##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the quarterly period ended June 29, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the transition period from  to
 Commission File No. 000-50052
 COSÌ, INC.
  Delaware
    
    06-1393745(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 1751 Lake Cook Road
Deerfield, Illinois 60015
 (847) 597-8800
 þ o
 o o
  Large accelerated filer o
Accelerated filer þ
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company o o þ




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##### 



COSI, INC.
 
 Page NumberPART I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (Unaudited)Consolidated Balance Sheets  as of June 29, 2009 and December 29, 2008
    
    3Consolidated Statements of Operations  Three and six month periods ended June 29, 2009 and June 30, 2008
    
    4Consolidated Statement of Stockholders Equity  Six month period ended June 29, 2009
    
    5Consolidated Statements of Cash Flows  Six month periods ended June 29, 2009 and June 30, 2008
    
    6Notes to Condensed Consolidated Financial Statements
    
    7-12Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    13-25Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    26Item 4.
    
    Controls and Procedures
    
    26PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    26Item 1A.
    
    Risk Factors
    
    26Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    27Item 6.
    
    Exhibits
    
    28SIGNATURES
    
    29EXHIBIT INDEX
    
    30CERTIFICATIONS
    
    31-33EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 Cosi, Inc.
Consolidated Balance Sheets
As of June 29, 2009 and December 29, 2008
(dollars in thousands, except share and per share data)
 June 29, 2009
    
    
    December 29, 2008(Unaudited)
    
    
    (Note 1)AssetsCurrent assets:Cash and cash equivalents
    
    $
    5,184
    
    
    $
    5,589Accounts receivable, net
    
    
    662
    
    
    
    916Inventories
    
    
    948
    
    
    
    998Prepaid expenses and other current assets
    
    
    1,316
    
    
    
    3,650Total current assets
    
    
    8,110
    
    
    
    11,153Furniture and fixtures, equipment and leasehold improvements, net
    
    
    26,123
    
    
    
    29,779Intangibles, security deposits and other assets, net
    
    
    1,759
    
    
    
    1,849Total assets
    
    $
    35,992
    
    
    $
    42,781Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    2,733
    
    
    $
    3,378Accrued expenses
    
    
    8,093
    
    
    
    9,835Deferred franchise revenue
    
    
    44
    
    
    
    149Current liabilities of discontinued operations
    
    
    
    
    
    
    4Current portion of other long-term liabilities
    
    
    414
    
    
    
    668Total current liabilities
    
    
    11,284
    
    
    
    14,034Deferred franchise revenue
    
    
    2,580
    
    
    
    2,545Other long-term liabilities, net of current portion
    
    
    6,813
    
    
    
    7,176Total liabilities
    
    
    20,677
    
    
    
    23,755Commitments and contingenciesStockholders equity:Common stock  $.01 par value; 100,000,000 shares
authorized,
40,866,474 and 40,663,164 shares issued, respectively
    
    
    409
    
    
    
    407Additional paid-in capital
    
    
    277,175
    
    
    
    276,593Treasury stock, 239,543 shares at cost
    
    
    (1,198
    )
    
    
    (1,198
    )Accumulated deficit
    
    
    (261,071
    )
    
    
    (256,776
    )Total stockholders equity
    
    
    15,315
    
    
    
    19,026Total liabilities and stockholders equity
    
    $
    35,992
    
    
    $
    42,781
 The accompanying notes are an integral part of these consolidated financial statements.
 3




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Cosi, Inc.
Consolidated Statements of Operations
For the Three and Six Month Periods Ended June 29, 2009 and June 30, 2008
(dollars in thousands, except share and per share data)
 Three Months Ended
    
    
    Six Months EndedJune 29,
    
    
    June 30,
    
    
    June 29,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Revenues:Restaurant net sales
    
    $
    31,015
    
    
    $
    36,207
    
    
    $
    59,139
    
    
    $
    68,666Franchise fees and royalties
    
    
    621
    
    
    
    516
    
    
    
    1,163
    
    
    
    1,248Total revenues
    
    
    31,636
    
    
    
    36,723
    
    
    
    60,302
    
    
    
    69,914Costs and expenses:Cost of food and beverage
    
    
    6,915
    
    
    
    8,261
    
    
    
    13,152
    
    
    
    15,797Restaurant labor and related benefits
    
    
    10,896
    
    
    
    11,778
    
    
    
