warrants at an exercise price of $0.01 per share, and (ii)
186,774 shares of common stock issuable upon exercise of outstanding
options at a weighted average exercise price of $12.25 per share.

(5) Mr. Wainwright served as interim Chief Executive Officer effective from
January 31, 2003 to July 7, 2003 and served as a director until August 18,
2003. Mr. Wainwright currently serves as Vice President of Concept
Development.

(6) Includes 427,573 shares of common stock issuable upon exercise of
outstanding options at a weighted average exercise price of $7.09 per
share.

(7) Mr. Betuker resigned as Chief Financial Officer, Treasurer and Secretary on
August 18, 2003.

(8) Includes 79,787 shares of common stock issuable upon exercise of
outstanding options at a weighted average exercise price of $12.25 per
share.

(9) Includes (i) 408,427 shares of common stock owned by Talon Opportunity
Fund, L.P. (Mr. Diamond is the Managing Member of Talon Opportunity Fund,
L.P.'s General Partner, Talon Partnership Management, LLC), (ii) 4,017
shares of common stock issuable upon exercise of outstanding warrants at an
exercise price of $0.01 per share owned by Talon Opportunity Fund, L.P.,
(iii) 71,076 shares of common stock issuable upon exercise of outstanding
warrants at an exercise price of $6.00 per share owned by Talon Opportunity
Fund, L.P., (iv) 12,605 shares of common stock issuable upon exercise of
outstanding warrants at an exercise price of $14.875 per share owned by
Talon Opportunity Fund, L.P., (v) 56,462 shares of common stock owned by
Mr. Diamond's wife, (vi) 14,215 shares of common stock issuable upon
exercise of outstanding warrants at an exercise price of $6.00 per share
owned by Mr. Diamond's wife, (vii) 1,004 shares of common stock issuable
upon exercise of outstanding warrants at an exercise price of $0.01 per
share owned by the Diamond Family Foundation and (viii) 7,108 shares of
common stock issuable upon exercise of outstanding warrants at an exercise
price of $6.00 owned by the Diamond Family Foundation.

(10) Mr. Forrest joined the Board of Directors and was elected Chairman on March
31, 2003. All shares are restricted stock issued to Mr. Forrest pursuant to
an employment agreement dated June 26, 2003. Such shares represent the sole
compensation of Mr. Forrest for serving as Executive Chairman. 25% of the
shares became fully vested upon issuance. As long as the employment
agreement is in effect on April 1, 2004, an additional 25% of the shares
will fully vest. As long as the agreement remains in effect on the last day
of each month, commencing with April 2004 and ending with March 2006, 2.08%
of the shares will fully vest on each such date.

(11) Mr. Marsh served as Chief Operating Officer during fiscal 2002. Mr. Marsh's
employment as Chief Operating Officer terminated as of April 30, 2003. He
resigned as a director on August 14, 2003.

(12) Includes (i) 314 shares of common stock issuable upon exercise of
outstanding warrants at an exercise price of $0.01 per share and (ii)
186,774 shares of common stock issuable upon exercise of outstanding
options at a weighted average exercise price of $12.25 per share.

(13) Mr. Orwasher served as Chief Development Officer during fiscal 2002. Mr.
Orwasher's employment terminated on June 30, 2003. Cosi is currently in
negotiations with Mr. Orwasher regarding the settlement of disputes related
to his employment contract.

(14) Mr. Riley served as Vice President of Store Development during fiscal 2002.
Mr. Riley's employment terminated on July 7, 2003.

(15) Includes (i) 278,687 shares of common stock held by JDS Partners (Mr. Stork
is a managing member of JDS Partners), (ii) 1,099 shares of common stock
issuable upon exercise of outstanding warrants at an exercise price of
$0.01 per share, (iii) 30,000 share of common stock issuable upon exercise
of outstanding warrants at an exercise price of $6.00 per share, (iv) 2,198
shares of common stock issuable upon exercise of outstanding warrants at an
exercise price of $0.01 per share held by JDS Partners and (v) 30,000
shares of common stock issuable upon exercise of outstanding warrants at an
exercise price of $6.00 per share held by JDS Partners.

(16) Represents 225,000 shares of common stock issuable upon exercise of
outstanding options at an exercise price of $1.77 per share.

(17) Includes 22,222 shares of common stock issuable upon exercise of
outstanding options held by Mark Stickney.

(18) These 13 persons include all directors and officers detailed under
"Management" and "Directors and Executive Officers" above. In addition to
the securities listed in notes (6), (9), (10), (16), (17) and (18),
includes (i) 40,334 shares of common stock issuable upon exercise of
outstanding options held by Charles Gray at a weighted average exercise
price of $12.18 per share and (ii) 28,687 shares of common stock issuable
upon exercise of outstanding options with a weighted average exercise price
of $12.25 held by Gilbert Melott.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

A partner of Cadwalader, Wickersham & Taft LLP is an owner of less than
0.5% of our equity securities and the father of Jay Wainwright, a former
director and formerly our interim President and Chief Executive Officer. Jay
Wainwright currently serves as Vice President of Concept Development.
Cadwalader, Wickersham & Taft LLP has acted as our outside legal counsel since
October 1999. Cadwalader, Wickersham & Taft LLP provides legal services on our
behalf, for which the firm was paid approximately $575,000, $71,000 and $41,000
for the fiscal years 2002, 2001 and 2000, respectively.

Prior to February 2003, we engaged London Misher Public Relations, Inc., a
public relations firm that is partially owned by the wife of our former Chief
Executive Officer. This firm provided us with public relations services, for
which the firm was paid approximately $235,000, $146,000 and $67,000 for fiscal
years 2002, 2001 and 2000, respectively. The relationship with this firm has
been terminated.

Our former Chief Executive Officer and former Chief Operating Officer each
issued promissory notes to us in the amount of $1,362,400, each due in 2005,
which accrue interest at an annual rate of 5.75%, in connection with each
executive's purchase of 119,771 shares of our preferred stock in 1998. In 1999,
each share of preferred stock was converted into one share of common stock.
These notes remain outstanding.

In August 2002, we entered into Senior Secured Note and Warrant Purchase
Agreements with certain of its existing shareholders and members of its Board of
Directors. These agreements provided us with a credit facility of up to $16.4
million available for general corporate purposes. In November 2002, the amount
available under this facility was increased to $25 million. The facility, which
terminated upon our initial public offering, allowed us to draw down funds from
time to time until August 12, 2003. Each draw-down was evidenced by a senior
secured note bearing interest at 12% per annum. As of November 2002, we had
issued $9.5 million of 12% senior secured notes pursuant to this credit
facility. These notes ranked senior to all of our other funded indebtedness at
the time and were secured by all of its tangible and intangible property, other
than equipment pledged to secure its equipment loan credit facility and its
capitalized lease obligations. All notes issued pursuant to these agreements
matured upon the consummation of our initial public offering in November 2002
and were repaid out of the proceeds of the IPO.

In connection with the Senior Secured Note and Warrant Purchase Agreements,
we issued warrants to purchase an aggregate of 2,070,004 shares of its common
stock, at an exercise price of $6.00 per share, pro rata to the parties to the
agreement. Each warrant issued pursuant to the Senior Secured Note and Warrant
Purchase Agreements has a five-year term and may not be exercised until after
one year from the date of issuance.

Eric J. Gleacher, at the time, one of our directors, agreed to fund up to
$2,500,000 of the credit facility and was issued 202,152 warrants, ZAM Holdings,
L.P., an entity that owned 15.5% of our common stock prior to our initial public
offering (and currently owns 10.2% of our common stock), agreed to fund up to
$5,373,616 of the credit facility and was issued 439,710 warrants, and LJCB
Nominees Pty Ltd ("LJCB"), an entity that owned 7.5% of our common stock prior
to the initial public offering, agreed to fund up to $3,500,000 of the credit
facility and was issued 296,919 warrants. Terry Diamond, one of our directors,
is the managing member of the Diamond Family Foundation and the husband of
Marilyn Diamond. The Diamond Family Foundation agreed to fund up to $75,000 of
the credit facility and was issued 7,108 warrants. Marilyn Diamond agreed to
fund up to $150,000 of the credit facility and was issued 14,215 warrants.
Jeffrey Stork, one of our directors, is the managing member of JDS Partners. Mr.
Stork agreed to fund up to $500,000 of the credit facility and was issued 30,000
warrants. JDS Partners agreed to fund up to $500,000 of the credit facility and
was issued 30,000 warrants.

On March 31, 2003, we obtained a line of credit from First Republic Bank,
whereby we issued a senior secured promissory note to First Republic Bank in the
principal amount of $3,000,000. The note was guaranteed by Eric J. Gleacher,
Charles G. Phillips, and Ziff Investors Partnership, L.P. II, an entity related
to ZAM Holdings, L.P., our largest stockholder. On October 30, 2003, First
Republic Bank assigned the note to these persons or their designees, and the
maturity date of the note was extended to December 31, 2004. Upon assignment of
the note, we issued amended and restated promissory notes in the amount of
$1,943,068.74, $759,397.00 and $304,634.26. Each holder has the right to
convert, in whole or in part, their pro-rata share of the

note plus accrued and unpaid interest into shares of common stock at a
conversion price equal to the lesser of (i) $1.50 per share and (ii) 85% of the
weighted average price per share of our common stock as reported on the Nasdaq
National Market for the 15-trading-day period ending three trading days before
the conversion date.

On August 5, 2003 and August 6, 2003, we issued senior secured promissory
notes with an aggregate principal amount of $1.5 million to Mr. Gleacher, Mr.
Phillips and ZAM Holdings L.P. Each of these persons has the right to convert,
in whole or in part, their pro-rata share of the $1.5 Million Note plus accrued
and unpaid interest into shares of common stock at a conversion price equal to
the lesser of (i) $1.50 per share and (ii) 85% of the weighted average price per
share of our common stock as reported on the Nasdaq National Market for the
15-trading-day period ending three trading days before the conversion date.

On August 5, 2003, we entered into an Investment Agreement with Mr.
Gleacher, Mr. Phillips, LJCB, and ZAM Holdings, L.P. Pursuant to the Investment
Agreement, the Funding Parties have agreed, subject to certain conditions, to
provide funding to us in an aggregate amount up to $8.5 million (including the
$3 Million Note and the $1.5 Million Note) or, at the option of the Funding
Parties such greater amount permitted by the Investment Agreement to allow the
Funding Parties to maintain certain relative ownership levels. If our
stockholders (other than the Funding Parties) subscribe for at least $2.0
million worth of shares in the rights offering, the Funding Parties would,
subject to certain conditions, provide this funding in the form of an investment
in our common stock at the subscription price and, following consummation of the
rights offering, the Funding Parties would convert the $3 Million Note and the
$1.5 Million Note. If our stockholders (other than the Funding Parties) do not
subscribe for at least $2.0 million worth of shares in the rights offering, we
will not consummate the rights offering and, subject to certain conditions, the
Funding Parties will provide funding to us, in the form of, at their option, a
purchase of shares of common stock at the subscription price or the purchase of
a senior secured note which is convertible into shares of common stock. The
aggregate amount of funding to be provided by the funding parties (whether in
the form of an investment in our common stock or a promissory note convertible
into shares of our common stock) would equal up to $8.5 million reduced by the
amount outstanding under the $3 Million Note and the $1.5 Million Note. The
Funding Parties have agreed not to exercise any of their subscription privileges
in the rights offering. The $8.5 million funding commitment described above is
allocated as follows: (a) Mr. Gleacher, $2,000,000; (b) Mr. Phillips, $750,000;
(c) LJCB, $750,000 and (d) ZAM Holdings, L.P. $5,000,000.

DESCRIPTION OF CAPITAL STOCK

Our Amended and Restated Certificate of Incorporation authorizes the
issuance of up to 100,000,000 shares of common stock and 40,000,000 shares of
preferred stock, 1,000,000 shares of which are designated as Series D Preferred
Stock, and 39,000,000 shares of which the rights and preferences may be
established from time to time by our board of directors. Upon completion of this
offering, assuming the offering is fully subscribed and assuming a subscription
price and conversion price (excluding accrued and unpaid interest) of $1.50
based on the number of shares outstanding as of November 24, 2003, 27,126,939
shares of common stock and no shares of preferred stock will be outstanding. As
of November 24, 2003, we had approximately 225 record stockholders.

COMMON STOCK

Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Thus, holders of a majority of the shares of common stock entitled to
vote in any election of directors may elect all of the directors standing for
election. Holders of common stock are entitled to receive ratably any dividends
that may be declared by our board of directors out of funds legally available
for dividends, subject to any preferential dividend rights of outstanding
preferred stock. If we liquidate, dissolve or wind up, the holders of common
stock are entitled to receive ratably all of our assets available after payment
of all debts and other liabilities, subject to the prior rights of any
outstanding preferred stock. Holders of common stock have no preemptive,
subscription, redemption or conversion rights or any rights to share in any
sinking fund. The rights, preferences and privileges of the holders of common
stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of preferred stock that we may designate and
issue in the future.

PREFERRED STOCK

Our Amended and Restated Certificate of Incorporation authorizes the
issuance of up to 40,000,000 shares of preferred stock from time to time in one
or more series and with terms of each series stated in our board's resolutions
providing for the designation and issue of that series. Our Amended and Restated
Certificate of Incorporation also authorizes the board of directors to fix,
state and express the powers, rights, designations, preferences, qualifications,
limitations and restrictions, and dividend, voting, conversion and redemption
rights pertaining to each series of preferred stock that we may issue. Without
seeking any stockholder approval, our board of directors may issue preferred
stock with voting and other rights that could adversely affect the voting power
of the holders of our common stock and could have the effect of delaying,
deferring or preventing a change in control. Other than the issuance of the
series of preferred stock previously authorized by the board of directors in
connection with the shareholder rights plan described below, we have no present
plans to issue any shares of preferred stock.

STOCK PURCHASE WARRANTS

Warrants to purchase 2,787,277 shares of our common stock were outstanding
as of November 24, 2003; 81,468 of which have an exercise price of $0.01 per
share and expire from November 2006 to April 2008; 2,670,004 of which have an
exercise price of $6.00 per share and expire from August 2007 to November 2007;
33,279 of which have an exercise price of $14.88 per share and expire in
November 2007; and 2,526 of which have an exercise price of $16.63 per share and
expire in December 2006. All of these warrants provide for anti-dilution
adjustments in the event of stock splits, stock dividends, merger,
consolidation, recapitalization or similar transactions. Additionally, the
warrants with an exercise price of $0.01 provide for anti-dilution adjustments
in the event of sales by us of our stock at, or issuance of options or warrants
containing an exercise price of, less than fair market value. This offering and
the conversion of the $3 Million Note and the $1.5 Million Note and any notes
issued pursuant to the Investment Agreement could result in sales by us of our
stock below fair market value. All of the holders of these warrants are entitled
to participate in any dividends declared upon shares of our common stock (other
than dividends payable solely in shares of common stock) as if these holders had
fully exercised such warrants.

REGISTRATION RIGHTS

We have granted registration rights to certain holders of shares of our
common stock and warrants under the terms of the Amended and Restated
Registration Agreement dated as of March 30, 1999, by and among us and Ziff
Asset Management, L.P., LBJ Capital, L.P., Talon Opportunity Fund, L.P., Howard
Babcock, Robert Burnstine, Jamie Diamond Schwartz, Jennifer Diamond, John
Diamond, Marilyn Diamond, Michael Warsh, Frances Tuite, Chancellor Private
Capital Partners III, L.P., Chancellor Private Capital Offshore Partners II,
L.P., Citiventure 96 Partnership, L.P., Chancellor Private Capital Offshore
Partners I, C.V., Blaine Trust, Handy Family Partnership LTD., Rod F. Dammeyer,
Randolph Street Partners, Randolph Street Partners 1998 DIF, LLC, Sheila
Rosenberg, SZ Investments, L.L.C., JDS PARTNERS, Andrew Stenzler, Nicholas
Marsh, David Kaufman, Creed Ford, III, Jeffrey Stork, Donald Stork, Dan Levitan,
Stephen Marsh, James Learner, Joseph Learner, Richard Learner, James D. McBride,
III, and David Kelson. Subject to certain exceptions, including our right to
defer a demand registration for a single period of up to 90 days in a given
year, these holders have the right to require us to register their shares at our
expense under the circumstances described in the agreement. In addition, all
holders of shares with registration rights have the right to piggyback on any
registration for our account, subject to certain limitations. Accordingly, in
the event that we propose to register additional shares of common stock under
the Securities Act, the holders of shares with registration rights are entitled
to receive notice of that registration and to include their shares in the
registration, subject to limitations described in the agreement. All
registration rights are subject to conditions and limitations, among them our
right to limit the number of shares of common stock held by these security
holders to be included in the registration. We are generally required to bear
all of the expenses of all registrations (other than underwriting discounts and
commissions).

We have also entered into a Supplemental Registration Rights Agreement,
dated as of August 5, 2003, with Eric Gleacher, Charles Phillips, LJCB and ZAM
Holdings, L.P. Pursuant to this agreement, we have granted certain registration
rights to these parties, including, subject to certain limitations, the right to
require us to register their shares at our expense under the circumstances
described in the agreement. These parties also have the right to piggyback on
any registration for our account, subject to certain limitations. Additionally,
we have agreed to file a shelf registration statement on Form S-3, covering all
of the shares subject to the Supplemental Registration Rights Agreement, at such
time as we are eligible to file such form.

Registration of the shares of common stock held by security holders with
registration rights would result in these shares becoming freely tradable
without restriction under the Securities Act immediately upon effectiveness of
such registration. In connection with any registration under these provisions,
we are required to indemnify the holder participating in an offering against
civil liabilities under the Securities Act.

REVERSE STOCK SPLIT

On November 24, 2003, our stockholders approved an amendment to our Amended
and Restated Certificate of Incorporation authorizing our board of directors, in
its discretion, to effect a one-for-five reverse split of our issued common
stock, without further approval or authorization of our stockholders, at any
time prior to the next annual meeting of Stockholders. If our board of directors
does not implement the reverse stock split before the date of our next Annual
Meeting of Stockholders, the authorization provided to our board of directors
will no longer have any effect. The reverse stock split would only be
implemented if our board of directors determines that the reverse stock split is
necessary to continue trading on the NASDAQ National Market. The NASDAQ National
Market requires a minimum bid price of $1.00 per share for continued listing. On
November 24, 2003, the closing price of Cosi common stock on the NASDAQ National
Market was $2.01.

If the reverse stock split is implemented, each issued share of common
stock immediately prior to the effective time of the reverse stock split,
including treasury shares, will automatically be changed, as of the effective
time of the reverse stock split, into one-fifth of a share of common stock. In
addition, proportional adjustments will be made to the maximum number of shares
issuable under the Company's stock option plans, as well as to the number of
shares issuable under and the exercise price of the Company's outstanding
options and warrants.

No fractional shares of common stock will be issued in connection with the
proposed reverse stock split. Holders of common stock who would otherwise
receive a fractional share of common stock pursuant to the reverse stock split
will receive cash in lieu of the fractional share. Because no fractional shares
of common stock will be issued in connection with the proposed reverse stock
split, holders of less than five shares of common

stock will be eliminated in the event that the reverse stock split is
implemented. As of the date of this prospectus, we had no record holders of our
common stock which held less than five shares of common stock. Therefore, the
reverse stock split, if adopted, would have no effect on the number of our
record holders of common stock.

Because the reverse stock split will apply to all issued shares of common
stock, the proposed reverse stock split will not alter the relative rights and
preferences of existing stockholders.

If the reverse stock split is effectuated, some stockholders may
consequently own "odd lots" of less than one hundred shares of common stock. Odd
lot shares may be more difficult to sell, and brokerage commissions and other
costs of transactions in odd lots are generally somewhat higher than the costs
of transactions in "round lots" of even multiples of 100 shares. Therefore,
those stockholders who own odd lots following the reverse stock split may be
required to pay higher transaction costs should they then determine to sell
their shares of common stock.

If implemented, the reverse stock split will have the effect of increasing
the proportion of authorized but un-issued shares of our common stock. Pursuant
to the reverse stock split, the number of outstanding shares of our common stock
will be reduced by a factor of five, however, the number of shares of common
stock and preferred stock authorized by our Amended and Restated Certificate of
Incorporation will not be reduced. These additional shares would be available
for issuance from time to time for corporate purposes and would provide us with
flexibility for such actions as raising additional capital, acquiring assets and
sales of stock or securities convertible into common stock. However, the
additional shares of common stock that would become available for issuance if
the reverse stock split is approved could also be used to oppose a hostile
takeover attempt or delay or prevent a change of control or changes in or
removal of our management, including any transaction that may be favored by a
majority of our stockholders or in which our stockholders might otherwise
receive a premium for their shares over then-current market prices or benefit in
some other manner. For example, without further shareholder approval, our board
of directors could strategically sell shares of common stock in a private
transaction to purchasers who would oppose a takeover or favor our current board
of directors. Although the increased proportion of un-issued authorized shares
to issued shares could, under certain circumstances, have an anti-takeover
effect, the reverse stock split proposal was not proposed in response to any
effort of which we are aware to accumulate shares of our common stock or obtain
control of the Company.

Our common stock is currently registered under the Securities Exchange Act
of 1934, as amended, and we are subject to the periodic reporting and other
requirements of the Exchange Act. The reverse stock split, if implemented, will
not affect the registration of our common stock under the Exchange Act.

