##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2007ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File
    No. 000-50052
      Cosi, Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware

06-1393745(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)   1751 Lake
    Cook Road, Suite 600, Deerfield, Illinois 60015Telephone Number
    (847) 597-8800
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of ClassCommon Stock
    ($.01 par value)   Securities registered pursuant to Section 12(g) of the
    Act:
    None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K o þ
  12b-2
  Large accelerated
    filer o

Accelerated
    filer þ

Non-accelerated
    filer o

Smaller reporting
    company o(Do not check if a smaller reporting company)   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K




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##### 





TABLE OF
    CONTENTS
  Item

Description

PagePART I1.


Business


31A.


Risk Factors


71B.


Unresolved Staff Comments


162.


Properties


163.


Legal Proceedings


194.


Submission of Matters to a Vote of Security
    Holders


19PART II5.


Market for Registrants Common Equity,
    Related Stockholder Matters, and Issuer Purchases of Equity
    Securities


206.


Selected Financial Data


227.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


237A.


Quantitative and Qualitative Disclosures about
    Market Risk


418.


Financial Statements and Supplementary Data


419.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


419A.


Controls and Procedures


419B.


Other Information


42PART III10.


Directors, Executive Officers and Corporate
    Governance


4311.


Executive Compensation


4312.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


4313.


Certain Relationships and Related Transactions
    and Director Independence


4314.


Principal Accounting Fees and Services


43PART IV15.


Exhibits and Financial Statement Schedules


44ConsentCertificationCertificationCertification   2




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##### Table of Contents



PART I  Item 1.
    BUSINESS  General
      www.getcosi.com Form 10-K, Form 10-Q, Form 8-K c/o Investor
  Business
    Strategy
      Offering an innovative menu appealing to our target
    customer.
  Providing customers with an exceptional service and dining
    experience.
  Expanding marketing initiatives to build brand
    awareness.
  Increasing comparable restaurant sales and average unit
    volumes.
 3




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Operating our restaurants efficiently.
  Growth
    Strategy
    Build a system of franchised restaurants and develop
    company-owned restaurants. multi-unit
  Pursue foodservice strategic alliances. grab-and-go
  Cosi
    Product Offerings
        People
   4




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Restaurant
    Operations
  Management Structure.
  Sales Forecasting.
  Product Quality.
  Food and Labor Cost Controls. item-by-item
  multi-unit
      Management
    Information Systems
      back-ups,
  Purchasing
   5




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Coca-Cola
      Competition
    Intellectual
    Property
        Governmental
    Regulation
   6




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and/or
      Item 1A.
    RISK
    FACTORS  Risks
    Related to Our Growth Strategy
  We may
    not be able to achieve our planned expansion. If we or our
    franchisees are unable to successfully open new restaurants, our
    revenue growth rate and profits may be reduced.
    
    locating suitable restaurant sites in new and existing markets;
    negotiating acceptable lease terms;
    generating positive cash flow from existing and new restaurants;
    successful operation and execution in new and existing markets;
    recruiting, training and retaining qualified corporate and
    restaurant personnel and management;
    attracting and retaining qualified franchisees;
    cost effective and timely planning, design and build-out of
    restaurants;
    the reliability of our customer and market studies; 7




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
    the reliability of our site identification studies;
    consumer trends;
    obtaining and maintaining required local, state, federal and
    where applicable, foreign governmental approvals and permits
    related to the construction of the sites and the sale of food
    and alcoholic beverages;
    creating customer awareness of our restaurants in new markets;
    competition in our markets, both in our business and in locating
    suitable restaurant sites;
    the cost of our principal food products and supply and delivery
    shortages or interruptions;
    weather conditions; and
    general economic conditions.  We
    must identify and obtain a sufficient number of suitable new
    restaurant sites for us to sustain our revenue growth
    rate.
    Our
    expansion in existing markets can cause sales in some of our
    existing restaurants to decline, which could result in
    restaurant closures.
    Our
    expansion into new markets may present increased risks due to
    our unfamiliarity with the area. The restaurants we open in new
    geographic regions may not achieve market
    acceptance.
     8




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We may
    not be able to successfully incorporate a franchising and area
    developer model into our strategy.
    If our
    franchisees cannot develop or finance new restaurants, build
    them on suitable sites or open them on schedule, our growth and
    success may be impeded.
    Additional
    foodservice strategic alliances may not be successful and may
    materially adversely affect our business and results of
    operations.
    Any
    inability to manage our growth effectively could materially
    adversely affect our operating results.
   9




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If we
    are unable to successfully integrate future acquisitions, our
    business could be negatively impacted. Any acquisitions may also
    be costly.
    Risks
    Related to Our Business
  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;
    management of construction and development costs of new and
    renovated restaurants;
    securing required governmental approvals and permits;
    recruitment and retention of qualified operating personnel;
    successful operation and execution in new and existing markets;
    recruiting, training and retaining qualified corporate and
    restaurant personnel and management;
    identification of under-performing restaurants and our ability
    to improve or efficiently close under-performing restaurants,
    including securing favorable lease termination terms;
    the rate of our internal growth, and our ability to generate
    increased revenue from existing restaurants;
    our ability to incorporate a franchising and area developer
    model into our strategy;
    competition in new and existing markets;
    the reliability of our customer and market studies;
    consumer trends;
    the cost of our principal food products and supply and delivery
    shortages or interruptions;
    weather conditions; and
    general regional, national and where applicable, foreign
    economic conditions.    During
    our operating history, we have been unable to achieve
    profitability.
   10