    21,505
    
    
    
    23,016Occupancy and other restaurant operating expenses
    
    
    9,044
    
    
    
    9,930
    
    
    
    18,011
    
    
    
    19,68526,855
    
    
    
    29,969
    
    
    
    52,668
    
    
    
    58,498General and administrative expenses
    
    
    3,731
    
    
    
    6,069
    
    
    
    7,704
    
    
    
    11,106Depreciation and amortization
    
    
    1,779
    
    
    
    2,056
    
    
    
    3,743
    
    
    
    4,167Restaurant pre-opening expenses
    
    
    
    
    
    
    73
    
    
    
    
    
    
    
    100Provision for losses on asset impairments
and disposals
    
    
    238
    
    
    
    267
    
    
    
    238
    
    
    
    267Closed store costs
    
    
    2
    
    
    
    13
    
    
    
    45
    
    
    
    47Lease termination expense
    
    
    5
    
    
    
    
    
    
    
    207
    
    
    
    243Total costs and expenses
    
    
    32,610
    
    
    
    38,447
    
    
    
    64,605
    
    
    
    74,428Operating loss
    
    
    (974
    )
    
    
    (1,724
    )
    
    
    (4,303
    )
    
    
    (4,514
    )Interest income
    
    
    1
    
    
    
    27
    
    
    
    2
    
    
    
    72Interest expense
    
    
    (1
    )
    
    
    (2
    )
    
    
    (3
    )
    
    
    (3
    )Other income
    
    
    5
    
    
    
    
    
    
    
    9
    
    
    
    Loss from continuing operations
    
    
    (969
    )
    
    
    (1,699
    )
    
    
    (4,295
    )
    
    
    (4,445
    )Discontinued operations:Loss from discontinued operations
    
    
    
    
    
    
    (30
    )
    
    
    
    
    
    
    (312
    )Net loss
    
    $
    (969
    )
    
    $
    (1,729
    )
    
    $
    (4,295
    )
    
    $
    (4,757
    )Per Share Data:Loss per share, basic and dilutedContinuing operations
    
    $
    (0.02
    )
    
    $
    (0.04
    )
    
    $
    (0.11
    )
    
    $
    (0.11
    )Discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (0.01
    )Net loss
    
    $
    (0.02
    )
    
    $
    (0.04
    )
    
    $
    (0.11
    )
    
    $
    (0.12
    )Weighted average shares outstanding:
    
    
    40,381,372
    
    
    
    40,030,460
    
    
    
    40,321,325
    
    
    
    39,980,356
 The accompanying notes are an integral part of these consolidated financial statements.
 4




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Cosi, Inc.
Consolidated Statement of Stockholders Equity
For the Six Months Ended June 29, 2009
(unaudited)
(dollars in thousands, except share data)
 Common Stock
    
    
    Treasury StockAdditionalNumber of
    
    
    
    
    
    
    Paid In
    
    
    Number of
    
    
    
    
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Capital
    
    
    Shares
    
    
    Amount
    
    
    Deficit
    
    
    TotalBalance, December 29, 2008
    
    
    40,663,164
    
    
    $
    407
    
    
    $
    276,593
    
    
    
    239,543
    
    
    $
    (1,198
    )
    
    $
    (256,776
    )
    
    $
    19,026Net issuances of
restricted stock
    
    
    203,310
    
    
    
    2
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    584
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    584Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,295
    )
    
    
    (4,295
    )Balance, June 29, 2009
    
    
    40,866,474
    
    
    $
    409
    
    
    $
    277,175
    
    
    
    239,543
    
    
    $
    (1,198
    )
    
    $
    (261,071
    )
    
    $
    15,315
 The accompanying notes are an integral part of these consolidated financial statements.
 5




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Cosi, Inc.
Consolidated Statements of Cash Flows
For the Six Month Periods Ended June 29, 2009 and June 30, 2008
(dollars in thousands)
 June 29,
    
    
    June 30,2009
    
    
    2008(Unaudited)
    
    
    (Unaudited)Cash flows from operating activities:Net loss
    
    $
    (4,295
    )
    
    $
    (4,757
    )Adjustments to reconcile net loss to net cash (used in)
provided by operating activitiesDepreciation and amortization
    
    
    3,743
    
    
    
    4,172Non-cash portion of asset impairments and disposals
    
    
    238
    
    
    