ANTI-TAKEOVER PROVISIONS OF OUR AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION, BY-LAWS AND SHAREHOLDER RIGHTS PLAN

GENERAL

The provisions of our Amended and Restated Certificate of Incorporation,
By-laws and shareholder rights plan, as well as certain provisions of Delaware
statutory law, described in this section may delay or make it more difficult for
someone to acquire us without the approval of our board of directors. These
provisions could have the effect of discouraging third parties from making
acquisition proposals, although such proposals, if made, might be considered
desirable by a majority of our stockholders. These provisions may also have the
effect of making it more difficult for third parties to cause the replacement of
our current management without the concurrence of our board of directors.

CLASSIFIED BOARD OF DIRECTORS

Our Amended and Restated Certificate of Incorporation provides for our
board (other than those directors elected solely by any series of preferred
stock created by resolution of our board) to be divided into three classes of
directors serving staggered three year terms. As a result, approximately
one-third of our board will be elected each year. See "Management" above.

We believe a classified board will help to assure the continuity and
stability of our board, and our business strategies and policies as determined
by our board, because a majority of the directors at any given time will have
73

prior experience as our directors. This provision should also help to ensure
that our board, if confronted with an unsolicited proposal from a third party
that has acquired a block of our voting stock, will have sufficient time to
review the proposal and appropriate alternatives and to seek the best available
result for all stockholders.

This provision could prevent a party who acquires control of a majority of
the outstanding voting stock from obtaining control of our board until the
second annual stockholders' meeting following the date the acquiror obtains the
controlling stock interest, could have the effect of discouraging a potential
acquiror from making a tender offer or otherwise attempting to obtain control of
us and could thus increase the likelihood that incumbent directors will retain
their positions.

NUMBER OF DIRECTORS; REMOVAL; VACANCIES

Our Amended and Restated Certificate of Incorporation and By-laws provide
that the number of directors will not be less than three nor more than 15 and,
except as may be provided in the terms of any series of preferred stock created
by resolutions of the board, will be determined from time to time exclusively by
a vote of a majority of our board then in office. Our Amended and Restated
Certificate of Incorporation also provides that our board will have the
exclusive right, except as may be provided in the terms of any series of
preferred stock created by resolutions of the board, to fill vacancies,
including vacancies created by expansion of our board. Furthermore, except as
may be provided in the terms of any preferred stock created by resolution of our
board with respect to the election of directors by the holders of such series,
directors may be removed by stockholders only for cause and only by the
affirmative vote of at least 66 2/3% of the voting power of all of the shares of
our capital stock then entitled to vote generally in the election of directors,
voting together as a single class.

These provisions could prevent stockholders from removing incumbent
directors without cause and filling the resulting vacancies with their own
nominees.

NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS

Our Amended and Restated Certificate of Incorporation provides that, except
as may be provided in the terms of any series of preferred stock created by
resolution of our board, stockholder action can be taken only at an annual or
special meeting of stockholders and cannot be taken by written consent in lieu
of a meeting. Our Amended and Restated Certificate of Incorporation also
provides that special meetings of stockholders can only be called by the
Chairman of the Board or by the Secretary pursuant to a resolution approved by a
majority of our board of directors then in office. Stockholders are not
permitted to call a special meeting of stockholders.

APPROVAL OF CERTAIN BUSINESS COMBINATIONS

Article IX of our Amended and Restated Certificate of Incorporation
requires that certain business combinations with a "Related Person" (as such
term is defined in our Amended and Restated Certificate of Incorporation) be
approved by the affirmative vote of 80% of our outstanding shares generally
entitled to vote for the election of directors, unless (i) the business
combination has been approved by two-thirds of the board of directors; or (ii)
the amount of consideration to be received in the business combination by the
holders of common stock or any class or series of outstanding voting stock,
other than common stock, shall be equal to the greater of: (a) the highest per
share price paid by the Related Person for any shares of our stock acquired
within the prior two years or (b) the "Fair Market Value" (as such term is
defined in our Amended and Restated Certificate of Incorporation) of our common
stock.

ADVANCE NOTICE FOR RAISING BUSINESS OR MAKING NOMINATIONS AT MEETINGS

Our By-laws establish an advance notice procedure with regard to
stockholder proposals and nominations of individuals for election to the board
of directors. In general, notice of a stockholder proposal or a director
nomination for an annual meeting must be delivered to us at our executive
offices not less than 120 days nor more than 150 days before the date of the
anniversary of the last annual stockholders' meeting (unless the meeting is to
be held more than 30 days in advance of such anniversary date, in which event
the stockholder proposal or director nomination shall be delivered to us no
later than the close of business on the 10th day following the day on which
notice of the meeting was given) and must contain specified information and
conform to certain
74

requirements, as set forth in our By-laws. Notice of a director nomination for a
special meeting must be received by us no later than the 10th day following the
day on which notice of the date of a special meeting of stockholders was given.
If the presiding officer at any stockholders' meeting determines that a
stockholder proposal or director nomination was not made in accordance with the
By-laws, we may disregard such proposal or nomination.

The notice of any nomination for election as a director must set forth the
name, age, business and residence address of the person or persons to be
nominated; the business experience during the past five years of such person or
persons, including the person's principal occupation or employment during such
period, the name and principal business of any corporation or other organization
in which such occupation or employment was carried on, and such other
information as to the nature of the persons responsibilities and level of
professional competence as may be sufficient to permit assessment of the
person's prior business experience; the class or series and number of shares of
our capital stock beneficially owned by the person; and any other information
relating to the person that would be required to be disclosed in a proxy
statement or other filing required to be made in connection with solicitations
of proxies for election of directors pursuant to Section 14 of the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.

AMENDMENTS TO BY-LAWS

Our Amended and Restated Certificate of Incorporation provides that our
board or the holders of at least 66 2/3% of the voting power of all shares of
our capital stock then entitled to vote generally in the election of directors,
voting together as a single class, have the power to amend or repeal our
By-laws.

AMENDMENT OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

Any proposal to amend, alter, change or repeal any provision of our Amended
and Restated Certificate of Incorporation, except as may be provided in the
terms of any preferred stock created by resolution of our board and which relate
to such series of preferred stock, requires approval by the affirmative vote of
both a majority of the members of our board then in office and a majority vote
of the voting power of all of the shares of our capital stock entitled to vote
generally in the election of directors, voting together as a single class.
However, any proposal to amend, alter, change or repeal the provisions of our
Amended and Restated Certificate of Incorporation relating to (i) the
classification of our board, (ii) removal of directors, (iii) the prohibitions
on stockholder action by written consent or stockholder calls for special
meetings, (iv) amendment of our By-laws or (v) amendment of the Amended and
Restated Certificate of Incorporation, requires approval by the affirmative vote
of 66 2/3% of the voting power of all of the shares of our capital stock
entitled to vote generally in the election of directors, voting together as a
single class; provided, however, that in the case of any proposal to amend,
alter, change or repeal the provision of our Amended and Restated Certificate of
Incorporation relating to business combinations, such a proposal requires
approval by the affirmative vote of 80% of the voting power of all of the shares
of our capital stock entitled to vote generally in the election of directors,
voting together as a single class.

PREFERRED STOCK AND ADDITIONAL COMMON STOCK

Under our Amended and Restated Certificate of Incorporation, our board will
have the authority to provide by resolution for the issuance of shares of one or
more series of preferred stock. Our board is authorized to fix by resolution the
terms and conditions of each such other series. See "Description of Capital
Stock -- Preferred Stock."

We believe that the availability of our preferred stock, in each case
issuable in series, and additional shares of common stock, could facilitate
certain financings and acquisitions and provide a means for meeting other
corporate needs that might arise. The authorized shares of our preferred stock,
as well as authorized but unissued shares of common stock, will be available for
issuance without further action by our stockholders, unless stockholder action
is required by applicable law or the rules of any stock exchange on which any
series of our stock may then be listed, or except as may be provided in the
terms of any preferred stock created by resolution of our board.

These provisions give our board the power to approve the issuance of a
series of preferred stock, or additional shares of common stock, that could,
depending on its terms, either impede or facilitate the completion of a merger,
tender offer or other takeover attempt. For example, the issuance of new shares
of preferred stock might impede a business combination if the terms of those
shares include voting rights which would enable a holder to block business
combinations or, alternatively, might facilitate a business combination if those
shares have general voting rights sufficient to cause an applicable percentage
vote requirement to be satisfied. Moreover, as discussed below, the Series D
preferred stock is issuable under the circumstances provided for in the rights
agreement upon exercise of the rights. See "Description of Capital
Stock -- Shareholder Rights Plan."

DELAWARE BUSINESS COMBINATION STATUTE

Section 203 of the Delaware General Corporation Law, or the DGCL, provides
that, subject to certain exceptions specified therein, an "interested
stockholder" of a Delaware corporation may not engage in any business
combination with the corporation for a three-year period following the time that
such stockholder becomes an "interested stockholder" unless (i) prior to such
time, the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
"interested stockholder," (ii) upon consummation of the transaction which
resulted in the stockholder becoming an "interested stockholder," the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding certain shares), or
(iii) at or subsequent to such time, the business combination is approved by the
board of directors of the corporation and authorized at an annual or special
meeting of stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the "interested stockholder."
Except as otherwise specified in DGCL Section 203, an "interested stockholder"
is defined to include (a) any person that is the owner of 15% or more of the
outstanding voting stock of the corporation, or is an affiliate or associate of
the corporation and was the owner of 15% or more of the outstanding voting stock
of the corporation at any time within three years immediately prior to the
relevant date and (b) the affiliates and associates of any such person. Under
certain circumstances, DGCL Section 203 makes it more difficult for a person who
would be an "interested stockholder" to effect various business combinations
with a corporation for a three-year period, although the stockholders may elect
to exclude a corporation from the restrictions imposed thereunder. Our Amended
and Restated Certificate of Incorporation does not exclude us from the
restrictions imposed under DGCL Section 203. The provisions of DGCL Section 203
may encourage companies interested in acquiring us to negotiate in advance with
our board, since the stockholder approval requirement would be avoided if a
majority of the directors then in office approve either the business combination
or the transaction which results in the stockholder becoming an interested
stockholder. These provisions also may have the effect of preventing changes in
our management. It is possible that such provisions could make it more difficult
to accomplish transactions that stockholders may otherwise deem to be in their
best interests.

SHAREHOLDER RIGHTS PLAN

Each holder of a share of our common stock has the right to purchase from
us one one-hundredth ( 1/100) of a share of our Series D Preferred Stock, $0.01
par value per share, at a price of $100 per one one-hundredth of a Series D
Preferred Share. The exercise price and the number of shares of Series D
Preferred Stock issuable upon exercise are subject to adjustments from time to
time to prevent dilution. The share purchase rights are not exercisable until
the earlier to occur of (i) 10 days following a public announcement that a
person or group of affiliated or associated persons, referred to as an acquiring
person, have acquired beneficial ownership of 15% or more of our outstanding
voting common stock or (ii) 10 business days following the commencement of, or
announcement of an intention to make, a tender offer or exchange offer which
would result in an acquiring person beneficially owning 15% or more of our
outstanding voting shares of common stock.

If we are acquired in a merger or other business combination, or if more
than 50% of our consolidated assets or earning power is sold after a person or
group has become an acquiring person, proper provision will be made so that each
holder of a share purchase right -- other than share purchase rights
beneficially owned by the acquiring person, which will thereafter be
void -- will have the right to receive, upon exercise of the share purchase
right at the then current exercise price, the number of shares of common stock
of the acquiring company which at the time of the transaction have a market
value of two times the exercise price. If any person or group becomes an
acquiring person, proper provision shall be made so that each holder of a share
purchase right --
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other than share purchase rights beneficially owned by the acquiring person,
which will thereafter be void -- will have the right to receive upon exercise of
the share purchase right at the then current exercise price, the number of
shares of Series D Preferred Stock with a market value at the time of the
transaction equal to two times the exercise price.

Series D Preferred Stock issuable upon exercise of the share purchase
rights will not be redeemable. Each Series D preferred share will be entitled to
a minimum preferential dividend payment of $0.10 per share and will be entitled
to an aggregate dividend of 100 times the cash dividend declared per share of
common stock. In the event we liquidate, the holders of the Series D Preferred
Stock will be entitled to receive a payment in an amount equal to the greater of
$100 per one one-hundredth share or 100 times the payment made per share of
common stock. Each Series D preferred share will have 100 votes, voting together
with the shares of common stock. Finally, in the event of any merger,
consolidation or other transaction in which shares of common stock are
exchanged, each Series D preferred share will be entitled to receive 100 times
the amount received per share of common stock. These rights are protected by
customary antidilution provisions.

Before the date the share purchase rights are exercisable, the share
purchase rights may not be detached or transferred separately from the common
stock. The share purchase rights will expire in 2012, or, if the share purchase
rights become exercisable before 2012, at the close of business on the 90th day
following such date the share purchase right become exercisable, provided that
our board of directors does not extend or otherwise modify the right. At any
time on or prior to 10 business days following the time an acquiring person
acquires beneficial ownership of 15% or more of our outstanding voting common
stock, our board of directors may redeem the share purchase rights in whole, but
not in part, at a price of $0.01 per share purchase right. Immediately upon any
share purchase rights redemption, the exercise rights terminate, and the holders
will only be entitled to receive the redemption price. A more detailed
description and terms of the share purchase rights are set forth in a rights
agreement between Cosi and American Stock Transfer and Trust Company, as rights
agent. This rights agreement could have the effect of discouraging tender offers
or other transactions that might otherwise result in our shareholders receiving
a premium over the market price for their common stock.

Our Board of Directors has specifically approved the Investment Agreement,
this rights offering and the transactions contemplated thereby (including the $3
Million Note and the $1.5 Million Note) for purposes of the Delaware business
combination statute, our shareholder rights plan and Article IX of our
Certificate of Incorporation.

INDEMNIFICATION AND LIMITATIONS ON LIABILITY OF DIRECTORS AND OFFICERS

Our By-laws provide for indemnification of directors to the fullest extent
permitted by Delaware law. Our Amended and Restated Certificate of
Incorporation, to the extent permitted by Delaware law, eliminates or limits the
personal liability of our directors to us and our stockholders for monetary
damages for breach of fiduciary duty. Such indemnification may be available for
liabilities arising in connection with this offering. To the extent that
limitation of liability or indemnification for liabilities under the Securities
Act of 1933, as amended, may be permitted to directors, officers or persons
controlling us under the foregoing provisions, we have been informed that, in
the opinion of the SEC, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable. Our by-laws also
allow us to indemnify our officers to the fullest extent permitted by Delaware
law. Our by-laws obligate us, under certain circumstances, to advance expenses
to our directors and officers in defending an action, suit or proceeding for
which indemnification may be sought. We also can indemnify someone serving at
our request as a director, officer, employee, fiduciary or agent of another
corporation or of a partnership, joint venture, trust or other enterprise
against these liabilities.

Our By-laws also provide that we have the power to purchase and maintain
insurance on behalf of any person who is or was one of our directors, officers,
employees or agents against any liability asserted against that person or
incurred by that person in these capacities, whether or not we would have the
power to indemnify that person against these liabilities under Delaware law. We
maintain insurance on behalf of all of our directors and executive officers.

TRANSFER AGENT AND REGISTRAR

American Stock Transfer and Trust Company is the transfer agent and
registrar for our common stock.

SHARES ELIGIBLE FOR FUTURE SALE

Following the completion of this offering, assuming the offering is fully
subscribed and assuming a subscription price of $1.50 per share and conversion
of the $3 Million Note and the $1.5 Million Note at a conversion price of $1.50
(excluding accrued and unpaid interest), we will have 27,126,939 shares of
common stock outstanding. All of the common stock sold in this offering will be
freely tradable without restriction or further registration under the Securities
Act of 1933, as amended, except any shares that are purchased by our
"affiliates," as that term is defined in Rule 144 under the Securities Act.
Shares of our common stock purchased by our affiliates and shares of our common
stock acquired by our affiliates pursuant to conversion of the $3 Million Note
and $1.5 Million Note may generally only be sold, absent registration, in
compliance with the limitations of Rule 144 described below. Substantial future
sales of our common stock in the public market after the offering may adversely
affect our stock price.

In general, under Rule 144 as currently in effect, an affiliate is entitled
to sell, within any three-month period, a number of shares that does not exceed
the greater of one percent of the then outstanding shares of our common stock
(approximately 270,000 shares immediately after the rights offering, assuming a
subscription price and a conversion price of $1.50 per share and all rights are
subscribed for) or the average weekly trading volume in the common stock on an
exchange in the four calendar weeks preceding such sale. Sales under Rule 144
are also subject to certain limitations on manner of sale, notice requirements
and availability of current public information about us.

LEGAL MATTERS

Certain legal matters with respect to the validity of common stock offered
hereby will be passed upon for us by Cadwalader, Wickersham & Taft LLP, New
York, New York. A partner of Cadwalader, Wickersham & Taft LLP beneficially
owned 64,008 shares prior to this offering, representing 0.36% of our common
stock prior to this offering.

EXPERTS

The consolidated financial statements (including the related financial
statement schedule) of Cosi, Inc., at December 30, 2002, December 31, 2001 and
for each of the three years in the period ended December 30, 2002, appearing in
this prospectus and registration statement have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.

On May 23, 2001, our board of directors dismissed Ernst & Young LLP and
engaged Arthur Andersen LLP as our principal accountants. The reports of Ernst &
Young LLP on the fiscal 1999 financial statements of Cosi did not contain an
adverse opinion or disclaimer of opinion, nor were they qualified or modified as
to uncertainty, audit scope or accounting principles. There were no
disagreements with Ernst & Young LLP during fiscal 1999, 2000 or during fiscal
2001 preceding their replacement on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedures, which
disagreements, if not resolved to their satisfaction, would have caused them to
make reference to the subject matter of the disagreement in connection with
their reports. None of the reportable events described under Item 304(a)(1)(v)
of Regulation S-K occurred during fiscal 2000 or preceding their replacement.
During fiscal 1999, 2000 and during fiscal 2001 preceding Ernst & Young LLP's
replacement, we did not consult with Arthur Andersen LLP regarding any of the
matters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K.

On June 17, 2002, our board of directors dismissed Arthur Andersen LLP and
engaged Ernst & Young LLP as our principal accountants. The reports of Arthur
Andersen LLP on the fiscal 2001 and 2000 financial statements of Cosi (not
included herein) did not contain any adverse opinion or disclaimer of opinion,
nor were they qualified or modified as to uncertainty, audit scope or accounting
principles. There were no disagreements between us and Arthur Andersen LLP
during fiscal years 2000, 2001 or during fiscal 2002 preceding their replacement
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to their satisfaction, would have caused them to make
78

reference to the subject matter of the disagreement in connection with their
reports. None of the reportable events described under Item 304(a)(l)(v) of
Regulation S-K occurred within our two most recent fiscal years and the first
quarter of fiscal year 2003. During fiscal 2000, 2001 and during fiscal 2002
preceding Arthur Andersen LLP's replacement, we did not consult with Ernst &
Young LLP regarding any of the matters or events set forth in Item 304(a)(2)(i)
and (ii) of Regulation S-K.

WHERE YOU CAN FIND MORE INFORMATION

This prospectus is part of a registration statement on Form S-1 that we
have filed with the Securities and Exchange Commission covering the shares of
common stock that we are offering pursuant to this rights offering. This
prospectus does not contain all of the information presented in the registration
statement, and you should refer to that registration statement with its exhibits
for further information. Statements in this prospectus describing or summarizing
any contract or other document are not complete, and you should review the
copies of those documents filed as exhibits to the registration statement for
more detail. You may read and copy the registration statement at the Securities
and Exchange Commission's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. For information on the operation of the Public Reference
Room, call the Securities and Exchange Commission at 1-800-SEC-0330. You can
also inspect our registration statement on the Internet at the Securities and
Exchange Commission's web site, http://www.sec.gov.

We also are required to file annual, quarterly and current reports, proxy
and information statements and other information with the Securities and
Exchange Commission. You can review this information at the Securities and
Exchange Commission's Public Reference Room or on its web site, as described
above.

CONSOLIDATED FINANCIAL STATEMENTS INDEX AND FINANCIAL STATEMENTS

COSI, INC.

CONSOLIDATED FINANCIAL STATEMENTS

INDEX

<Table>
<Caption>
PAGE
----

Report of Independent Auditors.............................. F-2
Consolidated Financial Statements (audited):
Consolidated Balance Sheets at December 30, 2002 and
December 31, 2001......................................... F-3
Consolidated Statements of Operations for the years ended
December 30, 2002, December 31, 2001 and January 1,
2001...................................................... F-4
Consolidated Statements of Redeemable Securities and
Stockholders' Equity for the years ended December 30,
2002, December 31, 2001 and January 1, 2001............... F-5
Consolidated Statements of Cash Flows for the years ended
December 30, 2002, December 31, 2001 and January 1,
2001...................................................... F-6
Notes to Consolidated Financial Statements.................. F-7
Consolidated Interim Financial Statements (unaudited):
Consolidated Balance Sheets at December 30, 2002 and
September 29, 2003........................................ F-29
Consolidated Statements of Operations for the nine months
ended September 29, 2003 and September 30, 2002........... F-30
Consolidated Statement of Stockholders' Equity for the nine
months ended September 29, 2003........................... F-31
Consolidated Statements of Cash Flows for the nine months
ended September 29, 2003 and September 30, 2002........... F-32
Notes to Consolidated Interim Financial Statements.......... F-33
</Table>

F-1

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors
Cosi, Inc.

We have audited the accompanying consolidated balance sheets of Cosi, Inc.
as of December 30, 2002 and December 31, 2001 and the related consolidated
statements of operations, redeemable securities and stockholders' equity and
cash flows for each of the three years in the period ended December 30, 2002.
These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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.