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Form 10-K
  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 may
    need additional capital in the future and it may not be
    available on acceptable terms.
    Our
    franchisees could take actions that could harm our
    business.
    We
    could face liability from our franchisees.
    Our
    financial results are affected by the financial results of our
    franchisees.
   11




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Our
    restaurants are currently concentrated in the Northeastern and
    Mid-Atlantic regions of the United States, particularly in
    the New York City and Washington DC area. Accordingly, we are
    highly vulnerable to negative occurrences in these
    regions.
    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.
    
    our ability to execute our business and growth strategy
    effectively;
    introduction of new menu items;
    sales performance by our new and existing restaurants;
    management turnover in the restaurants;
    competition;
    general regional, national and where applicable, foreign
    economic conditions;
    weather conditions; and
    consumer trends.    Seasonality,
    inclement weather and other variable factors may adversely
    affect our sales and results of operations and could cause our
    quarterly results to fluctuate and fall below expectations of
    securities analysts and investors, resulting in a decline in our
    stock price.
    Our
    operations depend upon governmental licenses and we may face
    liability under dram shop statutes.
  and/or
 12




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Form 10-K
  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
    hold significant amounts of illiquid assets and may have to
    dispose of them on unfavorable terms.
    We may
    face litigation that could have a material adverse effect on our
    business, financial condition and results of
    operations.
     13




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We
    have some new members on our management team that do not have
    proven success with the Company.
          If we
    are unable to protect our customers credit card data, we
    could be exposed to data loss, litigation and liability, and our
    reputation could be significantly harmed.
    We
    rely on computer systems and information technology to run our
    business. Any material failure, interruption or security breach
    of our computer systems or information technology may adversely
    affect the operation of the business and our results of
    operations.
    Risks
    Relating to the Food Service Industry
  Our
    business is affected by changes in consumer
    preferences.
    A
    slowdown in the United States economy or an uncertain economic
    outlook could lead to reduced consumer spending at our
    restaurants and decreased demand for our products.
   14




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Natural
    disasters, war, acts of terrorism or other armed conflict, or
    the threat of either on the United States or international
    economies may cause a decline in discretionary consumer
    spending, which would negatively affect our
    business.
    Our
    success depends on our ability to compete with many food service
    businesses.
      Changes
    in food and supply costs could adversely affect our results of
    operations.
     15




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Health
    concerns relating to the consumption of beef, poultry, produce
    or other food products could adversely affect the price and
    availability of beef, poultry, produce, and other food products,
    consumer preferences and our results of operations and stock
    price.
      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.
    Our
    business could be adversely affected by increased labor costs or
    labor shortages.
    Item 1B.
    UNRESOLVED
    STAFF COMMENTS    Item 2.
    PROPERTIES    10-year
 16