    355Non-cash portion of store closing costs
    
    
    
    
    
    
    24Provision for bad debts
    
    
    98
    
    
    
    (2
    )Stock-based compensation expense
    
    
    584
    
    
    
    995Changes in operating assets and liabilities:Accounts receivable
    
    
    156
    
    
    
    18Inventories
    
    
    49
    
    
    
    65Prepaid expenses and other current assets
    
    
    2,335
    
    
    
    691Other assets
    
    
    90
    
    
    
    43Accounts payable and accrued expenses
    
    
    (2,430
    )
    
    
    212Deferred franchise revenue
    
    
    (70
    )
    
    
    (170
    )Other long-term liabilities
    
    
    (578
    )
    
    
    (194
    )Net cash (used in) provided by operating activities
    
    
    (80
    )
    
    
    1,452Cash flows from investing activities:Capital expenditures
    
    
    (325
    )
    
    
    (1,789
    )Proceeds from sale of assets
    
    
    
    
    
    
    30Net payments of security deposits
    
    
    
    
    
    
    (14
    )Net cash used in investing activities
    
    
    (325
    )
    
    
    (1,773
    )Cash flows from financing activities:Net proceeds from exercise of stock options
    
    
    
    
    
    
    53Net cash provided by financing activities
    
    
    
    
    
    
    53Net decrease in cash and cash equivalents
    
    
    (405
    )
    
    
    (268
    )Cash and cash equivalents, beginning of period
    
    
    5,589
    
    
    
    6,309Cash and cash equivalents, end of period
    
    $
    5,184
    
    
    $
    6,041Supplemental disclosure of cash flow information:Cash paid for:Corporate franchise and income taxes
    
    $
    139
    
    
    $
    49
 The accompanying notes are an integral part of these consolidated financial statements.
 6




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COSI, INC.  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Note 1  Basis of Presentation
      Note 2  Stock-Based Compensation Expense
  For the Three Months Ended
    
    
    For the Six Months Ended(in thousands)
    
    
    (in thousands)June 29,
    
    
    June 30,
    
    
    June 29,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Stock option compensation expense
    
    $
    14
    
    
    $
    51
    
    
    $
    28
    
    
    $
    102Restricted stock compensation expense, net of forfeitures
    
    
    277
    
    
    
    469
    
    
    
    556
    
    
    
    893Total non-cash, stock-based compensation expense, net of
forfeitures
    
    $
    291
    
    
    $
    520
    
    
    $
    584
    
    
    $
    995
   7




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COSI, INC.  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)  continued
     NOTE 3  Warrants
  NOTE 4  Earnings Per Share
  NOTE 5  Asset impairments
  8




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COSI, INC.  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)  continued
  Accounting for the Impairment or Disposal of Long-Lived Assets
 NOTE 6  Lease Termination Costs
   NOTE 7  Discontinued Operations
    9




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COSI, INC.  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)  continued
  Three Months Ended
    
    
    Six Months EndedJune 29,
    
    
    June 30,
    
    
    June 29,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(dollars in thousands)
    
    
    (dollars in thousands)RevenuesRestaurant net sales
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    373Costs and expensesCost of food and beverage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    107Restaurant labor and related benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    188Occupancy and other restaurant
operating expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    181
    
    
    
    
    
    
    
    
    
    
    
    476Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Closed store costs
    
    
    
    
    
    
    30
    
    
    
    
    
    
    
    116Asset impairments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88Total costs and expenses
    
    
    
    
    
    
    30
    
    
    
    
    
    
    
    685Loss from discontinued operations
    
    $
    
    
    
    $
    (30
    )
    
    $
    
    
    
    $
    (312
    )
  NOTE 8  Contingencies
  NOTE 9  Income Taxes
  
 Accounting for Uncertainty in Income Taxes, an interpretation of FASB
Statement No. 109
 10




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COSI, INC.  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)  continued
   NOTE 10  New Accounting Pronouncements
 Fair Value Measures Effective Date of
FASB Statement No. 157
 The Fair Value Option for Financial Assets
and Financial Liabilities  Including an Amendment of FASB Statement No. 115.
 Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements, an amendment of ARB 51
 11




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COSI, INC.  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)  continued
 Disclosures about Derivative Instruments and
Hedging Activities  an amendment of FASB No. 133.
 Subsequent Events,
 Note 11  Subsequent Event
  12