Since the date of completion of our audit of the accompanying financial
statements and initial issuance of our report thereon dated February 19, 2003,
except for Note 17 as to which the date is March 31, 2003, the Company, as
discussed in Note 1, has experienced substantial losses that adversely affect
the Company's current results of operations and liquidity. Note 1 describes
management's plans to address these issues.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Cosi, Inc. at
December 30, 2002 and December 31, 2001, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
December 30, 2002, in conformity with accounting principles generally accepted
in the United States.

As discussed in Note 2, the Company adopted SFAS No. 142, "Goodwill and
Other Intangible Assets" effective January 1, 2002.

<Table>

/s/ ERNST & YOUNG LLP
</Table>

New York, New York
February 19, 2003 except for Note 17,
as to which the date is March 31, 2003 and
Note 1, as to which the date
is November 6, 2003

F-2

COSI, INC.

CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
DECEMBER 30, DECEMBER 31,
2002 2001
------------- -------------

ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 13,032,307 $ 4,469,571
Accounts receivable, net of allowances of $232,129 and
$219,845............................................... 1,511,526 1,198,786
Inventory................................................. 1,465,730 1,403,806
Prepaid expenses and other current assets................. 1,676,279 568,353
------------- -------------
Total current assets................................... 17,685,842 7,640,516
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net......... 45,755,319 25,507,195
INTANGIBLES, SECURITY DEPOSITS AND OTHER ASSETS, net........ 2,801,919 2,240,733
------------- -------------
Total assets........................................... $ 66,243,080 $ 35,388,444
============= =============

LIABILITIES, REDEEMABLE SECURITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 8,925,245 $ 4,737,121
Accrued liabilities....................................... 5,922,408 4,951,809
Current portion of other liabilities...................... 671,601 1,678,880
Current portion of capital lease obligations.............. 116,940 441,862
Current portion of long-term debt......................... 1,280,432 1,136,835
------------- -------------
Total current liabilities.............................. 16,916,626 12,946,507
OTHER LIABILITIES, net of current portion................... 9,748,334 9,531,364
CAPITAL LEASE OBLIGATIONS, net of current portion........... 2,485 135,236
LONG-TERM DEBT, net of current portion...................... 248,650 9,466,022
------------- -------------
Total liabilities...................................... 26,916,095 32,079,129
COMMITMENTS AND CONTINGENCIES (Note 13)
REDEEMABLE SECURITIES:
Series A Convertible Preferred stock -- $0.01 par value;
2,005,862 authorized, 1,146,206 issued and outstanding;
aggregate liquidation preference $18,768,150, including
accrued dividends of $4,727,116 in 2001................ -- 18,318,205
Series C Convertible Preferred stock -- $0.01 par value;
10,510,191 authorized 4,161,589 issued and outstanding,
aggregate liquidation preference of $74,524,713
including accrued dividends of $8,807,592 in 2001...... -- 73,971,056
------------- -------------
Total redeemable securities............................ -- 92,289,261
------------- -------------
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock -- $.01 par value: 100,000,000 shares
authorized, 16,573,514 and 4,511,494 shares issued and
outstanding, respectively................................. 165,735 45,115
Additional paid-in capital.................................. 189,255,034 32,004,032
Notes receivable from stockholders.......................... (2,974,804) (2,974,804)
Accumulated deficit......................................... (147,118,980) (118,054,289)
------------- -------------
Total stockholders' equity (deficit)................... 39,326,985 (88,979,946)
------------- -------------
Total liabilities, redeemable securities and
stockholders' equity (deficit)....................... $ 66,243,080 $ 35,388,444
============= =============
</Table>

The accompanying notes are an integral part of these consolidated statements.
F-3

COSI, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
FOR THE YEARS ENDED
------------------------------------------
DECEMBER 30, DECEMBER 31, JANUARY 1,
2002 2001 2001
------------ ------------ ------------

NET SALES........................................... $ 84,424,247 $ 70,184,136 $ 51,222,818
COST OF SALES:
Cost of goods sold................................ 22,697,549 18,791,711 13,843,992
Restaurant operating expenses..................... 50,852,670 45,114,495 32,172,860
------------ ------------ ------------
TOTAL COST OF SALES................................. 73,550,219 63,906,206 46,016,852
GENERAL AND ADMINISTRATIVE EXPENSES................. 17,811,712 18,361,511 14,774,234
DEPRECIATION AND AMORTIZATION....................... 5,851,207 6,689,985 6,158,146
RESTAURANT PRE-OPENING EXPENSES..................... 1,845,120 1,438,783 1,409,497
PROVISION FOR LOSSES ON ASSET IMPAIRMENTS
AND DISPOSALS....................................... 1,056,471 8,486,309 5,847,545
LEASE TERMINATION COSTS............................. (1,164,984) 6,410,759 477,266
------------ ------------ ------------
Operating loss................................. (14,525,498) (35,109,417) (23,460,722)
INTEREST INCOME..................................... 98,334 340,453 441,350
INTEREST EXPENSE.................................... (1,192,598) (527,511) (210,655)
AMORTIZATION OF DEFERRED FINANCING COSTS............ (548,972) (126,868)
LOSS ON EARLY EXTINGUISHMENT OF DEBT................ (5,083,188)
OTHER INCOME (EXPENSE).............................. 380,871 -- --
------------ ------------ ------------
Net loss....................................... (20,871,051) (35,423,343) (23,230,027)
PREFERRED STOCK DIVIDENDS........................... (8,193,640) (6,678,085) (4,219,684)
------------ ------------ ------------
NET LOSS ATTRIBUTABLE TO COMMON STOCK............... (29,064,691) $(42,101,428) $(27,449,711)
============ ============ ============
PER SHARE DATA:
Net Loss Per Share:
Basic and diluted.............................. $ (5.04) $ (9.34) $ (6.09)
============ ============ ============
Weighted Average Common Shares Outstanding:
Actual............................................ 5,762,818 4,507,237 4,503,862
============ ============ ============
</Table>

The accompanying notes are an integral part of these consolidated statements.
F-4

COSI, INC.

CONSOLIDATED STATEMENTS OF REDEEMABLE SECURITIES AND STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JANUARY 1, 2001, DECEMBER 31, 2001
AND DECEMBER 30, 2002
<Table>
<Caption>
REDEEMABLE SHARES
--------------------------------------------------------------------------------------------
SERIES A SERIES C
CONVERTIBLE PREFERRED CONVERTIBLE PREFERRED
STOCK STOCK COMMON STOCK
------------------------- ------------------------- TOTAL ---------------------
NUMBER OF NUMBER OF REDEEMABLE NUMBER OF
SHARES AMOUNT SHARES AMOUNT SECURITIES SHARES AMOUNT
---------- ------------ ---------- ------------ ------------ ---------- --------

BALANCE, January 3, 2000...... 1,146,206 $ 15,118,619 1,268,981 $ 19,901,891 35,020,510 4,503,815 $ 45,038
Issuance of Series C
convertible preferred stock,
net of issuance costs........ -- -- 1,426,936 22,455,104 22,455,104 -- --
Accrued preferred stock
dividend..................... -- 1,320,434 -- 2,649,775 3,970,209 -- --
Accretion of preferred stock
to liquidation value......... -- 224,936 -- 24,539 249,475 -- --
Issuance of common stock...... -- -- -- -- -- 54 1
Net loss...................... -- -- -- -- -- -- --
---------- ------------ ---------- ------------ ------------ ---------- --------
BALANCE, January 1, 2001...... 1,146,206 16,663,989 2,695,917 45,031,309 61,695,298 4,503,869 45,039
Issuance of Series C
convertible preferred stock,
net of issuance costs........ -- -- 1,465,672 23,915,878 23,915,878 -- --
Issuance of warrants.......... -- -- -- -- -- -- --
Issuance of warrants in
connection with preferred
stock financing.............. -- -- -- -- -- -- --
Accrued preferred stock
dividend..................... -- 1,429,280 -- 4,980,812 6,410,092 -- --
Accretion of preferred stock
to liquidation value......... -- 224,936 -- 43,057 267,993 -- --
Issuance of common stock...... -- -- -- -- -- 7,625 76
Net loss...................... -- -- -- -- -- -- --
---------- ------------ ---------- ------------ ------------ ---------- --------
BALANCE, December 31, 2001.... 1,146,206 18,318,205 4,161,589 73,971,056 92,289,261 4,511,494 45,115
Issuance of Series C
convertible preferred stock,
net of issuance costs........ -- -- 942,629 15,626,611 15,626,611 -- --
Issuance of warrants.......... -- -- -- -- -- -- --
Issuance of warrants in
connection with preferred
stock financing..............
Accrued preferred stock
dividend..................... -- 1,376,383 -- 6,473,731 7,850,114 -- --
Accretion of preferred stock
to liquidation value......... -- 200,836 -- 142,690 343,526 -- --
Exchange of senior
subordinated debt and
warrants for Series C
Convertible Preferred Stock
(Note 16).................... -- -- 217,327 3,613,075 3,613,075 -- --
Issuance of common stock...... -- -- -- -- -- 5,594,409 55,944
Conversion to common stock.... (1,146,206) (19,895,424) (5,321,545) (99,827,163) (119,722,587) 6,467,611 64,676
Net loss...................... -- -- -- -- -- -- --
---------- ------------ ---------- ------------ ------------ ---------- --------
BALANCE, December 30, 2002.... -- $ -- -- $ -- $ -- 16,573,514 $165,735
========== ============ ========== ============ ============ ========== ========

NOTES
ADDITIONAL RECEIVABLE
PAID-IN FROM ACCUMULATED
CAPITAL STOCKHOLDERS DEFICIT TOTAL
------------ ------------ ------------- ------------

BALANCE, January 3, 2000...... $ 30,606,697 $(2,974,804) $ (48,503,150) $(20,826,219)
Issuance of Series C
convertible preferred stock,
net of issuance costs........ -- -- -- --
Accrued preferred stock
dividend..................... -- -- (3,970,209) (3,970,209)
Accretion of preferred stock
to liquidation value......... -- -- (249,475) (249,475)
Issuance of common stock...... 634 -- -- 635
Net loss...................... -- -- (23,230,027) (23,230,027)
------------ ----------- ------------- ------------
BALANCE, January 1, 2001...... 30,607,331 (2,974,804) (75,952,861) (48,275,295)
Issuance of Series C
convertible preferred stock,
net of issuance costs........ -- -- -- --
Issuance of warrants.......... 1,098,469 -- -- 1,098,469
Issuance of warrants in
connection with preferred
stock financing.............. 231,631 -- -- 231,631
Accrued preferred stock
dividend..................... -- -- (6,410,092) (6,410,092)
Accretion of preferred stock
to liquidation value......... -- -- (267,993) (267,993)
Issuance of common stock...... 66,601 -- -- 66,677
Net loss...................... -- -- (35,423,343) (35,423,343)
------------ ----------- ------------- ------------
BALANCE, December 31, 2001.... 32,004,032 (2,974,804) (118,054,289) (88,979,946)
Issuance of Series C
convertible preferred stock,
net of issuance costs........ -- -- -- --
Issuance of warrants.......... 4,901,874 4,901,874
Issuance of warrants in
connection with preferred
stock financing.............. 43,900 43,900
Accrued preferred stock
dividend..................... -- -- (7,850,114) (7,850,114)
Accretion of preferred stock
to liquidation value......... -- -- (343,526) (343,526)
Exchange of senior
subordinated debt and
warrants for Series C
Convertible Preferred Stock
(Note 16).................... (429,865) -- -- (429,865)
Issuance of common stock...... 33,077,182 -- 33,133,126
Conversion to common stock.... 119,657,911 119,722,587
Net loss...................... -- -- (20,871,051) (20,871,051)
------------ ----------- ------------- ------------
BALANCE, December 30, 2002.... $189,255,034 $(2,974,804) $(147,118,980) $ 39,326,985
============ =========== ============= ============
</Table>

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

F-5

COSI, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
DECEMBER 30, DECEMBER 31, JANUARY 1,
2002 2001 2001
------------ ------------ ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(20,871,051) $(35,423,343) $(23,230,027)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 5,851,207 6,689,985 6,158,146
Amortization of deferred financing costs.................. 548,972 126,868 --
Loss on early extinguishment of debt...................... 5,083,188 -- --
Asset impairments and disposals........................... 1,056,471 9,933,142 5,847,545
Provision for bad debts................................... 27,000 3,600 73,330
Changes in operating assets and liabilities:
Accounts receivable....................................... (339,740) 762,161 (1,653,944)
Inventory................................................. (61,924) (492,934) (397,048)
Other assets.............................................. (367,352) (619,006) 667,935
Accounts payable.......................................... 4,188,124 918,150 2,282,931
Accrued liabilities....................................... 970,599 (255,229) 2,358,273
Accrued merger and integration............................ -- -- (639,300)
Accrued contractual lease increases....................... 785,794 825,772 628,401
Prepaid expenses and other current assets................. (1,107,926) (53,084) (198,203)
Lease termination accrual................................. (1,576,103) 5,201,674 (437,146)
------------ ------------ ------------
Net cash used in operating activities................... (5,812,741) (12,382,244) (8,539,107)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, equipment and leasehold
improvements............................................ (27,155,800) (20,350,590) (18,161,055)
Payments made for security deposits....................... (308,404) 82,725 (186,693)
------------ ------------ ------------
Net cash used in investing activities................. (27,464,204) (20,267,865) (18,347,748)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock.................... 33,133,126 66,677 635
Net proceeds from issuance of preferred stock............. 15,670,511 24,147,509 22,455,104
Retirement of Sr. Subordinated & Sr. Secured Notes........ (16,320,692) -- --
Principal payments on capital lease obligations........... (457,673) (572,060) (303,783)
Proceeds from long-term debt plus related Warrants and
accrued interest........................................ 10,980,647 9,269,198 2,998,977
Principal payments on long-term debt...................... (1,166,238) (854,516) (186,947)
------------ ------------ ------------
Net cash provided by financing activities................. 41,839,681 32,056,808 24,963,986
------------ ------------ ------------
Net increase (decrease) in cash........................... 8,562,736 (593,301) (1,922,869)
CASH AND CASH EQUIVALENTS, beginning of year................ 4,469,571 5,062,872 6,985,741
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of year...................... $ 13,032,307 $ 4,469,571 $ 5,062,872
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest.................................................. $ 1,323,459 $ 466,764 $ 220,492
============ ============ ============
Corporate franchise and income taxes...................... $ 118,690 $ 277,198 $ 7,931
============ ============ ============
Non-cash financing transactions:
Assets acquired under capital leases...................... $ -- $ -- $ 134,678
============ ============ ============
Conversion of Senior Subordinated Debt to Series C
Preferred............................................... $ 3,183,210 $ -- $ --
============ ============ ============
Conversion of Warrants to Series C Preferred.............. $ 429,865 $ -- $ --
============ ============ ============
</Table>

The accompanying notes are an integral part of these consolidated statements.
F-6

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 1, 2001, DECEMBER 31, 2001 AND DECEMBER 30, 2002

1. DESCRIPTION AND ORGANIZATION OF BUSINESS

Cosi, Inc. and subsidiaries (the "Company" or "Cosi") engages in the
business of operating restaurants, which sell high-quality coffees and
sandwiches along with a variety of coffee beverages, teas, baked goods and
alcoholic beverages. As of December 30, 2002, the Company had 91 restaurants in
operation in Connecticut, New York, the District of Columbia, Pennsylvania,
Maryland, Massachusetts, Virginia, Illinois, New Jersey, Michigan, Ohio and
Wisconsin.

During the first nine months of fiscal 2003, the Company experienced lower
sales and operating profits than it had projected, mostly related to
underperformance at new restaurants opened in the second half of 2002 and in the
first quarter of 2003 and severe winter weather in the Northeast. In addition,
the Company's cash position has been adversely impacted by the payment of costs
associated with restaurants in its development pipeline that the Company
determined not to open. As a result, the Company incurred a loss of $20.5
million and used cash in operating activities of $10.0 million for the nine
months ended September 29, 2003. Cash and cash equivalents were $3.2 million and
working capital was a deficit of $7.6 million. Primarily because of these
developments, the Company determined that it was prudent to seek additional
financing. Consequently, the Company obtained a $3 million line of credit from a
bank to be used for general corporate purposes and borrowed the full amount on
April 1, 2003. In addition, the Company announced its intention to pursue a
rights offering to raise approximately $14 million. In connection therewith, the
Company announced that a group of its shareholders (the "Funding Parties",
defined below) indicated that they will commit to provide funding in the amount
of up to $8.5 million of the rights offering. This commitment is subject to,
among other things, the Company's shareholders approving the conversion feature
of the $3 Million Note and the $1.5 Million Note (described below). The $3
Million Note and the $1.5 Million Note bear interest at 75 basis points over
Bank of America's prime lending rate and are each secured by all of the
Company's tangible and intangible property, other than equipment pledged to
secure the Company's equipment loan credit facility. The Company paid the bank
fees and expenses of approximately $22,000 upon funding of the $3 Million Note.
The $3 Million Note was guaranteed, jointly and severally, by Eric J. Gleacher,
one of the Company's stockholders and one of the Company's former directors;
Charles G. Phillips, one of the Company's stockholders, and Ziff Investors
Partnership, L.P. II, an entity related to ZAM Holdings, L.P., the Company's
largest stockholder. On October 30, 2003, the bank assigned the $3 Million Note
to these persons or their designees, and the maturity date was extended to
December 31, 2004. Upon assignment of the note, the Company issued amended and
restated promissory notes in the amount of $1,943,068.74, $759,397.00 and
$304,634.26 (collectively, the "$3 Million Note"). Subject to the receipt of
shareholder approval of the conversion feature of the senior secured notes, each
holder will have the right to convert, in whole or in part, their pro rata share
of the note plus accrued and unpaid interest into shares of the Company's common
stock at a conversion price equal to the lesser of $1.50 or 85% of the weighted
average price per share of the Company's common stock for the fifteen trading
day period ending three trading days before the conversion date. If the
Company's stockholders approve the conversion feature of the senior secured
notes and if the Company consummates the rights offering, the $3 Million Note
and the $1.5 Million Note will be converted by the holders.

On August 5, 2003, the Company entered into an Investment Agreement (the
"Investment Agreement") with Eric J. Gleacher, Charles G. Phillips, LJCB
Nominees Pty Ltd, and ZAM Holdings, L.P. (together, the "Funding Parties")
Pursuant to the Investment Agreement, subject to certain conditions, the Funding
Parties have agreed to provide funding to the Company in an aggregate amount up
to $8.5 million reduced by the amount outstanding under the $3 Million Note and
the $1.5 Million Note. At the option of the Funding Parties, the Funding Parties
may fund such greater amount permitted by the Investment Agreement to allow the
Funding Parties to maintain certain relative ownership levels. If the Company's
stockholders (other than the Funding Parties) subscribe for at least $2.0
million worth of shares in the rights offering, the Funding Parties would,
subject to certain conditions, provide this funding in the form of an investment
in the Company's common stock at the subscription price. If the Company's
stockholders (other than the Funding Parties) do not subscribe for at

F-7

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 1, 2001, DECEMBER 31, 2001 AND DECEMBER 30, 2002 -- (CONTINUED)

least $2.0 million worth of shares in the rights offering, the Company will not
consummate the rights offering and the Funding Parties will, subject to certain
conditions, provide this funding in the form of, at their option, a purchase of
shares of the Company's common stock at the subscription price or the purchase
of a senior secured note which is convertible into shares of the Company's
common stock. The Funding Parties agreed not to exercise their basic
subscription privilege or over-subscription privilege in the rights offering. If
the Company's stockholders (other than the Funding Parties) subscribe for at
least $7.5 million worth of shares in this rights offering, the Funding Parties
are not obligated to provide any additional funding to the Company (other than
the $3 Million Note and the $1.5 Million Note). The $8.5 million in funding
described above is allocated as follows: (a) Mr. Gleacher, $2,000,000; (b) Mr.
Phillips, $750,000; (c) LJCB, $750,000 and (d) ZAM Holdings, L.P. $5,000,000.

In order to ensure that the Company would have sufficient cash resources
pending consummation of the rights offering, on August 5, 2003, Mr. Gleacher and
ZAM Holdings provided $1,348,042.50 of the Funding Parties' $8.5 million
commitment in the form of two senior secured promissory notes, and on August 6,
2003, Mr. Phillips provided $151,957.50 of the Funding Parties' commitment in
the form of a senior secured promissory note. All three notes equal an aggregate
of $1.5 million (collectively, the "$1.5 Million Note"). The terms of the $1.5
Million Note are substantially similar to the terms of the $3 Million Note, and
the $1.5 Million Note matures on December 31, 2004. If approved by the Company's
stockholders, the $1.5 Million Note will be convertible into shares of the
Company's common stock, at the option of the holders thereof, at a conversion
price equal to the lesser of $1.50 or 85% of the weighted average price per
share of the Company's common stock for the fifteen trading day period ending
three trading days before the conversion date. If the Company's stockholders
approve the conversion feature of the senior secured notes and if the Company
consummates the rights offering, the $ 3 Million Note and the $1.5 Million Note
will be converted by the holders.