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Street Address

City

Date Opened

FormatMIDATLANTIC234 South 15th Street

Philadelphia, PA

September-96

Cosi325 Chestnut Street

Philadelphia, PA

April-97

Cosi1350 Connecticut Avenue

Washington, DC

September-97

Cosi1128 Walnut Street

Philadelphia, PA

December-97

Cosi1647 20th Street NW

Washington, DC

August-98

Cosi140 South 36th Street

Philadelphia, PA

August-98

Cosi761 Lancaster Avenue

Bryn Mawr, PA

September-98

Cosi301 Pennsylvania Avenue SE

Washington, DC

March-99

Cosi2050 Wilson Boulevard

Arlington, VA

April-99

Cosi215 Lombard Street

Philadelphia, PA

May-99

Cosi1700 Pennsylvania Avenue

Washington, DC

August-99

Cosi Downtown1700 Market Street

Philadelphia, PA

September-99

Cosi Downtown700 King Street

Alexandria, VA

May-00

Cosi700 11th Street

Washington, DC

May-00

Cosi4250 Fairfax Drive

Arlington, VA

June-00

Cosi1919 M Street

Washington, DC

September-00

Cosi201 South 18th Street

Philadelphia, PA

October-00

Cosi1001 Pennsylvania Avenue NW

Washington, DC

October-00

Cosi Downtown7251 Woodmont Avenue

Bethesda, MD

December-00

Cosi11909 Democracy Drive

Reston, VA

May-01

Cosi4074 The Strand West

Columbus, OH

October-01

Cosi1501 K Street NW

Washington, DC

December-01

Cosi Downtown1875 K Street

Washington, DC

July-02

Cosi Downtown6390 Sawmill Road

Columbus, OH

September-02

Cosi601 Pennsylvania Ave. NW

Washington, DC

September-02

Cosi1275 K Street

Washington, DC

September-02

Cosi2212 East Main Street

Bexley, OH

September-02

Cosi1478 Bethel Road

Columbus, OH

November-02

Cosi295 Main Street

Exton, PA

November-02

Cosi7166 N. High Street

Worthington, OH

December-02

Cosi5252 Wisconsin Ave, NW

Washington, DC

December-02

Cosi177 Kentlands Blvd

Gaithersburg, MD

January-03

Cosi1333 H Street, NW

Washington DC

January-03

Cosi Downtown1310 Polaris Parkway

Columbus, OH

February-03

Cosi1801 N. Lynn Street

Arlington, VA

November-05

Cosi4025 Welsh Road

Willow Grove, PA

December-05

Cosi50 Yorktown Plaza

Elkins Park, PA

April-06

Cosi833 Chestnut

Philadelphia, PA

June-06

Cosi9177 Reisterstown Road

Owing Mills, MD

June-06

Cosi424 West Swedesford Road

Berwyn, PA

June-06

Cosi100 South Charles

Baltimore, MD

July-06

Cosi513 West Broad Street

Falls Church, VA

October-06

Cosi 17




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##### Table of Contents



Street Address

City

Date Opened

Format3503 Fairfax Drive, Suite 200

Arlington, VA

November-06

Cosi201 N. Washington #290

Rockville, MD

March-07

Cosi2955 Market St.

Philadelphia, PA

July-07

CosiMIDWEST116 S. Michigan Avenue

Chicago, IL

September-00

Cosi55 E. Grand Street

Chicago, IL

October-00

Cosi230 W. Washington Street

Chicago, IL

November-00

Cosi Downtown203 North LaSalle Street

Chicago, IL

May-01

Cosi Downtown28 East Jackson Boulevard

Chicago, IL

January-03

Cosi Downtown301 South State Street

Ann Arbor, MI

May-01

Cosi1101 Lake Street

Oak Park, IL

June-01

Cosi101 North Old Woodward Avenue

Birmingham, MI

August-01

Cosi25 E. Hinsdale

Hinsdale, IL

December-01

Cosi8775 N. Port Washington Road

Fox Point, WI

December-01

Cosi230 West Monroe Street

Chicago, IL

May-02

Cosi Downtown301 East Grand River Avenue

East Lansing, MI

May-02

Cosi84 W. Adams Road

Rochester Hills, MI

September-02

Cosi28674 Telegraph Road

Southfield, MI

November-02

Cosi37652 Twelve Mile Road

Farmington Hills, MI

December-02

Cosi15131 LaGrange Road

Orland Park, IL

December-02

Cosi233 North Michigan Avenue

Chicago, IL

December-02

Cosi Downtown33 N Dearborn

Chicago, IL

June-05

Cosi Downtown1740 Sherman Avenue

Evanston, IL

September-05

Cosi17848 Gardenway NE

Woodinville, WA

November-05

Cosi1825 2nd Street

Highland Park, IL

December-05

Cosi7545 166th Avenue NE

Redmond, WA

June-06

Cosi1023 West Belmont

Chicago, IL

June-06

Cosi18 West 066 22nd Street

Oak Brook Terrace, IL

August-06

Cosi2200 North Clark

Chicago, IL

August-06

Cosi15522 Main Street, #P101-102

Mill Creek, WA

September-06

Cosi8310 Greenway Boulevard, #106

Middleton, WI

September-06

Cosi250 State Street

Madison, WI

September-06

Cosi910 North Milwaukee Avenue, Suite A

Lincolnshire, IL

November-06

Cosi220 South Washington Street

Naperville, IL

December-06

Cosi21720 W. Long Grove Rd.

Deer Park, IL

March-07

Cosi 18




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##### Table of Contents



Street Address

City

Date Opened

FormatNORTHEAST257 Park Avenue South

New York, NY

February-97

Cosi38 East 45th Street

New York, NY

February-97

Cosi Downtown11 West 42nd Street

New York, NY

June-97

Cosi Downtown60 East 56th Street

New York, NY

September-97

Cosi Downtown3 World Financial Center

New York, NY

January-98

Cosi Downtown504 Avenue of the Americas

New York, NY

March-98

Cosi55 Broad Street

New York, NY

March-98

Cosi Downtown54 Pine Street

New York, NY

May-98

Cosi Downtown1633 Broadway

New York, NY

July-98

Cosi Downtown61 West 48th Street

New York, NY

August-98

Cosi Downtown685 Third Avenue

New York, NY

June-99

Cosi Downtown970 Farmington Avenue

W. Hartford, CT

August-99

Cosi461 Park Avenue South

New York, NY

January-00

Cosi50 Purchase Street

Rye, NY

March-00

Cosi841 Broadway

New York, NY

September-00

Cosi15 S. Moger Avenue

Mt. Kisco, NY

December-00

Cosi77 Quaker Ridge Road

New Rochelle, NY

November-01

Cosi1298 Boston Post Road

Larchmont, NY

December-01

Cosi471 Mount Pleasant Road

Livingston, NJ

September-02

Cosi29 Washington Street

Morristown, NJ

December-02

Cosi385 West Main Street

Avon, CT

December-02

Cosi498 7th Avenue

New York, NY

December-02

Cosi700 6th Avenue

New York, NY

February-03

Cosi980 Boston Post Road

Darien, CT

October-05

Cosi129 West Putnam Avenue

Greenwich, CT

February-06

Cosi441 South Oyster Bay Road

Plainview, NY

June-06

Cosi1209 High Ridge Road

Stamford, CT

July-06

Cosi44 Great Neck Road

Great Neck, NY

July-06

Cosi53 E. 8th St.