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Item 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following discussion and analysis of our financial condition and results of operations
for the fiscal quarters ended June 29, 2009 and June 30, 2008 should be read in conjunction
with Selected Consolidated Financial Data and our audited consolidated financial statements
and the notes to those statements that are in our 2008 Annual Report on Form 10-K . Our
discussion contains forward-looking statements based upon current expectations that involve
risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual
results and the timing of events could differ materially from those anticipated in these
forward-looking statements as a result of a number of factors, including those set forth
under Cautionary Note Regarding Forward-Looking Statements below and elsewhere in this
Quarterly Report.
 OVERVIEW
  For the Three Months EndedJune 29, 2009
    
    June 30, 2008Company-
    
    
    
    
    
    
    
    
    
    Company-Owned
    
    Franchise
    
    Total
    
    Owned
    
    Franchise
    
    TotalRestaurants at beginning of
period
    
    
    97
    
    
    
    49
    
    
    
    146
    
    
    
    102
    
    
    
    42
    
    
    
    144New restaurants opened
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    1
    
    
    
    2
    
    
    
    3Restaurants permanently closed
    
    
    
    
    
    
    4
    
    
    
    4
    
    
    
    1
    
    
    
    1
    
    
    
    2Restaurants at end of period
    
    
    98
    
    
    
    46
    
    
    
    144
    
    
    
    102
    
    
    
    43
    
    
    
    145
 For the Six Months EndedJune 29, 2009
    
    June 30, 2008Company-
    
    
    
    
    
    
    
    
    
    Company-Owned
    
    Franchise
    
    Total
    
    Owned
    
    Franchise
    
    TotalRestaurants at beginning of
period
    
    
    101
    
    
    
    50
    
    
    
    151
    
    
    
    107
    (a)
    
    
    34
    
    
    
    141New restaurants opened
    
    
    1
    
    
    
    3
    
    
    
    4
    
    
    
    1
    
    
    
    10
    
    
    
    11Restaurants permanently closed
    
    
    4
    
    
    
    7
    
    
    
    11
    
    
    
    6
    
    
    
    1
    
    
    
    7Restaurants at end of period
    
    
    98
    
    
    
    46
    
    
    
    144
    
    
    
    102
    
    
    
    43
    
    
    
    145
 
 (a)
    
    Includes three locations that are classified as discontinued operations    13




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CRITICAL ACCOUNTING POLICIES
   Long Lived Assets Accounting for the Impairment or Disposal of Long-Lived
Assets
 Lease Termination Charges Accounting for Costs Associated with Exit or
Disposal Activities
 14




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Accounting for Lease Obligations: Accounting for Operating Leases with Scheduled Rent Increases
 Landlord Allowances Issues Relating to
Accounting for Leases
 Income Taxes
 Accounting for Uncertainty in
Income Taxes, an interpretation of FASB Statement No. 109
   Restaurant Net Sales.
 Franchise Fees and Royalties.
 Gift Card Sales
    Cost of Food and Beverage.
 15




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Restaurant Labor and Related Benefits.
 Occupancy and Other Restaurant Operating Expenses.
 General and Administrative Expenses.
 Depreciation and Amortization.
 Restaurant Pre-opening Expenses.
 16




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RESULTS OF OPERATIONS
  Three Months Ended
    
    Six Months EndedJune 29,
    
    June 30,
    
    June 29,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Revenues:Restaurant net sales
    
    
    98.0
    %
    
    
    98.6
    %
    
    
    98.1
    %
    
    
    98.2
    %Franchise fees and royalties
    
    
    2.0
    
    
    
    1.4
    
    
    
    1.9
    
    
    
    1.8Total revenue
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Cost and expenses:Cost of food and beverage (1)
    
    
    22.3
    
    
    
    22.8
    
    
    
    22.2
    
    
    
    23.0Restaurant labor and related benefits (1)
    
    
    35.1
    
    
    
    32.5
    
    
    
    36.4
    
    
    
    33.5Occupancy and other restaurant operating expenses (1)
    
    
    29.2
    
    
    
    27.4
    
    
    
    30.5
    
    
    
    28.786.6
    
    
    
    82.7
    
    
    
    89.1
    
    
    
    85.2General and administrative expenses
    
    
    11.8
    
    
    
    16.5
    
    
    
    12.8
    
    
    