The Funding Parties funding commitment pursuant to the Investment Agreement
is subject to certain conditions, including the Company's stockholders approving
the conversion feature of the $3 Million Note and the $1.5 Million Note and the
Investment Agreement and the transactions contemplated thereby, including the
rights offering. In order to provide the Company with sufficient liquidity and
cash resources in the event that the conditions to the Investment Agreement are
not satisfied, and consequently the Funding Parties are not obligated to provide
funding under the Investment Agreement, on August 5, 2003, the Company entered
into an agreement with Mr. Gleacher, Mr. Phillips and ZAM Holdings, L.P.
pursuant to which Messrs. Gleacher and Phillips and ZAM Holdings, L.P. agreed to
provide funding to the Company by purchasing senior secured promissory notes
from the Company in the aggregate principal amount of $3 million if (i) the
Rights Offering is abandoned by December 1, 2003; (ii) the Company's
stockholders do not approve (a) the conversion feature of the $3 Million Note
and the $1.5 Million Note and (b) the Investment Agreement; (iii) as a result,
the Funding Parties do not provide the funding contemplated by the Investment
Agreement and (iv) the Company's "Cumulative Modified EBITDA" for the months of
July through October 2003 is no less than a loss of $1,185,000. "Cumulative
Modified EBITDA" is defined in the agreement as (A) the Company's earnings
before interest, taxes, depreciation, amortization, asset impairment charges,
restaurant closing costs and other items customarily and properly classified by
the Company as one-time, extraordinary expenses for internal reporting purposes
less (B) capital expenditures. The Company's Cumulative Modified EBITDA for this
period satisfied condition (iv) above.

The $3 million in additional funding would be provided in the form of a
non-convertible secured promissory note with terms which may be substantially
less favorable to the Company than the $3 Million Note and the $1.5 Million
Note. The note would mature on January 15, 2005. Messrs. Gleacher and Phillips
and ZAM Holdings L.P. will only provide this funding if the Company's
stockholders do not approve the conversion feature of the $3 Million Note and
the $1.5 Million Note and the Investment Agreement, and the Company does not
consummate the rights offering. In this event, the Funding Parties are only
committed to provide an aggregate of $7.5 million (the $3 Million Note, the $1.5
Million Note and the $3 million non-convertible note described
F-8

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 1, 2001, DECEMBER 31, 2001 AND DECEMBER 30, 2002 -- (CONTINUED)

above) as opposed to up to $8.5 million pursuant to the Investment Agreement
(the $3 Million Note, the $1.5 Million Note and up to $4 million pursuant to the
Investment Agreement).

The Company currently estimates that its current cash resources will be
sufficient until the completion of the rights offering, or until the abandonment
of the rights offering and funding of the remaining commitment by the Funding
Parties.

The Company currently estimates that its capital expenditures during 2003
will be approximately $3.7 million, principally for the opening of the six new
restaurants that have already been opened, and for maintaining and remodeling
existing restaurants. Most of these expenditures have been paid. The remainder
will be funded through existing cash balances and from the proceeds from the
$1.5 Million Note. The Company anticipates that its capital expenditures for the
remainder of the year will be minimal.

The Company plans to fund the operations, maintenance and growth of its
restaurants primarily through the rights offering (including the senior secured
notes and any other securities issued pursuant to the Investment Agreement) and
internally generated cash flows produced by its existing restaurants. The
Company's cash resources, and therefore its liquidity, are highly dependent upon
the level of internally generated cash from operations and upon future financing
transactions, including the transactions the Company has negotiated with the
Funding Parties and the rights offering. If cash flows from the Company's
existing restaurants or cash flow from new restaurants that the Company opens do
not meet the Company's expectations or are otherwise insufficient to satisfy the
Company's cash needs or expansion plans, the Company may have to seek additional
financing from external sources to continue funding its operations, close
underperforming restaurants or reduce or cease its plans to open or franchise
new restaurants. The Company cannot predict whether such financing will be
available on terms acceptable to the Company, or at all.

In the event that the Company's stockholders approve the conversion feature
of the notes and the Investment Agreement and the Company's stockholders, other
than the Funding Parties, subscribe for at least $2 million in the rights
offering, the Company will, subject to certain conditions, secure a minimum of
$10.5 million of funding in the form of purchases of the Company's common stock,
including the conversion of the $3 Million Note and the $1.5 Million Note. The
Company anticipates that this funding ($6 million of new cash proceeds), its
current cash balances and expected internally generated cash flows will be
sufficient to fund its cash requirements for the next twelve months.

In the event that the Company's stockholders approve the conversion feature
of the notes and the Investment Agreement, but the Company's stockholders, other
than the Funding Parties, do not subscribe for a minimum of $2 million in the
rights offering, the Company will not consummate the rights offering and it
will, subject to certain conditions, obtain a maximum of $8.5 million in funding
(including the $3 Million Note and the $1.5 Million Note already received) in
the form of, at the option of the Funding Parties, a purchase of shares of the
Company's common stock at the subscription price or the purchase of a senior
secured note which is convertible into shares of the Company's common stock. In
addition, the $3 Million Note and the $1.5 Million Note may remain outstanding
and payable at maturity in December 2004, which could have an adverse effect on
the Company's expected near term working capital. In this event, the Company
anticipates that this funding, the Company's current cash balances and expected
internally generated cash flows will be sufficient to fund its cash requirements
for the next twelve months. However, the Company may need to secure additional
financing upon the maturity of the $3 Million Note, the $1.5 Million Note and
any other notes issued pursuant to the Investment Agreement. There can be no
assurance that such financing will be available on terms acceptable to the
Company, or at all.

In the event that the Company's stockholders do not approve the conversion
feature of the notes and the Investment Agreement, the Company will not
consummate the rights offering and it will secure a maximum of $7.5 million in
financing (including the $3 Million Note and the $1.5 Million Note already
received). The

F-9

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 1, 2001, DECEMBER 31, 2001 AND DECEMBER 30, 2002 -- (CONTINUED)

$3 million in additional funding would be in the form of senior secured
non-convertible notes due January 15, 2005. In addition, the $3 Million Note and
the $1.5 Million Note will remain outstanding and payable at maturity in
December 2004, which could have an adverse effect on the Company's expected near
term working capital. In this event, the Company anticipates that this funding,
its current cash balances and expected internally generated cash flows will be
sufficient to fund its cash requirements for the next twelve months; however,
the Company expects that it would need to reduce or cease its plans to open or
franchise new restaurants. The Company also may need to secure additional
financing upon the maturity of the $3 Million Note and the $1.5 Million Note and
the $3 million non-convertible note. There can be no assurance that such
financing will be available on terms acceptable to the Company, or at all.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

FISCAL YEAR END

The Company's fiscal year ends on the Monday closest to December 31. Fiscal
years 2002, 2001 and 2000 ended on December 30, 2002, December 31, 2001 and
January 1, 2001, respectively. Fiscal 2002, 2001 and 2000 each contained 52
weeks.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All intercompany accounts and transactions
have been eliminated in consolidation.

CASH AND CASH EQUIVALENTS

The Company considers all short-term liquid investments with a maturity of
three months or less when purchased to be cash equivalents. At December 30, 2002
and December 31, 2001, $9.4 million and $1.4 million, respectively, was invested
primarily in commercial paper and money market accounts and is classified as
cash and cash equivalents in the accompanying consolidated balance sheets.

CONCENTRATIONS OF CREDIT RISK

Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash deposits and accounts
receivable. The Company places its cash deposits in FDIC insured financial
institutions, commercial paper and money market funds. Cash deposits may exceed
FDIC insured levels from time to time.

The Company's accounts receivable consist principally of receivables from
trade or "house" accounts representing corporate customers, as well as amounts
due from certain landlords for tenant improvement reimbursements. The Company
has established credit procedures, whereby analyses are performed to control the
granting of credit to customers.

INVENTORY

Inventory is stated at the lower of cost (first in, first out method) or
market, and consists principally of whole bean coffee, liquor, sandwich
ingredients and packaging and related food supplies.

PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvements are stated at cost and
include improvements and costs incurred in the development and construction of
new restaurants and remodels, equipment and leasehold improvements. Depreciation
is computed using the straight-line method over estimated useful lives, which
range

F-10

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 1, 2001, DECEMBER 31, 2001 AND DECEMBER 30, 2002 -- (CONTINUED)

from two to fifteen years. Leasehold improvements are amortized using the
straight-line method over the shorter of their estimated useful lives or the
term of the related leases.

RESTAURANT IMPAIRMENT CHARGES

In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS 144 supercedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be disposed of", and APB Opinion No. 30, "Reporting Results of Operations
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions." SFAS 144 retains
the fundamental provisions of SFAS 121 for recognition and measurement of
impairment, but amends the accounting and reporting standards for segments of a
business to be disposed of. The Company adopted the provisions of this statement
beginning in fiscal 2002. The adoption of SFAS 144 did not have a material
impact on the Company's financial position or results of operations. In
accordance with SFAS. 144 and previously under SFAS 121, impairment losses are
recorded on long-lived assets on a restaurant by restaurant basis whenever
impairment factors are determined to be present. The Company considers a history
of restaurant operating losses to be the primary indicator of potential
impairment for individual restaurant locations. The Company has identified
certain units that have been impaired, and recorded charges of approximately
$5.8 million (related to ten restaurants), $7.2 million (related to fourteen
restaurants, including $0.3 million for one restaurant damaged in the events of
September 11, 2001 -- See Note 15) and $1.1 million (related to two restaurants)
in the statements of operations for fiscal years 2000, 2001 and 2002,
respectively. The Company determines whether a restaurant location is impaired
based on expected undiscounted cash flows, generally for the remainder of the
lease term, and then determines the impairment charge based on discounted cash
flows for the same period.

INTANGIBLES, SECURITY DEPOSITS AND OTHER ASSETS

Intangibles and other assets consist of expenditures associated with
obtaining liquor licenses, trademarks and logos. Liquor licenses are stated at
cost which, in the aggregate, is not in excess of market. Security deposits
primarily consist of deposits placed on leased locations. Amortization expense
related to intangibles and other assets amounted to approximately $8,400 and
$9,400 for fiscal years 2000 and 2001, respectively. Due to the adoption of SFAS
No. 142, "Goodwill and Other Intangible Assets" (see note 5) no amortization
expense was recorded in fiscal 2002.

The Company reviews intangible assets for impairment whenever events or
changes in circumstances indicate that the carrying amounts of those assets may
not be recoverable in accordance with SFAS 142. Management believes that there
is no impairment with respect to such intangible assets at December 30, 2002 or
December 31, 2001.

OTHER LIABILITIES

Other liabilities consist of deferred rent and accrued lease termination
costs (see Note 14).

INCOME TAXES

The Company accounts for income taxes in accordance with the provisions of
SFAS No. 109, "Accounting for Income Taxes". 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
carry-forwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the year in which those
temporary differences are expected to be recovered or settled.

F-11

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 1, 2001, DECEMBER 31, 2001 AND DECEMBER 30, 2002 -- (CONTINUED)

REVENUE RECOGNITION

The Company records revenue at the time of the purchase of its products by
its customers.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company accounts for financial instruments in accordance with SFAS No.
107, "Disclosures about Fair Value of Financial Instruments". The carrying value
of all financial instruments reflected in the accompanying balance sheet
approximates fair value at December 30, 2002 and December 31, 2001.

STOCK-BASED COMPENSATION

The following table illustrates the effect on net loss attributable to
common stock and net loss per common share as if the Company had applied the
fair value recognition provisions of SFAS 123 to stock-based employee
compensation.

<Table>
<Caption>
2002 2001 2000
------------ ------------ ------------

Net loss attributable to common stock -- as
reported.................................. $(29,064,691) $(42,101,428) $(27,449,711)
Stock based compensation determined under
SFAS 123.................................. (1,952,266) (1,377,415) (570,972)
------------ ------------ ------------
Net loss attributable to common stock -- Pro
forma..................................... (31,016,957) (43,478,843) (28,020,683)
Net loss per common share -- Basic and
Diluted:
As reported............................... $ (5.04) $ (9.34) $ (6.09)
============ ============ ============
Pro forma................................. $ (5.38) $ (9.64) $ (6.23)
============ ============ ============
</Table>

The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions:

<Table>
<Caption>
FISCAL YEAR ENDED 2002 2001 2000
- ----------------- ------- ------- -------

Expected volatility....................................... 40%(a) -- --
Average expected option life.............................. 5 years 5 years 5 years
Average risk-free interest rate........................... 4.11% 4.57% 6.37%
Dividend yield............................................ 0% 0% 0%
</Table>

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

(a) For options issued subsequent to the Company's initial public offering.

NET LOSS PER SHARE

The Company follows the provisions of SFAS No. 128, "Earnings Per Share".
In accordance with this statement, basic net loss per share is computed by
dividing the net loss attributable to common shareholders (after

F-12

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 1, 2001, DECEMBER 31, 2001 AND DECEMBER 30, 2002 -- (CONTINUED)

deducting preferred stock dividends) by the weighted-average number of common
shares outstanding. Diluted net loss per share is computed by dividing the net
loss attributable to common shareholders by the weighted-average number of
common shares and dilutive common share equivalents, if any, outstanding. For
all periods presented, the impact of all common share equivalents has not been
included, as their inclusion would be anti-dilutive.

SEGMENT DISCLOSURES

The Company has adopted the provisions of SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information". Pursuant to this
pronouncement, operating segments are defined as components of an enterprise
about which separate financial information is available and is evaluated
regularly by the chief operating decision maker in deciding how to allocate
resources in assessing performance. Management of the Company considers its
operations to be in the food service industry and, as a result, the Company has
one single reporting operating unit with all sales historically generated in the
United States.

PRE-OPENING COSTS

All costs incurred prior to the opening of a location, which consist
primarily of salaries and other direct expenses incurred with the initial setup
of restaurants and certain costs related to remodels, employee training and
general restaurant management, are expensed as incurred.

ADVERTISING COSTS

Advertising costs are expensed as incurred and approximated $110,000 ,
$141,000 and $177,000 for fiscal years 2002, 2001 and 2000, respectively.

COMPREHENSIVE INCOME

The Company's operations did not give rise to items includable in
comprehensive income that were not already in its net loss for fiscal years
2002, 2001 and 2000. Accordingly, the Company's comprehensive loss is the same
as its net loss for all periods presented.

RECLASSIFICATIONS

Certain items in the financial statements presented have been reclassified
to conform to the fiscal 2002 presentation.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In April 2002, the FASB approved SFAS 145, "Rescission of FASB Statements
No. 4, 44 and 54, Amendment of SFAS 13, and Technical Corrections." SFAS 145
rescinds previous accounting guidance, which required all gains and losses from
extinguishment of debt be classified as an extraordinary item. Under SFAS 145
classification of debt extinguishment depends on the facts and circumstances of
the transaction. SFAS 145 is effective for fiscal years beginning after May 15,
2002. The Company does not expect SFAS 145 to have a material impact on our
financial statements.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which addresses accounting for
restructuring, discontinued operation, plant closing, or other exit or disposal
activity. SFAS 146 requires companies to recognize costs associated with exit or
disposal activities when they are incurred rather than at the date of a
commitment to an exit or disposal plan. SFAS 146 is to be applied prospectively
to exit or disposal activities initiated after December 31, 2002. The adoption
of SFAS 146 is not expected to have a significant impact on the Company's
financial position and results of operations.

F-13

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 1, 2001, DECEMBER 31, 2001 AND DECEMBER 30, 2002 -- (CONTINUED)

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure." SFAS 148 amends SFAS 123 "Accounting
for Stock-Based Compensation" to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS 148 amends the disclosure requirements
of SFAS 123 to require more prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The
additional disclosure requirements of SFAS 148 have been incorporated into the
accompanying financial statements and footnotes. The Company has elected to
continue to follow the intrinsic value method of accounting as prescribed by APB
25 to account for employee stock options.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results may differ from those
estimates.

3. ACCOUNTS RECEIVABLE, NET

Accounts receivable, net, consists of the following:

<Table>
<Caption>
DECEMBER 30, DECEMBER 31,
2002 2001
------------ ------------

Accounts receivable, trade.................................. $ 616,411 $ 657,102
Reimbursements due from landlords........................... 823,100 482,548
Other....................................................... 304,144 278,981
---------- ----------
1,743,655 1,418,631
Less: allowance for doubtful accounts....................... (232,129) (219,845)
---------- ----------
Accounts receivable......................................... $1,511,526 $1,198,786
========== ==========
</Table>

At December 30, 2002 one landlord reimbursement represented 27% of total
reimbursements due from landlords.

4. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvements consist of the following:

<Table>
<Caption>
DECEMBER 30, DECEMBER 31,
2002 2001
------------ ------------

Leasehold improvements................................... $ 36,297,351 $ 23,216,827
Furniture and fixtures................................... 9,499,929 6,279,777
Restaurant equipment..................................... 13,000,904 6,455,154
Computer and telephone equipment......................... 7,962,204 5,600,702
Construction in progress................................. 1,063,823 181,252
------------ ------------
67,824,211 41,733,712
Less: accumulated depreciation and amortization.......... (22,068,892) (16,226,517)
------------ ------------
$ 45,755,319 $ 25,507,195
============ ============
</Table>

F-14

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 1, 2001, DECEMBER 31, 2001 AND DECEMBER 30, 2002 -- (CONTINUED)

Depreciation and amortization expense for fiscal years 2002, 2001 and 2000
was $5,851,207, $6,680,585 and $6,131,888, respectively.

5. INTANGIBLE ASSETS

Effective January 1, 2002, the Company adopted SFAS No. 141, "Business
Combinations", and SFAS No. 142, "Goodwill and Other Intangible Assets". These
statements established financial accounting and reporting standards for acquired
goodwill and other intangible assets. Specifically, the standards address how
intangible assets should be accounted for both at the time of acquisition and
after they have been recognized in the financial statements. The provisions of
SFAS 141 apply to all business combinations initiated after June 30, 2001. In
accordance with SFAS 142, intangible assets, included purchased goodwill, must
be evaluated for impairment. Those intangible assets that will continue to be
classified as goodwill or as other intangibles with indefinite lives are no
longer amortized. Finite lived intangibles will continue to be amortized over
their estimated useful lives. The adoption of these standards did not have a
material impact on the Company's financial statements, principally because the
Company's significant business combination, which took place in fiscal 1999, was
accounted for under the pooling-of-interests method of accounting in which no
goodwill was recorded. The Company's intangibles consist of expenditures
associated with obtaining liquor licenses, trademarks and logos. These
identifiable intangibles have indefinite lives and, accordingly, are no longer
being amortized effective January 1, 2002 upon adoption of this Statement.

In accordance with SFAS 142, the effect of this change is reflected
prospectively. The following table reflects consolidated results of operations
adjusted as though the adoption of SFAS 141 and 142 occurred as of January 2,
2001:

<Table>
<Caption>
YEAR ENDED
-------------------------------------------------------
DECEMBER 30, DECEMBER 31, JANUARY 1,
2002 2001 2001
----------------- ----------------- ---------------

Net loss:
As reported........................... $(20,871,051) $(35,423,343) $(23,230,027)
Indefinite-lived intangibles
amortization........................ -- 9,400 8,400
------------ ------------ ------------
As adjusted........................... $(20,871,051) $(35,413,943) $(23,221,627)
============ ============ ============
</Table>

Intangible assets consist of the following, and are included in
Intangibles, Security Deposits and Other Assets, net:

<Table>
<Caption>
DECEMBER 30, DECEMBER 31,
2002 2001
------------ ------------

Liquor Licenses............................................. $ 903,806 $527,679
Trademarks.................................................. 459,339 443,941
---------- --------
$1,363,145 $971,620
========== ========
</Table>

F-15

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 1, 2001, DECEMBER 31, 2001 AND DECEMBER 30, 2002 -- (CONTINUED)

6. ACCRUED LIABILITIES

Accrued liabilities consist of the following:

<Table>
<Caption>
DECEMBER 30, DECEMBER 31,
2002 2001
------------ ------------

Payroll and related benefits and taxes...................... $1,521,208 $2,043,941
Professional and legal costs................................ 436,993 188,581
Taxes payable............................................... 825,331 473,022
Other....................................................... 3,138,876 2,246,265
---------- ----------
$5,922,408 $4,951,809
========== ==========
</Table>

7. LONG-TERM DEBT

NOTES PAYABLE

The Company maintains a credit facility in the original amount of $3
million under a Master Loan and Security Agreement dated October 28, 1999 (the
"Equipment Loan Credit Facility"). The proceeds are required to be used for the
purchases of equipment. Borrowings are secured by the equipment purchased. Each
borrowing under the Equipment Loan Credit Facility is payable over 36 months and
the interest rate is determined at the time of the borrowing. Warrants to
purchase shares of common stock were issued in connection with the Credit
Facility. The warrants entitle the holder to acquire 8,068 shares of the
Company's common stock for $14.875 per share. As of December 30, 2002, there
were two notes payable outstanding under the Equipment Loan Credit Facility. The
note payable due September 1, 2003 requires monthly payments of $35,949, which
commenced in October 2000, and accrues interest at a rate of 9.10% per annum.
The note payable due December 1, 2003 requires monthly payments of $58,361,
which commenced in December 2001, and accrues interest at a rate of 8.50% per
annum.

In addition to the monthly payments, the Company is required to pay loan
fees of $113,738 and $186,158, respectively, which are due September 1, 2003 and
December 1, 2003, respectively. The Company is amortizing these loan fees as
additional interest expense over the term of the notes.

In addition to the credit facility, the Company has an outstanding note
payable of approximately $130,000. The note is due March 2007 and requires
monthly payments of $3,097, which commenced in May 1998, and accrues interest at
a rate of 10% per year.

In 2001 the Company entered into a settlement agreement involving a
trademark dispute. Under that agreement, the Company is obligated to make annual
payments of $25,000 per year through 2011. The present value of those future
payments is included in Notes Payable on the accompanying balance sheets.