New York, NY

April-07

Cosi2186 Broadway

New York, NY

June-07

Cosi230 Tresser Blvd. Ste 005

Stamford, CT

November-07

Cosi   Item 3.
    LEGAL
    PROCEEDINGS    Item 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   19




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PART II  Item 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, STOCK AND RELATED
    STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY
    SECURITIES    Stock
    Price Information
    Fiscal 2007


Fiscal 2006Fiscal Quarter:

High


Low


High


LowFirst Quarter

$
6.67


$
5.10


$
10.99


$
8.34Second Quarter

$
5.74


$
4.47


$
10.94


$
6.04Third Quarter

$
5.02


$
3.24


$
6.81


$
4.27Fourth Quarter

$
3.89


$
2.10


$
5.61


$
4.27   Stockholders
    Dividend
    Policy
   20




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Securities
    Authorized for Issuance Under Equity Compensation
    Plans
      Cumulative
    Total Return
  
  Recent
    Sales of Unregistered Securities
    (a)
    Exercises
    of Warrants   21




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Item 6.
    SELECTED
    FINANCIAL DATA    Fiscal Year2007


2006


2005


2004


2003(In thousands, except per share data)Consolidated Statement of Operations Data:RevenuesRestaurant net sales

$
132,414.1


$
122,849.3


$
114,036.3


$
110,039.8


$
107,257.4Franchise fees and royalties


2,142.2



849.2



100.5







Total revenues


134,556.3



123,698.5



114,136.8



110,039.8



107,257.4Costs and expenses:Cost of food and beverage


30,972.5



28,170.5



27,103.6



27,819.7



29,713.9Restaurant labor and related benefits


45,994.7



40,781.5



37,263.7



38,428.2



37,996.9Occupancy and other restaurant operating expenses


38,369.0



32,044.7



27,726.3



27,719.9



29,324.9115,336.2



100,996.7



92,093.6



93,967.8



97,035.7General and administrative expenses


21,019.4



21,910.5



21,320.4



21,718.4
(2)


22,274.4Stock-based compensation expense(1)


1,953.9



4,977.7



2,944.2



2,855.3



893.7Depreciation and amortization


8,823.2



7,196.3



6,515.9



6,873.7



7,852.5Restaurant pre-opening expenses


710.3



1,450.8



823.7



64.3



389.8Provision for losses on asset impairments and disposals


3,844.7



248.7



675.4



1,405.5



8,531.8Closed store costs


261.9















Lease termination expense (benefit), net


346.9



(231.5
)


(178.8
)


(588.8
)


(3,391.2
)Gain on sale of assets


(23.3
)


(482.3
)


(1,431.7
)






Operating loss


(17,716.9
)


(12,368.4
)


(8,625.9
)


(16,256.4
)


(26,329.3
)Other income (expense):Interest income


524.1



1,411.5



802.0



159.0



40.5Interest expense


(42.3
)


(9.3
)


(34.0
)


(62.4
)


(316.8
)Allowance for stockholders notes receivables










(261.1
)


(1,266.0
)


Other income (expense)


704.8



77.5



103.6



(102.5
)


112.0Total other income (expense)


1,186.6



1,479.7



610.5



(1,271.9
)


(164.3
)Loss from continuing operations


(16,530.3
)


(10,888.7
)


(8,015.4
)


(17,528.3
)


(26,493.6
)Discontinued operations:Operating loss from discontinued operations


(903.1
)


(1,182.9
)


(1,905.6
)


(504.0
)


Asset impairments of discontinued operations


(3,350.1
)


(256.0
)


(3,205.0
)


(341.1
)


Loss from discontinued operations


(4,253.2
)


(1,438.9
)


(5,110.6
)


(845.1
)


Net loss

$
(20,783.5
)

$
(12,327.6
)

$
(13,126.0
)

$
(18,373.4
)

$
(26,493.6
)Loss per share  basic and dilutedContinuing operations

$
(0.42
)

$
(0.28
)

$
(0.23
)

$
(0.59
)

$
(1.53
)Discontinued operations

$
(0.11
)

$
(0.04
)

$
(0.15
)

$
(0.03
)

$
Net loss

$
(0.53
)

$
(0.32
)

$
(0.38
)

$
(0.62
)

$
(1.53
)Weighted average shares used in computing net loss per common
    share  basic and diluted


39,332



38,207



34,929



29,432



17,304     (1)
    
    FAS 123R adopted in 2006(2)
    
    Includes $1.0 million in expenses related to the relocation
    of our corporate office from New York to Deerfield, IL 22




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##### Table of Contents



Fiscal Year2007


2006


2005


2004


2003(In thousands, except per share data)Selected Balance Sheet Data:Cash and cash equivalents

$
6,308.5


$
938.4


$
1,952.3


$
1,089.7


$
7,957.0Investments

$



$
18,961.5


$
32,917.5


$
9,961.6


$
Total assets

$
56,412.1


$
75,757.1


$
76,544.0


$
51,138.3


$
47,946.6Total stockholders equity

$
33,845.8


$
50,631.3


$
56,208.4


$
29,152.4


$
22,834.1Selected Statement of Cash Flow Data:Cash flow (used in) provided by in operating activities

$
(2,369.9
)

$
3,949.2


$
(4,249.4
)

$
(9,631.1
)

$
(11,387.7
)Cash flow provided by (used in) investing activities

$
5,727.4


$
(6,674.1
)

$
(31,535.8
)