    15.9Depreciation and amortization
    
    
    5.6
    
    
    
    5.6
    
    
    
    6.2
    
    
    
    6.0Restaurant pre-opening expenses
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    0.1Provision for losses on asset impairments
and disposals
    
    
    0.8
    
    
    
    0.7
    
    
    
    0.4
    
    
    
    0.4Closed store costs
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    0.1Lease termination expense
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    0.3Total costs and expenses
    
    
    103.1
    
    
    
    104.7
    
    
    
    107.1
    
    
    
    106.5Operating loss
    
    
    (3.1
    )
    
    
    (4.7
    )
    
    
    (7.1
    )
    
    
    (6.5
    )Interest income
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    0.1Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss from continuing operations
    
    
    (3.1
    )
    
    
    (4.6
    )
    
    
    (7.1
    )
    
    
    (6.4
    )Discontinued operations:Loss from discontinued operations
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    (0.4
    )Net loss
    
    
    (3.1
    )%
    
    
    (4.7
    )%
    
    
    (7.1
    )%
    
    
    (6.8
    )%
 
 (1)
    
    These are expressed as a percentage of restaurant net sales versus all other
items expressed as a percentage of total revenues. 17




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##### Table of Contents



Restaurant Net Sales
 Restaurant net salesas a % of total(in thousands)
    
    revenuesQuarter ended June 29, 2009
    
    $
    31,015
    
    
    
    98.0
    %Quarter ended June 30, 2008
    
    $
    36,207
    
    
    
    98.6
    %
 as a % of total(in thousands)
    
    revenuesSix months ended June 29, 2009
    
    $
    59,139
    
    
    
    98.1
    %Six months ended June 30, 2008
    
    $
    68,666
    
    
    
    98.2
    %
 Restaurant net sales.
  Franchise Fees and Royalties
 Franchise fees and royaltiesas a % of total(in thousands)
    
    revenuesQuarter ended June 29, 2009
    
    $
    621
    
    
    
    2.0
    %Quarter ended June 30, 2008
    
    $
    516
    
    
    
    1.4
    %
 as a % of total(in thousands)
    
    revenuesSix months ended June 29, 2009
    
    $
    1,163
    
    
    
    1.9
    %Six months ended June 30, 2008
    
    $
    1,248
    
    
    
    1.8
    %
 Franchise fees and royalties.
  18




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##### Table of Contents



Costs and Expenses
 Cost of food and beverageas a % ofrestaurant(in thousands)
    
    net salesQuarter ended June 29, 2009
    
    $
    6,915
    
    
    
    22.3
    %Quarter ended June 30, 2008
    
    $
    8,261
    
    
    
    22.8
    %
 as a % ofrestaurant(in thousands)
    
    net salesSix months ended June 29, 2009
    
    $
    13,152
    
    
    
    22.2
    %Six months ended June 30, 2008
    
    $
    15,797
    
    
    
    23.0
    %
 Cost of food and beverage
 Restaurant labor and related benefitsas a % ofrestaurant(in thousands)
    
    net salesQuarter ended June 29, 2009
    
    $
    10,896
    
    
    
    35.1
    %Quarter ended June 30, 2008
    
    $
    11,778
    
    
    
    32.5
    %
 as a % ofrestaurant(in thousands)
    
    net salesSix months ended June 29, 2009
    
    $
    21,505
    
    
    
    36.4
    %Six months ended June 30, 2008
    
    $
    23,016
    
    
    
    33.5
    %
 Restaurant labor and related benefits.
 Occupancy and other restaurantoperating expensesas a % ofrestaurant(in thousands)
    
    net salesQuarter ended June 29, 2009
    
    $
    9,044
    
    
    
    29.2
    %Quarter ended June 30, 2008
    
    $
    9,930
    
    
    
    27.4
    %
 as a % ofrestaurant(in thousands)
    
    net salesSix months ended June 29, 2009
    
    $
    18,011
    
    
    
    30.5
    %Six months ended June 30, 2008
    
    $
    19,685
    
    
    
    28.7
    %
 Occupancy and other restaurant operating expenses
 19




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##### Table of Contents



General and administrativeexpensesas a % of total(in thousands)
    
    revenuesQuarter ended June 29, 2009
    
    $
    3,731
    
    
    
    11.8
    %Quarter ended June 30, 2008
    
    $
    6,069
    
    
    