SENIOR SUBORDINATED DEBT

In November 2001, the Company issued approximately $9 million of senior
subordinated notes along with detachable warrants. The notes bore interest at
13% per annum, compounded quarterly and payable in arrears, and were subject to
a mandatory prepayment at the election of the Company or the holders at any time
after the earliest of (i) a material change in ownership, as defined, (ii) a
merger or sale of substantially all of the Company's assets, (iii) a substantial
change in corporate structure, as defined, or (iv) a default by the Company, as
defined. The notes were repaid in December 2002 in connection with the Company's
initial public offering of its common stock. (see note 11) The warrants are
exercisable at $.01 per common share and are exercisable for a period of 5 years
from the date of issuance. The fair value ascribed to the warrants was
$1,079,808. The value assigned to the warrants was being recognized as interest
expense over the term of the notes. Upon the repayment

F-16

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 1, 2001, DECEMBER 31, 2001 AND DECEMBER 30, 2002 -- (CONTINUED)

of the notes in December 2002 the Company recorded a charge of approximately
$0.5 million to write off the unamortized portion of the fair value ascribed to
the warrants. This amount is classified as loss on early extinguishment of debt
in the accompanying Consolidated Statement of Operations.

SENIOR SECURED DEBT

In August and November 2002, the Company entered into Senior Secured Note
and Warrant Purchase Agreements with certain of our existing shareholders and
members of our board of directors. These agreements provided the Company with a
credit facility of up to $25.0 million available for general corporate purposes.
The facility allowed the Company to draw down funds from time to time until
August 12, 2003. Each draw down was evidenced by a senior secured note bearing
interest at 12% per annum. During 2002 the Company issued $9.5 million of 12%
senior secured notes pursuant to this credit facility. These notes ranked senior
to all of the Company's other funded indebtedness and were secured by all of the
Company's tangible and intangible property, other than equipment pledged to
secure the Company's equipment loan credit facility and its capitalized lease
obligations. (see Note 8). Interest on the notes accrues and was payable
together with principal upon maturity. All notes issued pursuant to these
agreements matured, and the credit facility terminated, upon the consummation of
the Company's Initial Public Offering. (see Note 11).

In connection with the Senior Secured Note and Warrant Purchase Agreements,
the Company issued warrants to purchase an aggregate of 2,070,004 shares of its
common stock, at an exercise price of $6.00 per share, pro rata to the parties
to the agreement. Each warrant issued pursuant to the Senior Secured Note and
Warrant Purchase Agreements has a five year term and may not be exercised until
after one year from the date of issuance. The fair value ascribed to the
warrants was $4,840,465. The value assigned to the warrants was being recognized
as interest expense over the term of the notes. Upon the repayment of the notes
in December 2002 the Company recorded a charge of approximately $4.5 million to
write off the unamortized portion of the fair value ascribed to the warrants.
This amount is classified as loss on early extinguishments of debt in the
accompanying Consolidated Statement of Operations.

Maturities of long-term debt during the next five fiscal years and
thereafter are as follows (As of December 30, 2002)

<Table>

2003........................................................ $ 1,280,432
2004........................................................ 41,434
2005........................................................ 45,438
2006........................................................ 49,836
2007........................................................ 29,139
Thereafter.................................................. 82,803
-----------
$ 1,529,082
Less: Current maturities.................................... (1,280,432)
-----------
Long-term debt, net......................................... $ 248,650
===========
</Table>

F-17

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 1, 2001, DECEMBER 31, 2001 AND DECEMBER 30, 2002 -- (CONTINUED)

8. CAPITAL LEASE OBLIGATIONS

At December 30, 2002, the Company is obligated under capital leases for
certain restaurant equipment with an original cost of $2,019,144. The leases
expire at various dates through 2004. The following is a schedule of future
minimum lease payments for capital leases as of December 30, 2002:

<Table>

2003........................................................ $ 122,563
2004........................................................ 2,917
---------
Total lease payments........................................ 125,480
Less: amount representing interest.......................... (6,055)
---------
Present value of net capital lease payments................. 119,425
Less: current portion....................................... (116,940)
---------
Long-term portion........................................... $ 2,485
=========
</Table>

9. INCOME TAXES

Significant components of the Company's deferred tax assets are as follows:

<Table>
<Caption>
DECEMBER 30, DECEMBER 31,
2002 2001
------------ ------------

Deferred tax assets:
Net operating loss carryforward........................ $ 30,851,620 $ 21,239,769
Deferred compensation.................................. 1,669,651 1,669,651
Depreciation expense and Impairment of Long-Lived
Assets.............................................. 8,837,192 10,139,945
Lease termination accrual.............................. 2,451,461 3,034,619
Allowance for doubtful accounts........................ 85,888 81,343
Contractual lease increases............................ 1,403,914 1,113,171
Accrued expenses....................................... 492,299 238,190
Other assets........................................... 6,973 6,973
------------ ------------
Total deferred tax assets........................... 45,798,998 37,523,661
Valuation allowance...................................... (45,798,998) (37,523,661)
------------ ------------
Net deferred taxes.................................. $ -- $ --
============ ============
</Table>

As of December 30, 2002, the Company has Federal net operating tax loss
carryforwards of approximately $83.4 million, which if not used, will expire
through 2022. Utilization of the net operating losses may be subject to an
annual limitation due to the change in ownership provisions of the Internal
Revenue Code and similar state provisions. These annual limitations may result
in the expiration of these net operating losses before their utilization. The
Company has recorded a valuation allowance to offset the benefit associated with
the deferred tax assets noted above due to the uncertainty of realizing the
related benefits.

10. CAPITALIZATION

CHANGE IN AUTHORIZED NUMBER OF SHARES

On November 22, 2002, the Company amended its Certificate of Incorporation
to increase its authorized capital stock from 45,673,947 shares to 140,000,000,
of which 100,000,000 shares will be Common Stock and 40,000,000 shares will be
Preferred Stock.

F-18

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 1, 2001, DECEMBER 31, 2001 AND DECEMBER 30, 2002 -- (CONTINUED)

REDEEMABLE SECURITIES

Series A Convertible Preferred Stock

In connection with the Series A Convertible Preferred Stock Purchase
Agreement (the "Series A Purchase Agreement") dated April 28, 1998, the Company
issued 1,142,124 shares of Series A Convertible Preferred Stock (the "Series A")
for approximately $14 million. The proceeds were reduced by $351,800 for closing
costs. The Series A Purchase Agreement provides for the issuance of one warrant
to purchase one share of the Company's Common Stock at an exercise price of $.01
(the "Warrants") for each 13 shares of Series A issued. The Warrants are
exercisable for a period of ten years from the date of issuance and will expire
on the earlier of (i) if required by the Company, the completion of a qualified
public offering, as defined or (ii) the redemption of all of the Series A. The
Company allocated $997,818 of the proceeds to the warrants to recognize their
fair value. In November 1999, the Company issued an additional 4,082 shares of
Series A for $50,000, based on the same terms and conditions. No additional
warrants were issued.

Series B Convertible Preferred Stock

Contemporaneously with the Series A Purchase Agreement, the Company issued
261,521 shares of Series B Convertible Preferred Stock (the "Series B Executive
Stock") to certain officers of the Company in exchange for promissory notes
aggregating $2,974,804 pursuant to the terms of an Executive Stock Agreement the
"Executive Agreement". The promissory notes accrue interest at an annual rate of
5.75% and mature in April 2003. These notes are included in stockholders' equity
as notes receivable from stockholders. The Executive Agreement provided that
shares of Series B vest at the rate of 25% per year or immediately upon a
qualified public offering. During 1999, the officers converted the Series B
Executive Stock into an equal number of shares of common stock subject to the
same vesting provisions. In the event that the Company no longer employs the
stockholders, the Executive Agreement provides for certain Company stock
repurchases and/or stockholder put options.

Series C Convertible Preferred Stock

On March 1, 1999, the Company entered into a bridge financing arrangement
(the "Agreement") pursuant to which it issued Subordinated Promissory Notes (the
"Promissory Notes") aggregating $1.5 million maturing on July 28, 1999. The
Promissory Notes bear interest at an escalating rate (ranging from 12% to 18%)
based on the number of days from the issuance of the Promissory Notes. Warrants
(the "Bridge Warrants") to purchase shares of Series A Convertible Preferred
Stock were issued in connection with the Promissory Notes. The Bridge Warrants
entitle the holder to acquire a certain amount of the Company's Series A
Convertible Preferred Stock for a price to be determined at the time of the
Company's next financing. The amount of preferred stock to be issued would be
based upon a price per share based on certain provisions in the Agreement. At
the time of the Company's March 30, 1999 financing, the terms of the Bridge
Warrants were specified to be for the purchase of 25,208 shares of Series A
Convertible Preferred Stock at $14.875 per share. The fair value of the Bridge
Warrants was determined using the Black-Scholes option-pricing model and totaled
$88,230. On March 30, 1999, the Promissory Notes were exchanged for 100,840
shares of Series C Convertible Preferred Stock. The value assigned to the Bridge
Warrants was recognized as interest expense and the carrying amount of the
Promissory Notes were converted to Series C Convertible Preferred Stock upon
conversion of the Promissory Notes.

On March 30, 1999, in connection with the 1999 Series C Preferred Stock
Purchase Agreement (the "1999 Series C Purchase Agreement"), the Company issued
1,343,668 shares of Series C convertible preferred stock ("1999 Series C"), par
value $0.01 per share and received proceeds of approximately $20 million
(including the exchange for the Company's Promissory Notes aggregating $1.5
million; described above). The proceeds were reduced by $128,411 for closing
costs. During 1999, 74,687 shares of Series C were converted to an equal number
of shares of Common Stock.

F-19

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 1, 2001, DECEMBER 31, 2001 AND DECEMBER 30, 2002 -- (CONTINUED)

During fiscal 2000, the Company issued an aggregate of 1,426,936 shares of
Series C, par value $.01 at $15.75 per share, ("2000 Series C"). The Company
received aggregate proceeds of approximately $22.4 million in April 2000, June
2000, and September 2000. The terms of the issuance of 2000 Series C are the
same as the March 1999 issuance of 1999 Series C, with the exception that the
liquidation preference of the 2000 Series C is $15.75 per share.

During fiscal 2001, the Company issued 1,465,672 shares of Series C
convertible preferred stock, par value $.01. ("2001 Series C"). The Company
received proceeds of approximately $23.9 million, net of issuance costs. The
terms of the issuance of 2001 Series C are the same as the previous issuances of
Series C convertible preferred stock, with the exception that the liquidation
preference is $16.625 per share.

During fiscal 2002, the Company issued 1,159,956 shares of Series C
convertible preferred stock, par value $.01. ("2002 Series C"). The Company
received proceeds of approximately $19.2 million, net of issuance costs. The
terms of the issuance of 2002 Series C are the same as the previous issuances of
Series C convertible preferred stock, with the exception that the liquidation
preference is $16.625 per share.

In connection with the Company's initial public offering of its common
stock in November 2002, (see note 11) all outstanding shares of Series A and
Series C Convertible Preferred Stock were converted to common stock, on a one
for one basis. Upon the conversion any unamortized issuance costs were charged
to Additional Paid in Capital.

COMMON STOCK PURCHASE RIGHTS

On November 18, 2002, the Board of Directors resolved to adopt a
Shareholders' Rights Plan "Rights Plan". At that time the Board declared a
dividend distribution of one right ("Right") for each share of common stock,
$.01 par value per share of the Corporation on November 25, 2002, to
shareholders of record on November 25, 2002. Each Right entitles the registered
holder to purchase from the Company one one-hundredth of a share of preferred
stock of the Company designated as Series D Preferred Stock at a price of $100
per one one-hundredth of a share. The Board of Directors also resolved to amend
its certificate of incorporation, to designate 1,000,000 shares of Series D
Preferred Stock for such issuance.

Each holder of a share of the Company's common stock has the right to
purchase from the Company one one-hundredth (1/100) of a share of the Company's
Series D preferred stock, $.01 par value per share, at a price of $100 per one
one-hundredth of a Series D preferred share. The exercise price and the number
of Series D preferred shares issuable upon exercise are subject to adjustments
from time to time to prevent dilution. The share purchase rights are not
exercisable until the earlier to occur of (1) 10 days following a public
announcement that a person or group of affiliated or associated persons,
referred to as an acquiring person, have acquired beneficial ownership of 15% or
more of the Company's outstanding voting common stock or (2) 10 business days
following the commencement of, or announcement of an intention to make, a tender
offer or exchange offer which would result in an acquiring person beneficially
owning 15% or more of the Company's outstanding voting shares of common stock.

If the Company is acquired in a merger or other business combination, or if
more than 50% of the Company's consolidated assets or earning power is sold
after a person or group has become an acquiring person, proper provision will be
made so that each holder of a share purchase right -- other than share purchase
rights beneficially owned by the acquiring person, which will thereafter be
void -- will have the right to receive, upon exercise of the share purchase
right at the then current exercise price, the number of shares of common stock
of the acquiring company which at the time of the transaction have a market
value of two times the exercise price. If any person or group becomes an
acquiring person, proper provision shall be made so that each holder of a share
purchase right -- other than share purchase rights beneficially owned by the
acquiring person, which will thereafter be void -- will have the right to
receive upon exercise of the share purchase right at the then current

F-20

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 1, 2001, DECEMBER 31, 2001 AND DECEMBER 30, 2002 -- (CONTINUED)

exercise price, the number of shares of Series D preferred stock with a market
value at the time of the transaction equal to two times the exercise price.

Series D preferred shares issuable upon exercise of the share purchase
rights will not be redeemable. Each Series D preferred share will be entitled to
a minimum preferential dividend payment of $.10 per share and will be entitled
to an aggregate dividend of 100 times the cash dividend declared per share of
common stock. In the event the Company is liquidated, the holders of the Series
D preferred shares will be entitled to receive a payment in an amount equal to
the greater of $100 per one one-hundredth share or 100 times the payment made
per share of common stock. Each Series D preferred share will have 100 votes,
voting together with the shares of common stock. Finally, in the event of any
merger, consolidation or other transaction in which shares of common stock are
exchanged, each Series D preferred share will be entitled to receive 100 times
the amount received per share of common stock. These rights are protected by
customary antidilution provisions.

Before the date the share purchase rights are exercisable, the share
purchase Rights may not be detached or transferred separately from the common
stock. The share purchase Rights will expire in 2012, or, if the share purchase
Rights become exercisable before 2012, at the close of business on the 90th day
following such date the share purchase Right become exercisable, provided that
the Company's board of directors does not extend or otherwise modify the Right.
At any time on or prior to 10 business days following the time an acquiring
person acquires beneficial ownership of 15% or more of the Company's outstanding
voting common stock, the Company's board of directors may redeem the share
purchase Rights in whole, but not in part, at a price of $.01 per share purchase
Right. Immediately upon any share purchase Rights redemption, the exercise
Rights terminate, and the holders will only be entitled to receive the
redemption price.

STOCK PURCHASE WARRANTS

Warrants to purchase 2,212,636 shares of the Company's common stock were
outstanding as of December 30, 2002; 106,827 of which have an exercise price of
$.01 per share and expire from November 2006 to April 2008; 2,070,004 of which
have an exercise price of $6.00 per share, become exercisable after August 16,
2003 and expire from August 2007 to November 2007; 33,279 of which have an
exercise price of $14.88 per share and expire in November 2007; and 2,526 of
which have an exercise price of $16.63 per share and expire in December 2006 All
of these warrants provide for anti-dilution adjustments in the event of stock
splits, stock dividends, sales by the Company of its stock at, or issuance of
options or warrants containing an exercise price of, less than fair market value
or merger, consolidation, recapitalization or similar transactions. All of the
holders of these warrants are entitled to participate in any dividends declared
upon shares of the Company's common stock (other than dividends payable solely
in shares of common stock) as if these holders had fully exercised such
warrants.

11. INITIAL PUBLIC OFFERING

On November 22, 2002, the Company completed an initial public offering of
its common stock, issuing 5,555,556 shares at $7.00 per share. Concurrently, all
outstanding shares of Series A and Series C preferred stock were converted to
common stock, and all of the Company's outstanding obligations under its Senior
Subordinated and Senior Secured Debt agreements were repaid, and the Company's
Senior Secured Credit Facility was terminated (See Note 7). In connection with
the repayment of the Senior Subordinated and Senior Secured debt, and the
termination of the Senior Secured credit facility, all unaccreted debt discount,
and unamortized deferred financing charges were written off, and a loss on early
extinguishment of debt of approximately $5.1 million was recorded. The total net
proceeds of the offering, net of offering expenses of approximately $6.1 million
including underwriter's discount were approximately $32.8 million.

F-21

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 1, 2001, DECEMBER 31, 2001 AND DECEMBER 30, 2002 -- (CONTINUED)

12. STOCK OPTION PLANS

The Company has several stock option plans that provide for the granting of
incentive and nonqualified stock options to participants, employees and
non-employee directors, to acquire Common Stock.

There are approximately 10 million shares of Common Stock reserved for
issuance under the Plans. Grants have been made at fair market value (as
determined by the Board of Directors prior to the Company's initial public
offering) and generally vest over a period of five years and expire ten years
from the date of the grant. The Board of Directors approves vesting terms on an
individual basis. The Company accounts for stock option grants in accordance
with APB Opinion No. 25, "Accounting for Stock Issued to Employees."

Activity with respect to the Company's stock option plans for the years
ended January 1, 2001, December 31, 2001 and December 30, 2002 was as follows:

<Table>
<Caption>
WEIGHTED
NUMBER OF RANGE OF AVERAGE
OPTIONS EXERCISE PRICE EXERCISE PRICE
--------- -------------- --------------

Balance as of January 3, 2000................. 1,428,609 $1.56 - 18.81 $ 8.18
Granted..................................... 818,803 $12.25 $12.25
Exercised................................... (55) $10.94 $10.94
Canceled/Expired............................ (143,192) $8.93 - 12.25 $11.00
---------
Balance as of January 1, 2001................. 2,104,165 $1.56 - 18.81 $ 9.62
Granted..................................... 1,377,234 $12.25 $12.25
Exercised................................... (5,349) $5.30 - $12.25 $ 7.31
Canceled/Expired............................ (210,445) $8.93 - $12.25 $11.93
---------
Balance as of December 31, 2001............... 3,265,605 $1.56 - $18.81 $10.59
Granted..................................... 501,518 $6.00 - $12.25 $10.40
Exercised................................... (32,142) $10.94 $10.94
Canceled/Expired............................ (328,649) $6.11 - $12.25 $12.09
---------
Balance as of December 30, 2002............... 3,406,332 $1.56 - $18.81 $10.41
=========
</Table>

There were approximately 1.8 million, 1.5 million and 1.1 million options
exercisable under the Plans as of December 30, 2002, December 31, 2001 and
January 1, 2001, respectively.

Summarized information about the Company's stock options outstanding and
exercisable at December 30, 2002 is as follows:

<Table>
<Caption>
OUTSTANDING EXERCISABLE
---------------------------------- -------------------
REMAINING AVERAGE AVERAGE
EXERCISE PRICE RANGE OPTIONS AVERAGE LIFE PRICE OPTIONS PRICE
- -------------------- --------- ------------ ------- --------- -------

$1.56............................. 171,234 3.6 years $ 1.56 171,234 $ 1.56
$5.30 - $6.11..................... 475,518 5.8 years $ 5.55 336,409 $ 5.33
$8.93 - $12.25.................... 2,702,436 7.4 years $11.71 1,251,116 $11.10
$14.88 - $18.81................... 57,144 0.1 years $15.86 57,144 $15.86
</Table>

13. DEFINED CONTRIBUTION PLAN

The Company has a 401(k) Plan (the "Plan") for all qualified employees. The
Plan provides for a matching employer contribution of twenty-five percent of up
to four percent of the employees' deferred savings. The

F-22

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 1, 2001, DECEMBER 31, 2001 AND DECEMBER 30, 2002 -- (CONTINUED)

employer contributions vest over five years. The deferred amount cannot exceed
fifteen percent of an individual participant's compensation in any calendar
year. The Company's contribution to the Plan was $35,380, $26,115 and $21,635
for fiscal years 2002, 2001 and 2000, respectively.

14. COMMITMENTS AND CONTINGENCIES

COMMITMENTS

As of December 30, 2002 the Company is committed under lease agreements
expiring through 2014 for occupancy of its retail restaurants (excluding leases
for retail restaurants not yet opened as of December 30, 2002, which are
disclosed separately below) and for office space at the following minimum annual
rentals:

<Table>

2003........................................................ $12,082,924
2004........................................................ 12,352,035
2005........................................................ 12,520,043
2006........................................................ 12,404,946
2007........................................................ 12,260,853
Thereafter.................................................. 44,154,542
</Table>

Amounts shown are net of approximately $2.5 million of sublease rental
income under non-cancellable subleases. Rental expense for the fiscal years
ended 2002, 2001 and 2000 totaled $10,434,766, $9,096,207 and $6,184,680,
respectively. Certain lease agreements have renewal options ranging from 3 years
to 15 years. In addition, certain leases obligate the Company to pay additional
rent if restaurant sales reach certain minimum levels (percentage rent). Amounts
incurred under these additional rent provisions were $217,075, $168,451 and
$174,402 for fiscal years 2002, 2001 and 2000, respectively.

As of December 30, 2002, future minimum rental payments required under
non-cancellable operating leases for retail restaurants, which were not yet
opened as of December 30, 2002, are as follows:

<Table>

2003........................................................ $1,660,839
2004........................................................ 2,209,670
2005........................................................ 2,322,144
2006........................................................ 2,350,189
2007........................................................ 2,405,282
Thereafter.................................................. 13,521,350
</Table>

Certain of the Company's lease agreements provide for scheduled rent
increases during the lease term, or for rental payments commencing at a date
other than the date of initial occupancy. In accordance with SFAS No. 13,
"Accounting for Leases," rent expense is recognized on a straight-line basis
over the term of the respective leases. The Company's obligation with respect to
these scheduled rent increases has been presented as a long-term liability in
other liabilities in the accompanying consolidated balance sheets.