$
(17,267.9
)

$
(3,754.8
)Cash flow provided by financing activities

$
2,012.6


$
1,711.0


$
36,647.7


$
20,031.7


$
10,067.2Selected Operating Data:Company-owned restaurants open at the end of the fiscal year


107



110



96



92



89   Item 7.
    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 years ended
    December 31, 2007, January 1, 2007 and January 2,
    2006 should be read in conjunction with Selected
    Consolidated Financial Data and our audited consolidated
    financial statements and the notes to those statements that are
    included elsewhere in this Annual Report. 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 Annual Report.
  Business
    Overview
  Systemwide
    Restaurants:
  Fiscal Year2007


2006


2005Company-








Company-








Company-Owned


Franchise


Total


Owned


Franchise


Total


Owned


Franchise


TotalRestaurants at beginning of period


110
(c)


13



123



96
(b)


5



101



92
(a)






92New restaurants opened


6



22



28



21



8



29



8



5



13Restaurants permanently closed


9



1



10



7







7



4







4Restaurants at end of period


107
(d)


34



141



110
(c)


13



123



96
(b)


5



101     (a)
    
    Includes four locations that are classified as discontinued
    operations.(b)
    
    Includes seven locations that are classified as discontinued
    operations.(c)
    
    Includes nine locations that are classified as discontinued
    operations.(d)
    
    Includes three locations that are classified as discontinued
    operations. 23




---



##### Table of Contents



and/or
                Critical
    Accounting Policies
   24




---



##### Table of Contents



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
  Stock-based compensation: Share-Based Payment
  Accounting for lease obligations: Bulletin No. 85-3, Accounting for Operating Leases with Scheduled Rent
    Increases
  Landlord allowances: No. 88-1, Issues Relating to Accounting for Leases
 25




---



##### Table of Contents



Income taxes:
  Accounting for Uncertainty in Income Taxes, an
    interpretation of FASB Statement No. 109
      Revenue
  Restaurant net sales.
  Franchise fees and royalties.
  Gift card sales.
  Comparable
    Restaurant Sales
    Costs and
    Expenses
  Cost of food and beverage.
  Restaurant labor and related benefits.
 26




---



##### Table of Contents



Occupancy and other restaurant operating
    expenses.
  General and administrative expenses.
  Stock compensation expense.
  Depreciation and amortization.
  Restaurant pre-opening expenses.
 27




---



##### Table of Contents



Results
    of Operations
    Fiscal Year2007


2006


2005Revenues:Restaurant net sales


98.4
%


99.3
%


99.9
%Franchise fees and royalties


1.6



0.7



0.1Total revenues


100.0



100.0



100.0Cost and expenses:Cost of food and beverage(1)


23.4



22.9



23.8Restaurant labor and related benefits(1)


34.7



33.2



32.7Occupancy and other restaurant operating expenses(1)


29.0



26.1



24.387.1



82.2



80.8General and administrative expenses


15.6



17.7



18.7Stock-based compensation expense


1.5



4.0



2.6Depreciation and amortization


6.6



5.8



5.7Restaurant pre-opening expenses


0.5



1.2



0.7Provision for losses on asset impairments and disposals


2.9



0.2



0.5Closed store costs


0.2







Lease termination expense (benefit), net


0.3



(0.2
)


(0.2
)Gain on sale of assets






(0.4
)


(1.1
)Total costs and expenses


113.2



110.0



107.5Operating loss


(13.2
)


(10.0
)


(7.5
)Other income (expense):Interest income


0.4



1.1



0.7Interest expense










(0.1
)Allowance for stockholders notes receivables










(0.2
)Other income


0.5



0.1



0.1Loss from continuing operations


(12.3
)


(8.8
)


(7.0
)Discontinued operations:Operating loss from discontinued operations


(0.7
)


(1.0
)


(1.7
)Asset impairments of discontinued operations


(2.4
)


(0.2
)


(2.8
)Loss from discontinued operations


(3.1
)


(1.2
)


(4.5
)Net loss


(15.4
)


(10.0
)


(11.5
)     (1)
    
    These are expressed as a percentage of restaurant net sales
    versus all other items expressed as a percentage of total
    revenues. 28




---



##### Table of Contents



Fiscal
    Year 2007 (52 weeks) compared to Fiscal Year 2006
    (52 weeks)
  Restaurant
    Net Sales
  Restaurant Net SalesAs a % of Total(In Thousands)

RevenuesFiscal 2007

$
132,414.1



98.4
%Fiscal 2006

$
122,849.3



99.3
%     Franchise
    Fees and Royalties
  Franchise Fees and RoyaltiesAs a % of Total(In Thousands)

RevenuesFiscal 2007

$
2,142.2



1.6
%Fiscal 2006

$
849.2



0.7
%     Costs and
    Expenses
  Cost of Food and BeverageAs a % ofRestaurant Net(In Thousands)

SalesFiscal 2007

$
30,972.5



23.4
%Fiscal 2006

$
28,170.5



22.9
%  29




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##### Table of Contents



Cost of food and beverage.
  Restaurant Labor and Related BenefitsAs a % ofRestaurant Net(In Thousands)

SalesFiscal 2007

$
45,994.7



34.7
%Fiscal 2006

$
40,781.5



33.2
%   Restaurant labor and related benefits.
  Occupancy and Other Restaurant Operating ExpensesAs a % ofRestaurant Net(In Thousands)