    16.5
    %
 as a % of total(in thousands)
    
    revenuesSix months ended June 29, 2009
    
    $
    7,704
    
    
    
    12.8
    %Six months ended June 30, 2008
    
    $
    11,106
    
    
    
    15.9
    %
 General and administrative expenses
  Depreciation and amortizationas a % of total(in thousands)
    
    revenuesQuarter ended June 29, 2009
    
    $
    1,779
    
    
    
    5.6
    %Quarter ended June 30, 2008
    
    $
    2,056
    
    
    
    5.6
    %
 as a % of total(in thousands)
    
    revenuesSix months ended June 29, 2009
    
    $
    3,743
    
    
    
    6.2
    %Six months ended June 30, 2008
    
    $
    4,167
    
    
    
    6.0
    %
 Depreciation and amortization
 Restaurant pre-opening expensesas a % of total(in thousands)
    
    revenuesQuarter ended June 29, 2009
    
    $
    
    
    
    
    0.0
    %Quarter ended June 30, 2008
    
    $
    73
    
    
    
    0.2
    %
 as a % of total(in thousands)
    
    revenuesSix months ended June 29, 2009
    
    $
    
    
    
    
    0.0
    %Six months ended June 30, 2008
    
    $
    100
    
    
    
    0.1
    %
 Restaurant pre-opening expenses
 20




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##### Table of Contents



Provision for losses on assetimpairments and disposalsas a % of total(in thousands)
    
    revenuesQuarter ended June 29, 2009
    
    $
    238
    
    
    
    0.8
    %Quarter ended June 30, 2008
    
    $
    267
    
    
    
    0.7
    %
 as a % of total(in thousands)
    
    revenuesSix months ended June 29, 2009
    
    $
    238
    
    
    
    0.4
    %Six months ended June 30, 2008
    
    $
    267
    
    
    
    0.4
    %
 Provision for losses on asset impairments and disposals
 Closed store costsas a % of total(in thousands)
    
    revenuesQuarter ended June 29, 2009
    
    $
    2
    
    
    
    0.0
    %Quarter ended June 30, 2008
    
    $
    13
    
    
    
    0.0
    %
 as a % of total(in thousands)
    
    revenuesSix months ended June 29, 2009
    
    $
    45
    
    
    
    0.1
    %Six months ended June 30, 2008
    
    $
    47
    
    
    
    0.1
    %
 Closed store costs
 21




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##### Table of Contents



Lease termination expenseas a % of total(in thousands)
    
    revenuesQuarter ended June 29, 2009
    
    $
    5
    
    
    
    0.0
    %Quarter ended June 30, 2008
    
    $
    
    
    
    
    0.0
    %
 as a % of total(in thousands)
    
    revenuesSix months ended June 29, 2009
    
    $
    207
    
    
    
    0.3
    %Six months ended June 30, 2008
    
    $
    243
    
    
    
    0.3
    %
 Lease termination expense
 Loss from continuing operationsas a % of total(in thousands)
    
    revenuesQuarter ended June 29, 2009
    
    $
    (969
    )
    
    
    (3.1
    %)Quarter ended June 30, 2008
    
    $
    (1,699
    )
    
    
    (4.6
    %)
 as a % of total(in thousands)
    
    revenuesSix months ended June 29, 2009
    
    $
    (4,295
    )
    
    
    (7.1
    %)Six months ended June 30, 2008
    
    $
    (4,445
    )
    
    
    (6.4
    %)
 Loss from continuing operations
 Discontinued operations
 LIQUIDITY AND CAPITAL RESOURCES
   22




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23




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##### Table of Contents



Payments Due by Period(in thousands)Due
    
    
    Due
    
    
    DueTotal
    
    
    Due
    
    
    Fiscal 2010
    
    
    Fiscal 2012
    
    
    AfterDescription
    
    Obligations
    
    
    Fiscal 2009
    
    
    to Fiscal 2011
    
    
    to Fiscal 2013
    
    
    Fiscal 2013Long-term debt (1)
    
    $
    75
    
    
    $
    25
    
    
    $
    50
    
    
    $
    
    
    
    $
    Operating leases (2)
    
    
    73,187
    
    
    
    7,470
    
    
    
    28,623
    
    
    
    19,984
    
    
    
    17,110Other long-term liabilities (3)
    
    
    1,285
    
    
    
    257
    
    
    