As of December 30, 2002, the Company had outstanding approximately $368,000
in standby letters of credit, which were given as security deposits for certain
of the lease obligations. The letters of credit are fully secured by cash
deposits or marketable securities held in accounts at the issuing banks. Such
deposits are not available for withdrawal, amounted to approximately $368,000 at
December 30, 2002 and are included as a component of Intangible, Security
Deposits and Other Assets in the accompanying consolidated balance sheet.

In fiscal 2000 and 2001, the Company recorded a provision of approximately
$477,000 and $6,411,000 respectively, and in 2002 the Company recorded a credit
of approximately $1,165,000, relating to lease

F-23

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 1, 2001, DECEMBER 31, 2001 AND DECEMBER 30, 2002 -- (CONTINUED)

commitments for restaurants the Company has closed or is committed to close.
During fiscal 2002, the Company made cash payments totaling approximately
$411,000 for those restaurants' leases.

As of December 30, 2002, future minimum lease payments related to
restaurants that have been closed or are committed to be closed is approximately
$12.6 million, with remaining lease terms ranging from 6 to 12 years.

Other liabilities in the accompanying consolidated balance sheet as of
December 30, 2002 include $6,625,570 in accrued lease termination costs
(including a current portion of $671,601) and $3,794,354 in accrued contractual
lease increases. Other liabilities as of December 31, 2001 include $8,201,674 in
accrued lease termination costs (including a current portion of $1,678,880) and
$3,008,570 in accrued contractual lease increases.

PURCHASE COMMITMENT

During fiscal year 1999, the Company entered into an exclusive coffee
supply agreement with an unrelated third party ("Supplier"). The agreement calls
for minimum purchases, in terms of both quantity and price, to be made by the
Company of coffee beans and related products. The agreement is in effect through
December 2003 but may be terminated by the Company or the Supplier provided 180
days notice is given in advance of such termination. The Company is obligated to
purchase approximately $1.1 million of roasted coffee between now and fiscal
year end 2003 under the terms of that agreement.

During fiscal year 2002, the Company entered into a beverage marketing
agreement with the Coca-Cola Company. Under the agreement, the Company is
obligated to purchase approximately 2.0 million gallons of fountain syrups at
the then-current annually published national chain account prices.

During 2002, the Company received $600,000 in allowances from food and
beverage suppliers, which is being recognized ratably based on actual product
purchased. The Company may receive additional amounts if certain purchase levels
are achieved.

SELF-INSURANCE

The Company has a self-insured group health insurance plan. The Company is
responsible for all covered claims to a maximum liability of $50,000 per
participant during a plan year. Benefits paid in excess of $50,000 are
reimbursed to the plan under the Company's stop loss policy. In addition, the
Company also has an aggregate stop loss policy whereby the Company's liability
for total claims submitted cannot exceed a pre-determined dollar factor based
upon, among other things, past years' claims experience, actual claims paid, the
number of plan participants and monthly accumulated aggregate deductibles. Group
health insurance expense for the fiscal years 2002, 2001 and 2000 was
approximately $1,108,000, $968,000 and $800,000, respectively.

LITIGATION

From time to time, the Company is a party to litigation arising in the
normal course of its business operations. In the opinion of management and
counsel, it is not anticipated that the settlement or resolution of any such
matters will have a material adverse impact on the Company's financial
condition, liquidity or results of operations.

The Company has been named as a defendant in several purported class action
complaints (see Note 17).

EMPLOYMENT AGREEMENTS

During fiscal 2002, the Company entered into employment agreements with
certain officers and employees. The term of each agreement is for three years
with each agreement expiring in 2005. The Company's aggregate

F-24

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 1, 2001, DECEMBER 31, 2001 AND DECEMBER 30, 2002 -- (CONTINUED)

remaining obligations under these employment agreements was approximately $3.4
million as of December 30, 2002.

15. RELATED PARTY TRANSACTIONS

The Company incurs fees with a legal firm, a partner of which is an owner
of less than 0.5% of the Company's equity securities, and is also the father of
the Company's former interim President and Chief Executive Officer. This firm
provides legal services on behalf of the Company, which amounted to
approximately $575,000, $71,000 and $41,000 for the fiscal years 2002, 2001 and
2000. Furthermore, prior to February 2003, the Company engaged London Misher
Public Relations, Inc., a public relations firm that is partially owned by the
wife of the Company's former Chief Executive Officer. This firm provided the
Company with public relations services, for which the firm was paid
approximately $235,000, $146,000 and $67,000 for fiscal years 2002, 2001 and
2000, respectively. The relationship with this firm has been terminated.
Management of the Company believes that these related party transactions were
effected on a basis that approximates fair market value. Subsequent to December
30, 2002 the relationship with the public relations firm has been terminated.

16. EFFECT OF THE EVENTS OF SEPTEMBER 11, 2001

As a result of the events of September 11, 2001, a Company owned restaurant
location and a kiosk that had operated in the World Trade Center in New York
City were destroyed. Additionally, due to its proximity to the World Trade
Center, another restaurant in the World Financial Center was closed after the
attacks and was reopened in September 2002. The Company and its insurer, and its
insurance broker are in disagreement over the amount of insurance coverage for
these locations. Consequently, approximately $1.3 million has been included in
the 2001 provisions for asset impairments and disposals. The loss is net of
approximately $1.0 million received or recoverable by the Company from property
and casualty insurance. During fiscal 2002 the Company received $320,000 for
business interruption insurance claims which has been recorded as other income
in the accompanying statement of operations. Any future amounts received will be
recognized in income when received, or earlier, if the Company is notified of
the amount of claims approved by its insurers.

17. SUBSEQUENT EVENTS

During the first quarter of Fiscal 2003, The Company announced its
intention to create a franchising and area development program. While management
expects that Company owned restaurants will always be an important part of the
Company's new restaurant growth, it believes that incorporating a franchising
and area developer model into the Company's strategy will position the Company
to maximize the market potential for the Cosi brand and concept consistent with
our available capital and thus maximize shareholder value. The Company also
announced that its Chairman and CEO had resigned, and that it was slowing the
growth of its company owned restaurants, and that it expected to record a
one-time charge of approximately $1.7 million in the first quarter of 2003 to
provide for severance costs related to the executive and general and
administrative staff reductions.

Subsequent to making that announcement on February 3, 2003, the board
determined that additional changes to executive management are appropriate, and
now expect that the charge in the first quarter of 2003 to provide for severance
costs related to the executive and general and administrative staff reductions
will be approximately $3.7 million.

In addition, during the first quarter of 2003, the Company expects to
record additional charges of $2.1 million to write down assets at three
restaurant locations that were closed during the first quarter of 2003, and on
25 locations which were in our development pipeline, but which have been
cancelled. During the first quarter of 2003, the Company obtained a $3 million
line of credit (the "Loan") from a bank to be used for general corporate
purposes. Under the terms of this Loan, the Company issued a senior secured
promissory note
F-25

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 1, 2001, DECEMBER 31, 2001 AND DECEMBER 30, 2002 -- (CONTINUED)

to the Lender in the aggregate principal amount of $3,000,000 (the "$3 Million
Note"). The $3 Million Note bears interest at 75 basis points over the bank's
prime lending rate and is secured by all of the Company's tangible and
intangible property, other than equipment pledged to secure its equipment loan
credit facility (see page F-12). The Loan matures in May 2004. The Company has
agreed to pay the bank fees and expenses of approximately $22,000 upon funding
of the Loan. The Loan is guaranteed, jointly and severally, by Eric J. Gleacher,
one of the Company's former Directors; Charles G. Phillips, one of the Company's
shareholders and an entity related to our ZAM Holdings, the Company's largest
shareholder (together, "the Guarantors"). At any time during the term of the
Loan, the Guarantors have the right to require the bank to assign the Loan to
the Guarantors or their designees that are reasonably acceptable to the Company.
If the Loan has not been assigned by the bank to the Guarantors or their
designees, and has not been paid in full by August 15, 2003, then the bank is
required to assign the Loan to the Guarantors or their designees. If approved by
the Company's shareholders, upon assignment of the loan to the Guarantors or
their designees, the loan will be convertible into shares of our common stock,
at the option of the Guarantors, at a conversion price equal to the lesser of
$1.50 or 85% of the weighted average price per share of the Company's common
stock for the fifteen trading day period ending three trading days before the
conversion date.

The Company currently anticipates making a rights offering (the "Offering")
to existing shareholders to raise approximately $12 million. The Company
currently anticipates that the Offering will give existing shareholders the
right to purchase shares of common stock at a purchase price per share equal to
the lesser of $1.50 or 85% of the weighted average price per share of common
stock for the fifteen trading day period ending three trading days before the
expiration date of the Offering. A group of shareholders, including the
Guarantors, have indicated that they will commit to purchase shares in the
offering, or provide other funding support, in the amount of $8.5 million of the
$12 million offering. This shareholder group's commitment to purchase shares in
the Offering will be subject to shareholder approval of the equity conversion
feature of the Loan.

The terms of the Loan and the Offering were reviewed and approved by a
committee of the board comprised of disinterested directors.

The Company intends to file a registration statement with the Securities
and Exchange Commission relating to the Offering. The timing and completion of
the Offering is subject to market conditions and other contingencies. There can
be no assurance that the Company will be able to complete the Offering on terms
acceptable to the Company or at all. The Offering will only be made pursuant to
a prospectus filed with the Securities and Exchange Commission.

On March 31, 2003 Mr. William D. Forrest joined its Board of Directors, and
was elected Chairman of the Board. Mr. Forrest is a Managing Director at
Gleacher Partners, LLC. Eric Gleacher, who was previously Chairman of the Board,
will remain a director. The Company also announced that Jay Wainwright will
serve as interim Chief Executive Officer until a successor can be hired, and
Nick Marsh will be stepping down as Chief Operating Officer, and will be leaving
the Company.

On February 5, 2003, a purported shareholder class action complaint was
filed in the United States District Court for the Southern District of New York
(the "Court"), alleging that the Company and various of its officers and
directors and the Underwriter violated Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933 by misstating, and by failing to disclose, certain
financial and other business information (Sheel Mohnot v. Cosi, Inc., et al.,
No. 03 CV 812). At least six additional class action complaints with similar
allegations were later filed (collectively, the "Securities Act Litigation").
The Securities Act Litigation is brought on behalf of a purported class of
purchasers of the Company's stock allegedly traceable to its November 22, 2002
initial public offering ("IPO"). The complaints in the Securities Act Litigation
generally claim that at the time of the IPO, the Company's offering materials
failed to disclose that the funds raised through the IPO would be insufficient
to implement the Company's expansion plan; that it was improbable that the
Company would be able to open 53 to 59 new restaurants in 2003; that at the time
of the IPO, Cosi had negative working capital and therefore did not
F-26

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 1, 2001, DECEMBER 31, 2001 AND DECEMBER 30, 2002 -- (CONTINUED)

have available working capital to repay certain debts; and that the principal
purpose for going forward with the IPO was to repay certain existing
shareholders and members of the Board of Directors for certain debts and to
operate the Company's existing restaurants.

On February 21, 2003, a purported shareholder class action complaint was
filed in the Court alleging that the Company and certain of its officers and
directors violated Sections 10(b) and 20(a) of the Securities Exchange Act of
1934, and Rule 10-b promulgated thereunder, by issuing a series of material
misrepresentations to the market between November 22, 2002 and February 4, 2003
(the "Class Period") (Georgette Pacia v. Cosi, Inc. et al., No. 03-CV-1156) (the
"Securities Exchange Act Litigation"). The emphasis of the allegations in the
complaint in the Securities Exchange Act Litigation is that the defendants
knowingly or recklessly caused misrepresentations and omissions to be made
regarding the Company's operating condition and future business prospects. Among
other things, plaintiffs in the Securities Exchange Act Litigation allege that
defendants failed to disclose that the funds raised by the IPO would be
insufficient to implement the Company's expansion plan; that at the time of the
IPO, defendants should have known that the costs of expansion would be greater
than the cash available to the Company, making it improbable that the Company
would be able to successfully continue to open new restaurants at the pace
announced by the Company; and that defendants failed to disclose that a
reduction in the offering price of the IPO would result in the Company being
forced to abandon its growth strategy.

The plaintiffs in the Securities Act Litigation and the Securities Exchange
Act Litigation (the "Litigations") generally seek to recover compensatory
damages, expert fees, attorneys' fees, costs of Court and pre- and post-
judgment interest. The Underwriter is seeking indemnification from the Company
for any damages assessed against it in the Securities Act Litigation. The
Litigations are at a preliminary stage, and the Company expects that these
related lawsuits will be consolidated into a single action. The Company believes
that it has meritorious defenses to these claims, and intends to vigorously
defend against them.

F-27

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 1, 2001, DECEMBER 31, 2001 AND DECEMBER 30, 2002 -- (CONTINUED)

18. SELECTED QUARTERLY OPERATING DATA (UNAUDITED)

The following table contains selected unaudited statement of operations
information for each quarter of fiscal 2002 and 2001. The Company believes that
the following information reflects all normal recurring adjustments necessary
for a fair presentation of the information for the periods presented. The
operating results for any quarter are not necessarily indicative of results for
any future period. Unaudited quarterly results were as follows:

<Table>
<Caption>
2001 2002
---------------------------------------------- ----------------------------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
--------- --------- --------- ---------- --------- --------- --------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Net sales....................... $15,855.9 $18,463.8 $18,217.0 $ 17,647.4 $18,052.1 $20,919.9 $22,085.5 $ 23,366.7
Cost of goods sold.............. 4,205.6 4,871.7 4,817.3 4,897.1 4,853.4 5,645.6 5,861.5 6,337.0
Restaurant operating expenses... 9,976.1 11,586.2 11,984.7 11,567.5 11,127.0 12,366.5 13,160.6 14,198.6
Total costs of sales............ 14,181.7 16,457.9 16,802.0 16,464.6 15,980.4 18,012.1 19,022.1 20,535.6
General and administrative
expenses...................... 3,735.2 4,534.5 4,528.4 5,563.4 4,620.3 4,227.6 4,051.7 4,912.1
Depreciation and amortization... 2,021.9 2,126.9 1,243.0 1,298.2 1,210.3 1,335.5 1,602.2 1,703.2
Restaurant pre-opening
expenses...................... 253.6 320.0 407.9 457.3 111.4 286.1 542.3 905.3
Provision for losses on asset
impairments and disposals..... 90.4 -- 1,561.9 6,834.0 -- 7.3 -- 1,049.2
Lease termination costs......... 578.3 -- 1,647.1 4,185.3 -- -- -- (1,165.0)
Operating income(loss).......... (5,005.2) (4,975.5) (7,973.3) (17,155.4) (3,870.3) (2,948.7) (3,132.8) (4,573.7)
Interest income................. 60.8 105.9 146.9 26.9 29.9 32.4 20.0 16.0
Interest expense................ (75.5) (92.1) (84.0) (276.0) (301.4) (245.6) (232.5) (413.1)
Amortization of deferred
financing cost & debt
discount...................... (22.9) (22.9) (22.9) (58.1) (86.4) (62.4) (230.5) (169.7)
Loss on Early Extinguishment of
Debt.......................... -- -- -- -- -- -- -- (5,083.2)
Other income(expense)........... -- -- -- -- -- -- 380.4 .5
Net income (loss)............... (5,042.8) (4,984.6) (7,933.3) (17,462.6) (4,228.2) (3,224.3) (3,195.4) (10,223.2)
Preferred stock dividends....... (1,312.7) (1,639.4) (1,836.0) (1,890.0) (1,960.5) (2,383.4) (2,432.8) (1,416.9)
Net income (loss)attributable to
common stockholders........... (6,355.5) (6,624.0) (9,769.3) (19,352.6) (6,188.7) (5,607.7) (5,628.2) (11,640.1)
Net income (loss) per common
share......................... (1.41) (1.47) (2.17) (4.29) (1.37) (1.23) (1.24) (1.23)
Shares used in computing net
loss per common share (in
thousands).................... 4,504 4,505 4,508 4,511 4,527 4,544 4,545 9,434
</Table>

F-28

COSI, INC.

CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<Table>
<Caption>
SEPTEMBER 29, DECEMBER 30,
2003 2002
------------- ------------

ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 3,239.0 $ 13,032.3
Accounts receivable, net of allowances of $246.3 and
$232.1, respectively................................... 1,214.8 1,511.5
Inventory................................................. 1,149.4 1,465.8
Prepaid expenses and other current assets................. 955.0 1,676.3
----------- -----------
Total current assets................................... 6,558.2 17,685.9
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net......... 38,217.2 45,755.3
INTANGIBLES, SECURITY DEPOSITS AND OTHER ASSETS, net........ 3,200.8 2,801.9
----------- -----------
Total assets........................................... 47,976.2 66,243.1
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 4,197.1 $ 8,925.2
Accrued liabilities....................................... 8,872.4 5,922.4
Current portion of other liabilities...................... 664.6 671.6
Current portion of capital lease obligations.............. 1.5 117.0
Current portion of long-term debt......................... 429.4 1,280.4
----------- -----------
Total current liabilities.............................. 14,165.0 16,916.6
OTHER LIABILITIES, net of current portion................... 9,661.6 9,748.3
CAPITAL LEASE OBLIGATIONS, net of current portion........... -- 2.5
LONG-TERM DEBT, net of current portion...................... 4,737.0 248.7
----------- -----------
Total liabilities...................................... 28,563.6 26,916.1
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock -- $.01 par value: 100,000,000 shares
authorized,
17,732,081 and 16,573,514 shares issued and outstanding,
respectively.............................................. 177.3 165.7
Additional paid-in capital.................................. 190,836.2 189,255.0
Deferred stock compensation................................. (1,056.6) --
Treasury Stock, at cost 21,978 shares in 2003............... (250.0) --
Notes receivable from stockholders.......................... (2,724.8) (2,974.8)
Accumulated deficit......................................... (167,569.5) (147,118.9)
----------- -----------
Total stockholders' equity............................. 19,412.6 39,327.0
----------- -----------
Total liabilities, and stockholders' equity............ $ 47,976.2 $ 66,243.1
=========== ===========
</Table>

The accompanying notes are an integral part of these consolidated statements.
F-29

COSI, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<Table>
<Caption>
NINE MONTHS ENDED
-----------------------------
SEPTEMBER 29, SEPTEMBER 30,
2003 2002
------------- -------------

NET SALES................................................... $ 82,130.2 $ 61,057.4
COST OF SALES:
Cost of goods sold........................................ 23,004.5 16,360.5
Restaurant operating expenses............................. 52,062.3 36,654.1
---------- ----------
TOTAL COST OF SALES....................................... 75,066.8 53,014.6
GENERAL AND ADMINISTRATIVE EXPENSES......................... 15,862.7 12,899.6
DEPRECIATION AND AMORTIZATION............................... 5,815.8 4,147.9
RESTAURANT PRE-OPENING EXPENSES............................. 381.4 939.8
PROVISION FOR LOSSES ON ASSET IMPAIRMENTS AND DISPOSALS..... 5,698.6 7.3
LEASE TERMINATION COSTS..................................... (345.7) --
---------- ----------
Operating loss............................................ (20,349.4) (9,951.8)
INTEREST INCOME............................................. 39.7 82.3
INTEREST EXPENSE............................................ (239.8) (1,158.8)
OTHER INCOME................................................ 99.0 380.4
---------- ----------
Net loss.................................................. (20,450.5) (10,647.9)
PREFERRED STOCK DIVIDENDS................................... -- (6,776.8)
---------- ----------
NET LOSS ATTRIBUTABLE TO COMMON STOCK....................... $(20,450.5) $(17,424.7)
========== ==========
PER SHARE DATA:
Net Loss Per Share:
Basic and diluted........................................... $ (1.20) $ (3.84)
Weighted Average Common Shares Outstanding: (in
thousands)................................................ 17,036 4,536
</Table>

The accompanying notes are an integral part of these consolidated statements.
F-30

COSI, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR NINE MONTHS ENDED SEPTEMBER 29, 2003
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<Table>
<Caption>
COMMON STOCK
----------------------------------------
NUMBER OF ADDITIONAL PAID DEFERRED
SHARES AMOUNT IN CAPITAL COMPENSATION
---------- ------- ----------------- ------------

BALANCE, DECEMBER 30, 2002..... 16,573,514 $ 165.7 $189,255.0 $ --
Stock Compensation........... -- -- 43.1 --
Exercise of Warrants......... 1,274 -- --
Issuance of Restricted
Stock..................... 1,157,293 11.6 1,538.1 (1,549.7)
Amortization of deferred
compensation.............. -- -- -- 493.1
Return of shares for note.... -- -- -- --
Net Loss..................... -- -- -- --
---------- ------- ---------- -----------
BALANCE, SEPTEMBER 29, 2003.... 17,732,081 $ 177.3 $190,836.2 $ (1,056.6)
========== ======= ========== ===========
</Table>

<Table>
<Caption>
TREASURY STOCK
----------------------------------------
NOTE RECEIVABLE
NUMBER OF FROM ACCUMULATED
SHARES AMOUNT STOCKHOLDERS DEFICIT TOTAL
---------- ------- ----------------- ------------ ----------

BALANCE, DECEMBER 30, 2002..... -- $ -- $ (2,974.8) $(147,119.0) $ 39,326.9
Stock Compensation............. -- -- -- -- 43.1
Exercise of Warrants......... -- -- -- -- --
Issuance of Restricted
Stock..................... -- -- -- -- --
Amortization of deferred
compensation.............. -- -- -- -- 493.1
Return of shares for note.... 21,978 (250.0) 250.0 -- --
Net Loss..................... -- -- -- (20,450.5) (20,450.5)
---------- ------- ---------- ----------- ----------
BALANCE, SEPTEMBER 29, 2003.... 21,978 $(250.0) $ (2,724.8) $(167,569.5) $ 19,412.6
========== ======= ========== =========== ==========
</Table>

F-31

COSI, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)

<Table>
<Caption>
NINE MONTHS ENDED
-----------------------------
SEPTEMBER 29, SEPTEMBER 30,
2003 2002
------------- -------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(20,450.5) $(10,647.9)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.......................... 5,815.8 4,148.0
Amortization of deferred financing costs............... 62.1 167.5
Non-cash portion of asset impairments and disposals.... 5,293.9 4.5
Provision for bad debts................................ 27.0 18.0
Amortization of deferred compensation.................. 493.1 --
Non-cash employee severance cost....................... 43.1 --
Changes in operating assets and liabilities:
Accounts receivable.................................. 269.7 419.5
Inventory............................................ 316.3 1.5
Other assets......................................... (751.5) (2,121.1)
Accounts payable..................................... (4,728.2) 164.8
Accrued liabilities.................................. 3,445.5 80.3
Accrued contractual lease increases.................. 436.7 520.2
Prepaid expenses and other current assets............ 721.3 (236.2)
Lease termination accrual............................ (1,025.8) (318.8)
---------- ----------
Net cash used in operating activities............. (10,031.5) (7,799.7)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, equipment and leasehold
improvements........................................... (3,571.6) (12,248.4)
Return of security deposits............................... 290.5 --
---------- ----------
Net cash used in investing activities............. (3,281.1) (12,248.4)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock.................... -- 351.6
Net proceeds from issuance of preferred stock............. -- 15,670.5
Principal payments on capital lease obligations........... (118.0) (379.9)
Proceeds from long-term debt plus related Warrants and
accrued interest....................................... 4,500.0 4,203.0
Principal payments on long-term debt...................... (862.7) (872.7)
---------- ----------
Net cash provided by (used in) financing
activities...................................... 3,519.3 18,972.5
---------- ----------
Net increase (decrease) in cash............................. (9,793.3) (1,075.6)
CASH AND CASH EQUIVALENTS, beginning of year................ 13,032.3 4,469.6
---------- ----------
CASH AND CASH EQUIVALENTS, end of period.................... $ 3,239.0 $ 3,393.9
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest............................................... $ 229.2 $ 241.0
Corporate franchise and income taxes................... 134.6 165.4
Non-cash financing transactions:
Conversion of Senior Subordinated Debt to Series C
Preferred............................................. -- 3,183.2
Conversion of Warrants to Series C Preferred........... -- 429.9
</Table>

The accompanying notes are an integral part of these consolidated statements.
F-32

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 29, 2003

NOTE A -- BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of
Cosi, Inc. and its subsidiaries (the "Company") have been prepared in accordance
with generally accepted accounting principles for interim financial information,
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly they do not include all of the information and footnotes required by
generally accepted accounting principles in the United States for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the thirty-nine week period ended September
29, 2003 are not necessarily indicative of the results that may be expected for
the fiscal year ending December 29, 2003.