SalesFiscal 2007

$
38,369.0



29.0
%Fiscal 2006

$
32,044.7



26.1
%   Occupancy and other restaurant operating
    expenses
  General and Administrative CostsAs a % of(In Thousands)

Total RevenuesFiscal 2007

$
21,019.2



15.6
%Fiscal 2006

$
21,910.5



17.7
%   General and administrative costs.
  Stock-Based Compensation ExpenseAs a % of(In Thousands)

Total RevenuesFiscal 2007

$
1,953.9



1.5
%Fiscal 2006

$
4,977.7



4.0
%  30




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##### Table of Contents



Stock-based compensation expense.
  Depreciation and AmortizationAs a % of(In Thousands)

Total RevenuesFiscal 2007

$
8,823.2



6.6
%Fiscal 2006

$
7,196.3



5.8
%   Depreciation and amortization.
  Restaurant Pre-opening ExpensesAs a % of(In Thousands)

Total RevenuesFiscal 2007

$
710.3



0.5
%Fiscal 2006

$
1,450.8



1.2
%   Restaurant pre-opening expenses.
  Provision for Losses on AssetImpairments and DisposalsAs a % of(In Thousands)

Total RevenuesFiscal 2007

$
3,844.7



2.9
%Fiscal 2006

$
248.7



0.2
%   Provision for losses on asset impairments and
    disposals.
  Closed Store CostsAs a % of(In Thousands)

Total RevenuesFiscal 2007

$
261.9



0.2
%Fiscal 2006






  31




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##### Table of Contents



Closed store costs.
  Lease Termination Expense (Benefit)As a % of(In Thousands)

Total RevenuesFiscal 2007

$
346.9



0.3
%Fiscal 2006

$
(231.5
)


(0.2
)%   Lease termination expense (benefits), net.
  Gain on Sale of AssetsAs a % of(In Thousands)

Total RevenuesFiscal 2007

$
23.3



0.0
%Fiscal 2006

$
482.3



0.4
%   Gain on sale of assets.
  Interest Income

Interest ExpenseAs a % of



As a % of(In Thousands)

Total Revenues

(In Thousands)

Total RevenuesFiscal 2007

$
524.1



0.4
%

$
42.3



0.0
%Fiscal 2006

$
1,411.5



1.1
%

$
9.3



0.0
%   Interest income and expense.
  Other Income (Expense)As a % of(In Thousands)

Total RevenuesFiscal 2007

$
704.8



0.5
%Fiscal 2006

$
77.5



0.1
%   Other income (expense).
  Loss from Continuing OperationsAs a % of(In Thousands)

Total RevenuesFiscal 2007

$
(16,530.3
)


(12.3
)%Fiscal 2006

$
(10,888.7
)


(8.8
)%  32




---



##### Table of Contents



Loss from Continuing Operations.
  Discontinued Operations.
    Accounting for the
    Impairment or Disposal of Long-Lived Assets
    Fiscal
    Year 2006 (52 weeks) compared to Fiscal Year 2005
    (52 weeks)
  Restaurant
    Net Sales
  Restaurant Net SalesAs a % of(In Thousands)

Total RevenuesFiscal 2006

$
122,849.3



99.3
%Fiscal 2005

$
114,036.3



99.9
%   Restaurant net sales.
  Franchise
    Fees and Royalties
  Franchise Fees and RoyaltiesAs a % of(In Thousands)

Total RevenuesFiscal 2006

$
849.2



0.7
%Fiscal 2005

$
100.5



0.1
%  33




---



##### Table of Contents



Franchise fees and royalties.
  Costs and
    Expenses
  Cost of Food and BeverageAs a % of(In Thousands)

Restaurant Net SalesFiscal 2006

$
28,170.5



22.9
%Fiscal 2005

$
27,103.6



23.8
%   Cost of food and beverage.
  Restaurant Labor and Related BenefitsAs a % of(In Thousands)

Restaurant Net SalesFiscal 2006

$
40,781.5



33.2
%Fiscal 2005

$
37,263.7



32.7
%   Restaurant labor and related benefits.
  Occupancy and Other Restaurant Operating ExpensesAs a % of(In Thousands)

Restaurant Net SalesFiscal 2006

$
32,044.7



26.1
%Fiscal 2005

$
27,726.3



24.3
%   Occupancy and other restaurant operating
    expenses.
  General and Administrative ExpensesAs a % of(In Thousands)

Total RevenuesFiscal 2006

$
21,910.5



17.7
%Fiscal 2005

$
21,320.4



18.7
%  34




---



##### Table of Contents



General and administrative expenses.
  Stock-Based Compensation ExpenseAs a % of(In Thousands)

Total RevenuesFiscal 2006

$
4,977.7



4.0
%Fiscal 2005

$
2,944.2



2.6
%   Stock-based compensation expense. Accounting for
    Stock Issued to Employees
  Depreciation and AmortizationAs a % of(In Thousands)

Total RevenuesFiscal 2006

$
7,196.3



5.8
%Fiscal 2005

$
6,515.9



5.7
%   Depreciation and amortization.
  Restaurant Pre-opening ExpensesAs a % of(In Thousands)