    945
    
    
    
    83Total contractual cash
obligations
    
    $
    74,547
    
    
    $
    7,752
    
    
    $
    29,618
    
    
    $
    20,067
    
    
    $
    17,110
 
 (1)
    
    Amounts shown include aggregate scheduled interest payments of $0.01 million. The pricipal amount of the debt, net of interest
obligations, is included in the other long-term liabilities, in the attached consolidated balance sheets. This obligation is related to a
trademark infringement settlement.(2)
    
    Amounts shown are net of an aggregate $0.1 million of sub-lease rental income due under non-cancelable subleases and include
aggregate accrued contractual lease increases of approximately $4.4 million, which are included in other long-term liabilities
in the attached consolidated balance sheets.(3)
    
    These obligations are related to contractual obligations for lease termination agreements and for an obligation related
to a legal settlement. These obligations are non-interest bearing and are included in other long-term liabilities
in the attached consolidated balance sheets.  PURCHASE COMMITMENTS
    CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
  24




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##### Table of Contents




    
    the cost of our principal food products and supply and delivery shortages or
interruptions;
    
    labor shortages or increased labor costs;
    
    changes in demographic trends and consumer tastes and preferences, including
changes resulting from concerns over nutritional or safety aspects of beef, poultry,
produce or other foods or the effects of food-borne illnesses such as mad cow
disease and avian influenza or bird flu;
    
    public health issues such as the H1N1 influenza A virus, commonly referred to as
the swine flu that cause people to stay home from work or away from public places;
    
    competition in our markets, both in our business and locating suitable restaurant
sites;
    
    our operation and execution in new and existing markets;
    
    expansion into new markets, including foreign countries;
    
    our ability to attract and retain qualified franchisees;
    
    our ability to locate suitable restaurant sites in new and existing markets and
negotiate acceptable lease terms;
    
    the rate of our internal growth, and our ability to generate increased revenue
from our existing restaurants;
    
    our ability to generate positive cash flow from existing and new restaurants;
    
    fluctuations in our quarterly results due to seasonality;
    
    increased government regulation and our ability to secure required governmental
approvals and permits;
    
    our ability to create customer awareness of our restaurants in new markets;
    
    the reliability of our customer and market studies;
    
    cost effective and timely planning, design and build-out of new restaurants;
    
    our ability to recruit, train and retain qualified corporate and restaurant
personnel and management;
    
    market saturation due to new restaurant openings;
    
    inadequate protection of our intellectual property;
    
    adverse weather conditions which impact customer traffic at our restaurants; and
    
    adverse economic conditions that cause individuals or businesses to decrease their
discretionary spending.
  25




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
   
 Item 4. Controls and Procedures
   
 Part II. OTHER INFORMATION
 
 Item 1: LEGAL PROCEEDINGS
   
 Item 1A: RISK FACTORS
  26




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##### Table of Contents



Public health issues may adversely affect our financial results.
  Our liquidity and cash resources are limited. The incurrence of significant unexpected cash
requirements could cause us to experience an inability to obtain needed liquidity which could
have a material adverse effect on our financial condition and results of operations .
  
 Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
  NOMINEE
    
    FOR
    
    WITHHELDMichael ODonnell
    
    
    23,603,713
    
    
    
    7,505,063Karl Okamoto
    
    
    23,595,551
    
    
    
    7,513,225
  27




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##### Table of Contents



FOR
    
    AGAINST
    
    ABSTAIN
    
    BROKER NON-VOTES30,683,431
    
    
    108,505
    
    
    
    316,839
    
    
    
    0
 
 Item 6: EXHIBITS
 (a)
    
    Exhibits:
 Exhibit Number
    
    DescriptionExhibit 31.1
    
    Certification of the Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.Exhibit 31.2
    
    Certification of the Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.Exhibit 32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 28




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##### Table of Contents



SIGNATURES
  COSI, INC.Date: August 10, 2009
    By:
    /s/ JAMES HYATTJames HyattPresident,
Chief Executive Officer, and
DirectorDate: August 10, 2009
    By:
    /s/ WILLIAM KOZIELWilliam KozielChief Financial Officer (chief
accounting officer)
Treasurer and Secretary 29




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##### Table of Contents



EXHIBIT INDEX
 Exhibit 31.1
    
    Certification of the Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.Exhibit 31.2
    
    Certification of the Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.Exhibit 32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 30