The balance sheet at December 30, 2002 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles in the United
States for complete financial statements. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 30, 2002.

NOTE B -- STOCK-BASED COMPENSATION

The Company complies with the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation". This statement establishes financial
accounting and reporting standards for stock-based employee compensation plans.
The provisions of SFAS 123 encourage entities to adopt a fair value based method
of accounting for stock compensation plans; however, these provisions also
permit the Company to continue to measure compensation costs under pre-existing
accounting pronouncements. In December 2002, the FASB issued SFAS No. 148,
"Accounting for Stock-Based Compensation -- Transition and Disclosure." SFAS 148
amends SFAS 123 to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS
123 to require more prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based employee compensation
and the effect of the method used on reported results. The additional disclosure
requirements of SFAS 148 have been incorporated herein. Pursuant to SFAS 123,
the Company has elected to continue the accounting set forth in Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees" and to provide the necessary pro forma disclosures.

F-33

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

<Table>
<Caption>
NINE MONTHS ENDED
---------------------------------
SEPTEMBER 29, SEPTEMBER 30,
2003 2002
--------------- ---------------
(IN 000'S, EXCEPT PER SHARE DATA)

Net loss attributable to common stock -- as reported....... $(20,450.5) $(17,424.7)
Stock based compensation included in the determination of
net loss, as reported.................................... 43.1 --
Stock based compensation determined under SFAS 123......... (844.5) (1,444.2)
---------- ----------
Net loss attributable to common stock -- Pro forma......... (21,251.9) (18,868.9)
Net loss per common share -- Basic and Diluted:
As reported.............................................. $ (1.20) $ (3.84)
========== ==========
Pro forma................................................ $ (1.25) $ (4.16)
========== ==========
</Table>

NOTE C -- PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvements consist of the following:

<Table>
<Caption>
SEPTEMBER 29, DECEMBER 30,
2003 2002
------------- ------------
(IN 000'S)

Leasehold improvements..................................... $ 34,583.3 $ 36,297.4
Furniture and fixtures..................................... 9,495.9 9,499.9
Restaurant equipment....................................... 13,848.7 13,000.9
Computer and telephone equipment........................... 8,154.2 7,962.2
Construction in progress................................... -- 1,063.8
---------- ----------
66,082.1 67,824.2
Less: accumulated depreciation and amortization............ (27,864.9) (22,068.9)
---------- ----------
$ 38,217.2 $ 45,755.3
========== ==========
</Table>

RESTAURANT IMPAIRMENT CHARGES

In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets" and previously under SFAS 121, impairment losses are
recorded on long-lived assets on a restaurant by restaurant basis whenever
impairment factors are determined to be present. The Company considers a history
of restaurant operating losses to be the primary indicator of potential
impairment for individual restaurant locations. The Company has identified
certain units that have been impaired, and recorded an asset impairment charge
of approximately $3.8 million (related to nine restaurants) through the third
quarter of fiscal 2003. The Company recorded a nominal impairment charge in the
first three quarters of fiscal 2002. The Company determines whether a restaurant
location is impaired based on expected undiscounted cash flows, generally for
the remainder of the lease term, and then determines the impairment charge based
on discounted cash flows for the same period.

In addition, during the first three quarters of fiscal 2003 the Company
recorded a charge of $0.6 million to reflect the writedown of fixed assets
associated with the closure of three underperforming restaurants, and also
recorded a writedown of approximately $1.3 million to reflect the write-off of
construction in progress on 25 restaurants which were in the development
pipeline, but have been cancelled. These charges have been

F-34

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

recorded in provision for losses on asset impairments and disposals in the
accompanying Consolidated Statements of Operations.

NOTE D -- ACCRUED LIABILITIES

Accrued liabilities consist of the following:

<Table>
<Caption>
SEPTEMBER 29, DECEMBER 30,
2003 2002
------------- ------------
(IN 000'S)

Payroll and related benefits and taxes..................... $1,592.2 $1,521.2
Professional and legal costs............................... 167.6 437.0
Taxes payable.............................................. 1,415.7 825.3
Severance payable -- current portion....................... 1,357.0 --
Unearned vendor allowances................................. 575.7 595.5
Other...................................................... 3,764.2 2,543.4
-------- --------
$8,872.4 $5,922.4
======== ========
</Table>

NOTE E -- LONG-TERM DEBT

NOTES PAYABLE

The Company maintains a credit facility in the original amount of $3
million under a Master Loan and Security Agreement dated October 28, 1999 (the
"Equipment Loan Credit Facility"). The proceeds are required to be used for the
purchases of equipment. Borrowings are secured by the equipment purchased. Each
borrowing under the Equipment Loan Credit Facility is payable over 36 months and
the interest rate is determined at the time of the borrowing. Warrants to
purchase shares of common stock were issued in connection with the Credit
Facility. The warrants entitle the holder to acquire 8,068 shares of the
Company's common stock for $14.875 per share. As of December 30, 2002, there
were two notes payable outstanding under the Equipment Loan Credit Facility. A
note payable in the remaining principal amount of $113,738 was satisfied in full
on September 1, 2003 according to the terms of the note. A note payable due
December 1, 2003 in the amount of $186,158 requires monthly payments of $58,361,
which commenced in December 2001, and accrues interest at a rate of 8.50% per
annum. The Company is amortizing loan fees as additional interest expense over
the term of the notes.

The Company has an outstanding note payable of approximately $110,000. The
note is due March 2007 and requires monthly payments of $3,097, which commenced
in May 1998, and accrues interest at a rate of 10% per year.

In April 2003, the Company borrowed the full amount of a $3 million line of
credit (the "$3 Million Note") from a bank to be used for general corporate
purposes. The $3 Million Note bears interest at 75 basis points over Bank of
America's prime lending rate and is secured by all of the Company's tangible and
intangible property,

F-35

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

other than equipment pledged to secure its equipment loan credit facility. The
Company paid the bank fees and expenses of approximately $22,000 upon funding of
the loan in April 2003. The $3 Million Note was guaranteed, jointly and
severally, by Eric J. Gleacher, one of the Company's stockholders and formerly a
director; Charles G. Phillips, one of its stockholders, and an entity related to
ZAM Holdings L.P., the Company's largest stockholder (together, "the
Guarantors"). On October 30, 2003, the bank assigned the note to the Guarantors
or their designees and the maturity date was extended to December 31, 2004. If
approved by the Company's stockholders, the $3 Million Note will be convertible
into shares of common stock, under certain circumstances, at the option of the
holders, at a conversion price equal to the lesser of $1.50 or 85% of the
weighted average price per share of the Company's common stock for the fifteen
trading day period ending three trading days before the conversion date.

On August 5 and 6, 2003, the Company issued senior secured promissory notes
with an aggregate principal amount of $1.5 million to Eric J. Gleacher, Charles
G. Phillips and ZAM Holdings, L.P. (collectively the "$1.5 Million Note").
Subject to stockholder approval, each of the holders will have the right to
convert, in whole or in part, their pro-rata share of the outstanding principal
amount of the $1.5 Million Note plus accrued and unpaid interest into shares of
common stock at a conversion price equal to the lesser of (i) $1.50 per share
and (ii) 85% of the weighted average price per share of the Company's common
stock as reported on the Nasdaq National Market for the 15-trading-day period
ending three trading days before the conversion date.

NOTE F -- EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted
earnings per share for the periods indicated (in thousands, except for per share
data):

<Table>
<Caption>
NINE MONTHS ENDED
---------------------------------
SEPTEMBER 29, SEPTEMBER 30,
2003 2002
--------------- ---------------
(IN 000'S, EXCEPT PER SHARE DATA)

Basic and Diluted:
Net loss................................................... $(20,450.5) $(10,647.9)
Preferred stock dividends.................................. -- (6,776.8)
---------- ----------
Net loss attributable to common stock...................... $(20,450.5) $(17,424.7)
========== ==========
Weighted average common shares outstanding................. 17,036 4,536
Net loss per share......................................... $ (1.20) $ (3.84)
========== ==========
</Table>

For all periods presented, the impact of all common share equivalents has
not been included, as their inclusion would be anti-dilutive.

NOTE G -- EMPLOYEE SEVERANCE CHARGE

During the first quarter of fiscal 2003 the Company reduced its executive,
general and administrative staffing by 26 persons. These reductions were
primarily due to a change in the Company's growth plans and in the Company's
executive management. At that time the Company recorded a charge of $3.7 million
to provide for the costs, including severance payments, expected to be incurred
in connection with this personnel reduction.

During the third quarter of 2003, the Company recorded a reversal of the
severance charge of $0.9 million for an executive that was originally slated for
termination but has been reinstated in a different capacity. This reversal was
offset by a charge of $0.2 million for severance for another officer resulting
in a net reversal of $0.7 million for the third quarter of 2003 included in
general and administrative expense in the accompanying statement of operations.

F-36

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

Therefore, the net charge for severance included in general and
administrative expenses in the accompanying consolidated statements of
operations for the nine months ended September 29, 2003 is $3.0 million. Of this
amount, $1.1 million was paid during the first nine months of fiscal 2003,
leaving a remaining accrued liability as of September 29, 2003 in the amount of
$1.9 million. Of this amount, $0.6 million is due after one year and is included
in other liabilities, net of current portion in the accompanying financial
statements.

<Table>
<Caption>
TERMINATION BENEFITS
--------------------
(IN $000'S)

Balance December 30, 2002................................... --
Charges during the period................................... 3,037.1
Non-cash portion of charges................................. 43.1
Cash Payments............................................... 1,135.4
--------
Balance September 29, 2003.................................. $1,858.6
========
</Table>

NOTE H -- LEASE TERMINATION CHARGES

During the nine months ended September 29, 2003, the Company recorded a net
reversal of lease termination charges of approximately $0.3 million. This net
amount is comprised of a charge of $0.5 million for stores that the Company has
closed or related to the termination of several leases on restaurants which were
in the development pipeline, but for which our plans were cancelled during the
first quarter of fiscal 2003 offset by a reversal of $0.8 million for leases
that the Company was able to exit on a more favorable basis than previously
anticipated.

NOTE I -- OTHER INCOME

During the third quarter of 2003, the Company received approximately $0.1
million for business interruption insurance claims related to the events of
September 11, 2001, which has been recorded in other income in the accompanying
statement of operations.

NOTE J -- CONTINGENCIES

F-37

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

preliminary stage, and we believe that we have meritorious defenses to these
claims, and intend to vigorously defend against them.

NOTE K -- RESTRICTED STOCK

On June 26, 2003, the Company entered into an employment agreement with
William D. Forrest. Pursuant to the agreement, Mr. Forrest will serve as
Executive Chairman for three years ending on March 31, 2006. In consideration
for Mr. Forrest's service as the Company's Executive Chairman, on June 26, 2003,
the Company issued to Mr. Forrest 1,156,407 shares of its authorized but
unissued common stock, representing 5% of its outstanding common stock on a
fully diluted basis (assuming all outstanding options and warrants are
exercised). Upon completion of the Company's pending rights offering, the
Company will issue a number of additional shares to Mr. Forrest such that his
percentage ownership of Cosi on a fully diluted basis remains 5%; provided,
however, that if the subscription price in the rights offering is less than
$1.25 per share, the Company will issue Mr. Forrest a number of shares equal to
the number of shares that Mr. Forrest would have received in the offering based
upon a subscription price of $1.25 per share. Mr. Forrest's rights in the shares
vest as follows: (i) 25% of the shares vested upon issuance; (ii) 25% of the
shares will vest on April 1, 2004, provided the agreement is still in effect;
and (iii) on the last day of each month, commencing with April 2004, and ending
on March 2006, 2.08% of the shares will vest, and an additional .08% of the
shares will vest on March 31, 2006, provided that at the end of each month the
agreement is still in effect. All shares not vested will fully vest upon the
termination of this agreement by Cosi without cause (as defined in the
agreement), or upon a change of control (as defined in the agreement). If Mr.
Forrest is terminated by the Company for cause (as defined in the agreement),
all unvested shares will be forfeited. Mr. Forrest agreed that, during the term
of the agreement and for a period of 12 months thereafter, he will not compete
with the Company or solicit its employees. The value of Mr. Forrest's shares,
based on the closing price of the Company's common stock on the date of the
grant, of $1.34 per share, was $1,549,585, which was recorded as deferred stock
compensation within stockholder's equity. The amortization of deferred stock
compensation expense, representing the value of the shares that vested upon
issuance, of $493,100 for the nine months ended September 29, 2003 is included
in general and administrative expenses in the accompanying consolidated
statements of operations. The remaining balance will be amortized as stock
compensation expense evenly over the remaining life of Mr. Forrest's employment.

NOTE L -- INVESTMENT AGREEMENT

On August 5, 2003, the Company entered into an Investment Agreement with
Mr. Gleacher, Mr. Phillips, LJCB Nominees Pty Ltd, and ZAM Holdings, L.P.,
(together the "Funding Parties"). Pursuant to the Investment Agreement, subject
to certain conditions, the Funding Parties have agreed to provide funding to the
Company in an aggregate amount up to $8.5 million reduced by the amount
outstanding under the $3 Million Note and the $1.5 Million Note. At the option
of the Funding Parties, the Funding Parties may fund such greater amount
permitted by the Investment Agreement to allow the Funding Parties to maintain
certain relative ownership levels. If stockholders (other than the Funding
Parties) subscribe for at least $2.0 million worth of shares in the Company's
pending rights offering, the Funding Parties would, subject to certain
conditions, provide this funding in the form of an investment in common stock at
the subscription price. If stockholders (other than the Funding Parties) do not
subscribe for at least $2.0 million worth of shares in the Company's pending
rights offering, the Company will not consummate the pending rights offering,
and the Funding Parties will, subject to certain conditions, provide this
funding in the form of, at their option, a purchase of shares of common stock at
the subscription price or the purchase of a senior secured note which is
convertible into shares of common stock. The Funding Parties agreed not to
exercise their basic subscription privilege or over-subscription privilege in
the Company's pending rights offering.
F-38

COSI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

On August 5, 2003, the Company and Mr. Gleacher, Mr. Phillips and ZAM
Holdings, L.P. entered into an agreement pursuant to which Messrs. Gleacher and
Phillips and ZAM Holdings, L.P. agreed to provide funding to the Company by
purchasing senior secured promissory notes in the aggregate principal amount of
$3 million if (i) the Company's proposed rights offering is abandoned by
December 1, 2003, (ii) stockholders do not approve (a) the conversion feature of
the $3 Million Note and the $1.5 Million Note, and (b) the Investment Agreement,
(iii) as a result, the Funding Parties do not provide the funding contemplated
by the Investment Agreement and (iv) the Company's "Cumulative Modified EBITDA",
for the months of July through October, 2003 is no less than a loss of
$1,185,000. "Cumulative Modified EBITDA" is defined in the agreement as (A) the
Company's earnings before interest, taxes, depreciation, asset impairment
charges, restaurant closing costs and other items customarily and properly
classified by the Company as one-time, extraordinary expenses for internal
reporting purposes) less (B) capital expenditures. The $3 million in additional
funding would be provided in the form of a non-convertible secured promissory
note. The note will mature on January 15, 2005. Messrs. Gleacher and Phillips
and ZAM Holdings, L.P. will only provide this funding if stockholders do not
approve the conversion feature of the $3 Million Note and the $1.5 Million Note
and the Investment Agreement, and the Company does not consummate the rights
offering.

NOTE M -- MANAGEMENT

On July 7, 2003, Mr. Kevin Armstrong joined Cosi as its Chief Executive
Officer, and was appointed to the Company's Board of Directors. In connection
with his employment Mr. Armstrong was granted options to purchase 900,000 shares
of the Company's common stock at a price of $1.77 per share, the closing market
price on the date of the grant. Twenty-five percent of Mr. Armstrong's options
vested immediately, with 1/3 of the balance vesting on each of the first three
anniversaries of the grant date.

On August 18, 2003, Mr. Mark Stickney joined Cosi as its Chief Financial
Officer. In connection with his employment Mr. Stickney was granted options to
purchase 400,000 shares of the Company's common stock at a price of $2.37, the
closing market price on August 18, 2003. Mr. Stickney's options vest at a rate
of 11,111 per month upon completion of each month of employment through April
30, 2004. 111,111 options will vest on August 31, 2004, 100,000 will vest in
August 2005 and 100,000 will vest in August 2006.

F-39

REPORT OF INDEPENDENT AUDITORS ON SCHEDULE

To the Board of Directors
Cosi, Inc.

We have audited the consolidated financial statements of Cosi, Inc. as of
December 30, 2002 and December 31, 2001, and for each of the three years in the
period ended December 30, 2002, and have issued our report thereon dated
February 19, 2003, except for Note 17 as to which the date is March 31, 2003.
(included elsewhere in this registration statement) Our audits also included the
financial statement Schedule II -- Valuation and Qualifying Accounts listen in
Item 16(b) of this registration statement. This schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

/s/ ERNST & YOUNG LLP

New York, New York
February 19, 2003

S-i

COSI, INC. AND SUBSIDIARIES

SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDING DECEMBER 30, 2002

<Table>
<Caption>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER ACCOUNTS DEDUCTIONS END OF
DESCRIPTION OF PERIOD EXPENSES (DESCRIBE) (DESCRIBE) PERIOD
- ----------- ---------- ---------- -------------- ---------- ----------
(IN $000S)

JANUARY 1, 2001
Allowance for doubtful accounts
receivable.................... 306.9 88.1 -- (28.0)(a) 367.0
Lease termination reserve........ 3,437.1 477.3 -- (914.4)(b) 3,000.0
Accrued merger and integration
costs......................... 639.3 55.7 -- (695.0)(c) --

DECEMBER 31, 2001
Allowance for doubtful accounts
receivable.................... 367.0 3.6 -- (150.8)(a) 219.8
Lease termination reserve........ 3,000.0 6,410.8 -- (1,209.1)(b) 8,201.7

DECEMBER 30, 2002
Allowance for doubtful accounts
receivable.................... 219.8 27.0 -- (14.7)(a) 232.1
Lease termination reserve........ 8,201.7 (1,165.0) -- (411.1)(b) 6,625.6
</Table>

Notes:

(a) Write-off of uncollectable accounts.

(b) Payments to landlords and others for leases on closed restaurants.