Total RevenuesFiscal 2006

$
1,450.8



1.2
%Fiscal 2005

$
823.7



0.7
%   Restaurant pre-opening expenses.
  Provision for Losses on Asset Impairments and DisposalsAs a % of(In Thousands)

Total RevenuesFiscal 2006

$
248.7



0.2
%Fiscal 2005

$
675.4



0.5
%  35




---



##### Table of Contents



Provision for losses on asset impairments and
    disposals.
  Lease Termination (Benefit) Expense, netAs a % of(In Thousands)

Total RevenuesFiscal 2006

$
(231.5
)


(0.2
)%Fiscal 2005

$
(178.8
)


(0.2
)%   Lease termination (benefit) expense,
    net.
  Gain on Sale of AssetsAs a % of(In Thousands)

Total RevenuesFiscal 2006

$
(482.3
)


(0.4
)%Fiscal 2005

$
(1,431.7
)


(1.1
)%   Gain on sale of assets.
  Allowance for Stockholders Notes ReceivablesAs a % of(In Thousands)

Total RevenuesFiscal 2006






Fiscal 2005

$
(261.1
)


(0.2
)%   Allowance for stockholders notes
    receivables.
  Interest Income

Interest ExpenseAs a % of



As a % of(In Thousands)

Total Revenues

(In Thousands)

Total RevenuesFiscal 2006

$
1,411.5



1.1
%

$
(9.3
)


0.0
%Fiscal 2005

$
802.0



0.7
%

$
(34.0
)


(0.1
)%   Interest income and expense.
  Other Income (Expense)As a % of(In Thousands)

Total RevenuesFiscal 2006

$
77.5



0.1
%Fiscal 2005

$
103.6



0.1
%  36




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##### Table of Contents



Other income (expense).
  Loss from Continuing OperationsAs a % of(In Thousands)

Total RevenuesFiscal 2006

$
(10,888.7
)


(8.8
)%Fiscal 2005

$
(8,015.4
)


(7.0
)%   Loss from continuing operations.
  Liquidity
    and Capital Resources
               37




---



##### Table of Contents



and/or
  Contractual
    Obligations:
    Payments Due by PeriodDue


Due


DueTotal


Due


Fiscal 2009


Fiscal 2011


AfterDescription

Obligations


Fiscal 2008


to Fiscal 2010


to Fiscal 2012


Fiscal 2012(In thousands)Long-term liabilities(1)

$
100.0


$
25.0


$
50.0


$
25.0


$
Operating leases(2)(3)


85,415.5



15,382.8



28,126.9



21,359.6



20,546.2Total contractual cash obligations

$
85,515.5


$
15,407.8


$
28,176.9


$
21,384.6


$
20,546.2     (1)
    
    Amounts shown include aggregate scheduled interest payments of
    $0.02 million.(2)
    
    Amounts shown are net of $0.5 million of total sublease
    rental income due under non-cancelable subleases.(3)
    
    Amounts shown include approximately $0.3 million of
    obligations on leases for restaurants that are closed as of
    December 31, 2007.  Off-Balance
    Sheet Arrangements
   38




---



##### Table of Contents



Selected
    Quarterly Financial Data
    First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter(Dollars in thousands, except share data)Fiscal 2007Total revenues

$
31,121.3


$
35,448.1


$
34,837.5


$
33,149.4Total costs and expenses


35,197.8



39,623.3



38,489.4



38,962.7Net loss

$
(4,205.0
)

$
(7,400.6
)

$
(3,002.4
)

$
(6,175.5
)Basic and diluted loss per share:

$
(0.11
)

$
(0.19
)

$
(0.08
)

$
(0.16
)Fiscal 2006Total revenues

$
29,021.1


$
31,839.4


$
32,128.3


$
30,709.7Total costs and expenses


32,927.9



32,737.7



35,110.8



35,290.5Net loss

$
(3,928.3
)

$
(748.9
)

$
(2,855.4
)

$
(4,795.0
)Basic and diluted loss per share:

$
(0.10
)

$
(0.20
)

$
(0.07
)

$
(0.12
)   New
    Accounting Pronouncements
  The Fair Value Option for Financial
    Assets and Financial Liabilities  Including an
    Amendment of FASB Statement No. 115.
  Fair Value Measures
  Business Combinations
  Noncontrolling Interests in Consolidated Financial
    Statements, an amendment of ARB 51
 39




---



##### Table of Contents



CAUTIONARY
    NOTE REGARDING
    FORWARD
    LOOKING STATEMENTS  Form 10-K
    
    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, E.coli,
    mad cow disease and avian influenza or bird
    flu;
    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 new and 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. 40




---



##### Table of Contents



Item 7A:
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Interest
    Rate Risk
    Foreign
    Currency Risk
    Inflation
    Item 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA    Item 9.CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE
    Item 9A.
    CONTROLS
    AND PROCEDURES  Rule 13a-15(e)
 41




---



##### Table of Contents



Managements
    Report on Internal Controls Over Financial Reporting
  Form 10-K.
  Rule 13a-15(f)
      Internal
    Control  Integrated Framework
    Changes
    in Internal Control Over Financial Reporting
  Rules 13a-15(f) 15d-15(f)
  Item 9B.OTHER
    INFORMATION
   42