S-ii

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Set forth below is an estimate of the approximate amount of the fees and
expenses payable by Cosi in connection with this offering:

<Table>

Securities and Exchange Commission Registration Fee......... $ 774.25
Nasdaq National Market Listing Fees......................... $ 22,500.00
Printing Expenses........................................... 50,000.00
Legal Fees and Expenses..................................... 451,725.75
Accounting Fees and Expenses................................ 150,000.00
Transfer Agent Fees and Expenses............................ 25,000.00
Miscellaneous............................................... 50,000.00
-----------
Total..................................................... $750,000.00
===========
</Table>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the DGCL permits indemnification of officers, directors, and
other corporate agents under certain circumstances and subject to certain
limitations. Our Amended and Restated Certificate of Incorporation and By-laws
provide that we will indemnify our directors and officers, and anyone who is or
was serving at Cosi's request as a director, officer, employee, fiduciary, or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, to the fullest extent permitted under Delaware law. These
indemnification provisions may be sufficiently broad to permit indemnification
of Cosi's executive officers and directors for liabilities (including
reimbursement of expenses incurred) arising under the Securities Act of 1933, as
amended ("Securities Act").

Cosi maintains directors' and officers' liability insurance against any
actual or alleged error, misstatement, misleading statement, act, omission,
neglect or breach of duty by any director or officer, excluding certain matters
including fraudulent, dishonest or criminal acts or self dealing.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since November 2000, the Registrant and its Predecessors have sold and
issued the following unregistered securities:

(a) Issuances of shares of Common Stock other than pursuant to
exercise of employee stock options.

On June 26, 2003, the Registrant issued 1,156,407 shares of common stock to
Mr. William D. Forrest, Executive Chairman of the Registrant, in reliance upon
the exemption from registration provided pursuant to Section 4(2) of the
Securities Act.

(b) Issuances of Shares of Series C Preferred Stock.

On January 31, 2001, the Registrant issued a total of 1,517,482 shares of
Series C Preferred to 51 investors, 50 of which were accredited investors (27 of
which represented to the Company that they were a natural person with a net
worth over $1 million, 9 of which were organizations described in Section
501(c)(3) of the IRC, 3 of which represented to the Company that they were a
natural person with individual income greater than $200,000, or, if married,
combined income with spouse of over $300,000, in 2 of the last 3 years, 4 of
which were a trust with assets exceeding $5 million, not formed for the specific
purpose of acquiring the securities offered, and 7 of which represented to the
Company that they were an entity in which all the equity owners are accredited
investors) and 39 of which were existing stockholders of the Registrant for an
aggregate purchase price of $14,416,168, or $9.50 per share.

II-1

On March 31, 2001, the Registrant issued a total of 73,758 shares of Series
C Preferred to 1 accredited investor (which represented to the Company that it
was an entity in which all the equity owners are accredited investors) for an
aggregate purchase price of $700,701, or $9.50 per share.

On May 10, 2001, the Registrant issued a total of 868,822 shares of Series
C Preferred to 2 accredited investors (both of which were organizations
described in Section 501(c)(3) of the IRC) both of which were existing
stockholders of the Registrant, for an aggregate purchase price of $8,250,009,
or $9.50 per share.

On December 1, 2001, the Registrant issued a total of 105,264 shares of
Series C Preferred to an investor, for an aggregate purchase price of
$1,000,008, or $9.50 per share.

On February 23, 2002, the Registrant issued a total of 2,029,923 shares of
Series C to 72 investors, 69 of which were accredited investors (46 of which
represented to the Company that they were a natural person with a net worth over
$1 million, 1 of which was a bank as defined in Section 3(a)(2) of the Act, 1 of
which was an organization described in Section 501(c)(3) of the IRC, 5 of which
represented to the Company that they were a natural person with individual
income greater than $200,000, or, if married, combined income with spouse of
over $300,000, in 2 of the last 3 years, 4 of which were a trust with assets
exceeding $5 million, not formed for the specific purpose of acquiring the
securities offered, and 13 of which represented to the Company that they were an
entity in which all the equity owners are accredited investors) and 24 of which
were existing stockholders of the Registrant, for an aggregate purchase price of
$19,284,229.37, or $9.50 per share. Participating in this sale were 20
principals and 1 vice president of William Blair & Company, L.L.C.

On November 15, 2000, the Registrant sold 95 shares of its Common Stock to
an employee for aggregate consideration of $635, or approximately $6.68 per
share, pursuant to the exercise of outstanding stock options granted prior to
January 2, 2001.

On February 10, 2001, the Registrant issued stock options to purchase
19,156 shares of its Common Stock at an exercise price of $7.00 per share, to an
outside recruiter in consideration of executive recruitment services rendered.

On February 15, 2001, the Registrant issued stock options to purchase
20,000 shares of Common Stock at an exercise price of $7.00 per share, to an
outside consultant in consideration of consulting services rendered.

On March 1, 2001, the Registrant sold 400 shares of its Common Stock to an
employee for aggregate consideration of $2,500, or approximately $6.25 per
share, pursuant to the exercise of outstanding stock options granted prior to
January 2, 2001.

On July 13, 2001, the Registrant sold 9,319 shares of its Common Stock to
an employee for aggregate consideration of $38,803.92, or approximately $4.16
per share, pursuant to the exercise of outstanding stock options granted prior
to January 2, 2001.

On November 20, 2001, the Registrant issued a stock option to purchase
5,000 shares of its Common Stock at an exercise price of $7.00 per share, to an
outside consultant in consideration of store design services rendered.

On December 31, 2001, the Registrant issued stock options to purchase
150,000 shares of its Common Stock at an exercise price of $7.00 per share, to
four outside consultants in consideration of consulting services rendered.

On December 31, 2001, the Registrant issued stock options to purchase
20,000 shares of its Common Stock at an exercise price of $7.00 per share, to an
outside attorney in consideration of legal services rendered.

On January 30, 2002, the Registrant sold 56,250 shares of its Common Stock
to a former director for aggregate consideration of $351,562.50, or
approximately $6.25 per share, pursuant to the exercise of outstanding stock
options granted prior to January 2, 2001.

On February 11, 2002, the Registrant sold 41 shares of its Common Stock to
an employee for aggregate consideration of $287, or approximately $7.00 per
share, pursuant to the exercise of stock options granted prior to January 2,
2001.
II-2

(d) Issuances and exercises of Warrants.

On November 6, 2001, the Registrant issued stock purchase warrants to
purchase 703 shares of Common Stock at $0.01 per share to 2 investors, 1 of
which represented to the Company that it was a natural person with a net worth
over $1 million and both of which were existing stockholders of the Registrant,
pursuant to a Note and Warrant Purchase Agreement.

On November 7, 2001, the Registrant issued stock purchase warrants to
purchase 92,077 shares of Common Stock at $0.01 per share to 4 investors, all of
which were accredited investors (2 of which represented to the Company that they
were a natural person with a net worth over $1 million, 1 of which was an
organization described in Section 501(c)(3) of the IRC, and 1 of which
represented to the Company that it was a natural person with individual income
greater than $200,000, or, if married, combined income with spouse of over
$300,000, in 2 of the last 3 years) and existing stockholders of the Registrant,
pursuant to a Note and Warrant Purchase Agreement.

On November 27, 2001, the Registrant issued a stock purchase warrant to
purchase 176 shares of Common Stock at $0.01 per share to an accredited investor
(which represented to the Company that it was a natural person with a net worth
over $1 million) and existing stockholder of the Registrant, pursuant to a Note
and Warrant Purchase Agreement.

On December 3, 2001, the Registrant issued a stock purchase warrant to
purchase 4,419 shares of Common Stock at $9.50 per share to an accredited
investor (which represented to the Company that it was an entity in which all
the equity owners are accredited investors) and existing stockholder of the
Registrant pursuant to a Note and Warrant Purchase Agreement.

On December 10, 2001, the Registrant issued a stock purchase warrant to
purchase 26 shares of Common Stock at $0.01 per share to an investor and
existing stockholder of the Registrant, pursuant to a Note and Warrant Purchase
Agreement.

On January 18, 2002, the Registrant issued a stock purchase warrant to
purchase 8,785 shares of Common Stock at $0.01 per share to two investors,
pursuant to a Note and Warrant Purchase Agreement.

On June 3, 2002, the Registrant sold 2,198 shares of its Common Stock to an
existing stockholders for an aggregate consideration of $21.98 pursuant to the
exercise of outstanding warrants.

On July 17, 2002, the Registrant sold 220 shares of its Common Stock to two
existing stockholders for an aggregate consideration of $3.84 pursuant to the
exercise of outstanding warrants.

On August 1, 2002, the Registrant sold 144 shares of its Common Stock to
two existing stockholders for an aggregate consideration of $2.52 pursuant to
the exercise of outstanding warrants.

On August 2, 2002, the Registrant sold 220 shares of its Common Stock to an
existing stockholder for an aggregate consideration of $3.85 pursuant to the
exercise of outstanding warrants.

On August 12, 2002, the Registrant issued stock purchase warrants to
purchase 983,670 shares of Common Stock at $6.00 per share to 20 investors, all
of which were accredited investors and 18 of which were existing stockholders of
the Registrant, pursuant to a Senior Secured Note and Warrant Purchase
Agreement.

During September 2002, the Registrant issued stock purchase warrants to
purchase 210,000 shares of Common Stock at $6.00 per share to 20 investors, all
of which were accredited investors and 18 of which were existing stockholders of
the Registrant, pursuant to a Senior Secured Note and Warrant Purchase
Agreement.

During October 2002, the Registrant issued stock purchase warrants to
purchase 360,000 shares of Common Stock at $6.00 per share to 20 investors, all
of which were accredited investors and 18 of which were existing stockholders of
the Registrant, pursuant to a Senior Secured Note and Warrant Purchase
Agreement.

During November 2002, we issued stock purchase warrants to purchase 516,330
shares of Common Stock at $6.00 per share to nine investors, all of which were
accredited investors and all of which were existing stockholders, pursuant to a
Senior Secured Note and Warrant Purchase Agreement.

II-3

On December 19, 2002, we sold 4,396 shares of our Common Stock to an
existing stockholder for an aggregate consideration of $43.96 pursuant to the
exercise of outstanding warrants.

On March 28, 2003, we sold 2,121 shares of our Common Stock to five
existing stockholders for an aggregate consideration of $21.21 pursuant to the
exercise of outstanding warrants.

(e) Issuances of Promissory Notes.

On November 6, 2001, the Registrant sold promissory notes in the principal
amount of $40,000, to two investors, one of which was an accredited investor
(which represented to the Company that it was a natural person with a net worth
over $1 million) and both of which were existing stockholders of the Registrant,
pursuant to a Note and Warrant Purchase Agreement.

On November 7, 2001, the Registrant sold promissory notes in the principal
amount of $5,240,046, to four investors, all of which were accredited investors
(2 of which represented to the Company that they were a natural person with a
net worth over $1 million, 1 of which was an organization described in Section
501(c)(3) of the IRC, and 1 of which represented to the Company that it was a
natural person with individual income greater than $200,000, or, if married,
combined income with spouse of over $300,000, in 2 of the last 3 years) and
existing stockholders of the Registrant, pursuant to a Note and Warrant Purchase
Agreement.

On November 27, 2001, the Registrant sold promissory notes in the principal
amount of $10,000, to an accredited investor (which represented to the Company
that it was a natural person with a net worth over $1 million) and existing
stockholder of the Registrant, pursuant to a Note and Warrant Purchase
Agreement.

On January 18, 2002, the Registrant sold a promissory note in the principal
amount of $500,000, to two investors, pursuant to a Note and Warrant Purchase
Agreement.

During September 2002, the Registrant sold promissory notes in the
principal amount of $3.0 million to 20 investors, all of which were accredited
investors and 18 of which were existing stockholders of the Registrant, pursuant
to a Senior Secured Note and Warrant Purchase Agreement.

During October 2002, the Registrant sold promissory notes in the principal
amount of $6.5 million to 20 investors, all of which were accredited investors
and 18 of which were existing stockholders of the Registrant, pursuant to a
Senior Secured Note and Warrant Purchase Agreement.

During April 2003, the Registrant issued a promissory note in the principal
amount of $3 million to First Republic Bank. The note was assigned by the bank
on October 30, 2003 to ZAM Holdings, L.P., Eric J. Gleacher and Charles G.
Phillips. Upon assignment of the note, the Registrant issued amended and
restated promissory notes in the amount of $1,943,068.74, $759,397.00 and
$304,634.26.

During August 2003, the Registrant issued promissory notes collectively in
the amount of $1.5 million to Eric J. Gleacher, Charles G. Phillips and ZAM
Holdings, L.P.

There were no underwriters employed in connection with any of the
transactions set forth in Item 15.

The issuances described in this Item 15 prior to June 4, 2002 do not
reflect the 1.75 to 1 reverse stock split.

The issuances described in Items 15(a), 15(b), 15(d) (except for the 10th,
11th and 12th issuances) and 15(e) were made in reliance upon the exemption from
registration provided pursuant to Section 4(2) of the Securities Act. The
Company determined that each of these sales qualified as private placements
under Section 4(2) because (i) neither the issuer nor any person acting on its
behalf offered or sold these securities by any form of general solicitation or
general advertising, (ii) no private placement included more than 3
non-accredited investors, (iii) in connection with each private placement, the
Company provided written disclosure with respect to all relevant financial and
other information to each investor, and (iv) the Company provided written
disclosure to each purchaser prior to sale stating that the securities had not
been registered under the Securities Act and, therefore, could not be resold
unless they were registered under the Securities Act or unless an exemption from
registration was available. The issuances described in paragraphs 10, 11 and 12
of Item 15(d) were made in reliance upon the exemption from registration
provided pursuant to Rule 506 of Regulation D, promulgated under the Securities
Act.

II-4

The issuances of options described in paragraphs 2, 3, 6, 7 and 8 of Item
15(c) we made in reliance upon the exemption from registration provided pursuant
to Section 4(2) of the Securities Act. The sales of the Company's common stock
pursuant to the exercise of stock options described in paragraphs 1, 4, 5, 9 and
10 of Item 15(c) we made in reliance upon the exemption from registration
provided pursuant to Rule 701 promulgated under the Securities Act as securities
sold pursuant to certain compensatory benefit plans and contracts relating to
compensation.

The recipients of securities in each such transaction represented their
intention 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 other instruments issued in such
transactions. All recipients either received adequate information about the
Registrant or had access, through employment or other relationships, to such
information.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

a. Exhibits

<Table>

2.1 -- Merger Agreement by and among Xando, Incorporated, Xando
Merger Corp. and Cosi Sandwich Bar, Inc., dated as of
October 4, 1999. (Filed as Exhibit 2.1 to the Company's
Registration Statement on Form S-1, file #333-86390).
3.1 -- Amended and Restated Certificate of Incorporation of Cosi,
Inc. (Filed as Exhibit 3.1 to the Company's Annual Report on
Form 10-K for the period ended December 30, 2002).
3.2 -- Amended and Restated By-Laws of Cosi, Inc. (Filed as Exhibit
3.2 to the Company's Annual Report on Form 10-K for the
period ended December 30, 2002).
4.1 -- Form of Certificate of Common Stock. (Filed as Exhibit 4.1
to the Company's Registration Statement on Form S-1, file
#333-86390).
4.2+ -- Form of Rights Certificate.
4.3 -- Rights Agreement between Cosi, Inc. and American Stock
Transfer and Trust Company, dated November 21, 2002. (Filed
as Exhibit 4.2 to the Company's Annual Report on Form 10-K
for the period ended December 30, 2002).
4.4.1 -- Amended and Restated Registration Agreement, dated as of
March 30, 1999. (Filed as Exhibit 4.3 to the Company's
Registration Statement on Form S-1, file #333-86390).
4.4.2# -- Supplemental Registration Rights Agreement, dated as of
August 5, 2003 by and among the Company and the parties
thereto.
4.6.3 -- Promissory Note dated as of August 6, 2003 between Cosi,
Inc. and Charles G. Phillips (Filed as Exhibit 4.5 to the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 2003).
4.6.4 -- Promissory Note dated as of October 30, 2003 between Cosi,
Inc. and ZAM Holdings, L.P. (Filed as Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 29, 2003).
4.6.5 -- Promissory Note dated as of October 30, 2003 between Cosi,
Inc. and Eric J. Gleacher (Filed as Exhibit 4.2 to the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 29, 2003).
4.6.6 -- Promissory Note dated as of October 30, 2003 between Cosi,
Inc. and Charles G. Phillips (Filed as Exhibit 4.3 to the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 29, 2003).
4.7 -- Amendment No. 1 to Rights Agreement dated as of November 21,
2002, between Cosi, Inc. and American Stock Transfer and
Trust Company, as rights agent (Filed as Exhibit 4.3 to the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 2003).
4.8.1# -- Promissory Note dated as of August 5, 2003 between Cosi,
Inc. and ZAM Holdings, L.P.
4.8.2# -- Promissory Note dated as of August 5, 2003 between Cosi,
Inc. and Eric J. Gleacher.
4.9# -- Investment Agreement, dated as of August 5, 2003, among the
Company, Eric J. Gleacher, Charles G. Phillips, LJCB
Nominees Pty Ltd, and ZAM Holdings, L.P.
</Table>

II-5

<Table>
<Caption>
5.1# -- Opinion of Cadwalader, Wickersham & Taft LLP as to the legality of the securities being registered.

10.1.1 -- Amended and Restated Cosi, Inc. Stock Incentive Plan. (Filed as Exhibit 10.1 to the Company's
Registration Statement on Form S-1, file #333-86390).
10.1.2 -- Cosi Sandwich Bar, Inc. Incentive Stock Option Plan (Filed as Exhibit E to the Company's Definitive
Proxy Statement on Schedule 14A for the Annual Meeting of Stockholders held on November 24, 2003,
filed with the Commission on November 3, 2003)
10.2 -- Cosi, Inc. Employee Stock Purchase Plan. (Filed as Exhibit 10.2 to the Company's Registration
Statement on Form S-1, file #333-86390).
10.3 -- Cosi, Inc. Non-Employee Director Stock Incentive Plan. (Filed as Exhibit 10.3 to the Company's
Registration Statement on Form S-1, file #333-86390).
10.4.1 -- Employment Agreement between Cosi, Inc. and Kevin Armstrong, dated as of July 3, 2003. (Filed as
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended September
29, 2003).
10.4.2 -- Employment Agreement between Cosi, Inc. and Mark Stickney, dated as of August 18, 2003. (Filed as
Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended September
29, 2003).
10.4.3 -- Employment Agreement between Cosi, Inc. and Jonathan M. Wainwright, Jr., dated as of August 20,
2003. (Filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 29, 2003).
10.4.4# -- Employment Agreement between Cosi, Inc. and William D. Forrest, dated June 26, 2003.
10.4.5 -- Settlement Agreement between Cosi, Inc. and Andy Stenzler, effective January 31, 2003 (Filed as
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
2003).
10.4.6 -- Separation and Release Agreement between Cosi, Inc. and Nicholas Marsh, effective April 30, 2003.
(Filed as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 29, 2003).
10.4.7 -- Separation Agreement between Cosi, Inc. and Kenneth S. Betuker, dated as of September 17, 2003.
(Filed as Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 29, 2003).
10.5.1 -- Amended and Restated Distributor Service Agreement between Cosi, Inc. and Maines Paper & Food
Service, Inc., dated as of June 18, 2002(1) (Filed as Exhibit 10.6 to the Company's Registration
Statement on Form S-1, file #333-86390).
10.5.2 -- Second Amendment to Amended and Restated Distributor Service Agreement between Cosi, Inc. and
Maines Paper & Food Service, Inc. (Filed as Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 2003).
21.1 -- Subsidiaries of Cosi, Inc. (Filed as Exhibit 21.1 to the Company's Registration Statement on Form
S-1, file #333-86390).
23.1+ -- Consent of Ernst & Young LLP, dated November 21, 2003.
23.2# -- Consent of Cadwalader, Wickersham & Taft LLP (included in Exhibit 5.1)
24.1# -- Power of Attorney (included on the signature page of this registration statement).
99.1# -- Form of Subscription Agent Agreement between Cosi, Inc. and American Stock Transfer and Trust
Company.
99.2+ -- Form of Instructions as to Use of Cosi, Inc. Rights Certificates.
99.3+ -- Form of Notice of Guaranteed Delivery for Rights Certificate.
99.4+ -- Form of Letter to Shareholders of Record.
99.5+ -- Form of Letter from Broker or Other Nominee to Beneficial Shareholders.
99.6+ -- Form of Instructions by Beneficial Owner to Broker or Other Nominee.
99.7+ -- Form of Letter to Brokers and Other Nominees.
99.8+ -- Form of Nominee Holder Certification Form.
</Table>

II-6

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

+ Filed herewith.

# Previously filed.

(1) Portions of Exhibit 10.5 have been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for Confidential
Treatment.

II-7

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
Cosi, Inc., has duly caused this Amendment No. 3 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, New York, on November 24, 2003.

<Table>

COSI, INC.

By: /s/ KEVIN ARMSTRONG
-----------------------------------------
Kevin Armstrong
Chief Executive Officer and President
</Table>

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 3 to the Registration Statement has been signed on November
24, 2003, by the following persons in the capacities indicated.

<Table>
<Caption>
SIGNATURE TITLE
--------- -----

* Chairman of the Board
- -------------------------------------
William D. Forrest

* Chief Executive Officer, President and Director
- ------------------------------------- (Principal Executive Officer)
Kevin Armstrong

* Director
- -------------------------------------
Terry Diamond

* Director
- -------------------------------------
Creed L. Ford III

* Director
- -------------------------------------
D. Ian McKinnon

* Director
- -------------------------------------
Jeffrey M. Stork

* Director
- -------------------------------------
Greg Woolley

/s/ MARK STICKNEY Chief Financial Officer
- ------------------------------------- (Principal Financial and Accounting Officer)
Mark Stickney

*By: /s/ KEVIN ARMSTRONG
------------------------------
Kevin Armstrong
Attorney-in-fact
</Table>

II-8