---



##### Table of Contents



PART III  Item 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE    Item 11.
    EXECUTIVE
    COMPENSATION    Item 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    Item 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE    Item 14.
    PRINCIPAL
    ACCOUNTING FEES AND SERVICES   43




---



##### Table of Contents



PART IV  Item 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES        ExhibitNumber

Description of Exhibit2
.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 3.1 to the Companys Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended October 1, 2007).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

Rights Agreement between Cosi, Inc. and American Stock Transfer
    and Trust Company as Rights Agent 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
.3

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

Supplemental Registration Rights Agreement, dated as of
    August 5, 2003 by and among the Company and the parties
    thereto (Filed as Exhibit 4.4.2 to the Companys
    Registration Statement on
    Form S-1,
    file #333-107689).4
.5

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
.6

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. (Filed as Exhibit 4.9 to
    the Companys Registration Statement on
    Form S-1/A,
    file #333-107689).4
.7

Letter 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. (Filed as Exhibit 4.10 to
    the Companys Registration Statement on
    Form S-1/A,
    file #333-107689).10
.1

Cosi, Inc. 2005 Omnibus Long-Term Incentive Plan (Filed as
    Exhibit C to the Companys Proxy Statement on
    Schedule 14A filed on March 31, 2005, file #000-50052).10
.2

Cosi 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 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

Cosi Sandwich Bar, Inc. Incentive Stock Option Plan (Filed as
    Exhibit 10.4 to the Companys Registration Statement
    on
    Form S-1,
    file #333-86390).10
.5.3

Employment agreement between Cosi, Inc. and Kevin Armstrong,
    dated May 9, 2005 (Filed as Exhibit 10.5.11 to the
    Companys Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended April 4, 2005).10
.5.4

Separation and Release Agreement between Cosi, Inc. and Cynthia
    Jamison, dated August 17, 2005 (Filed as Exhibit 10.1
    to the Companys Current report on
    Form 8-K,
    dated August 23, 2005).10
.5.5

Employment Agreement between Cosi, Inc. and William D. Forrest,
    dated December 12, 2005 (Filed as Exhibit 10.1 to the
    Companys Current report on
    Form 8-K,
    dated December 16, 2005). 44




---



##### Table of Contents



ExhibitNumber

Description of Exhibit10
.5.6

Terms of Employment between Cosi, Inc. and William E. Koziel,
    effective as of August 17, 2005 as described in the
    Companys Current Report on
    Form 8-K
    (Filed on August 23, 2005).10
.5.7

Terms of Employment between Cosi, Inc. and Christopher Carroll,
    effective as of May 22, 2006 as described in the
    Companys Current Report of
    Form 8-K
    (Filed on May 25, 2006).10
.5.8

Terms of Employment between Cosi, Inc. and Christopher Ames,
    effective as of November 13, 2006 as described in the
    Companys Current Report on
    Form 8-K
    (Filed on November 17, 2006).10
.5.9

Terms of Employment between Cosi, Inc. and Robert Merritt,
    effective as of March 12, 2007 as described in the
    Companys Current Report on
    Form 8-K
    (Filed on March 12, 2007).10
.5.10

General separation and release agreement by and between the
    Company and Patrick Donnellan, dated August 8, 2007 (Filed
    as Exhibit 10.1 to the Companys Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended October 1, 2007).10
.5.11

Employment agreement, dated as of September 15, 2007 by and
    between the Company and James F. Hyatt (Filed as
    Exhibit 10.1 to the Companys Current Report on
    Form 8-K,
    dated September 18, 2007).10
.5.12

General separation and release agreement by and between the
    Company and Gilbert Melott, dated October 17, 2007 (Filed
    as Exhibit 10.2 to the companys Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended October 1, 2007),10
.6.1

Foodservice Distribution Agreement between Cosi, Inc. and
    Distribution Market Advantage, Inc. dated as of November 1,
    2005.(1)10
.7.1

Cosi, Inc. Form of Franchise Agreement (Filed as
    Exhibit 10.5 to the Companys Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 4, 2005).10
.7.2

Cosi, Inc. Form of Area Developer Franchise Agreement (Filed as
    Exhibit 10.6 to the Companys Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 4, 2005).10
.8

Form of Senior Secured Note and Warrant Purchase Agreement
    (Filed as Exhibit 10.7 to the Companys Registration
    on
    Form S-1,
    file #333-86390).10
.9

Securities Purchase Agreement dated as of April 27, 2004
    (Filed as Exhibit 10.1 to the Companys Current Report
    on
    Form 8-K,
    dated April 28, 2004).10
.10

Form of Restricted Stock Award Agreement (Filed as
    Exhibit 10.1 to the Companys Current Report of
    Form 8-K,
    dated June 6, 2005).16


Letter from Ernst & Young LLP to the Securities and
    Exchange Commission, dated as of August 13, 2004,
    acknowledging its agreement with the statements made in Current
    Report on
    Form 8-K
    (Filed as Exhibit 16 to the Companys Current Report
    on
    Form 8-K,
    dated August 13, 2004).21


Subsidiaries of Cosi, Inc. (Filed as Exhibit 21.1 to the
    Companys Registration Statement on
    Form S-1,
    file #333-86390) .23
.1

Filed herewith Consent of BDO Seidman, LLP, Registered Public
    Accounting Firm.31
.1

Filed herewith Certification of the Chief Executive Officer
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31
.2

Filed herewith Certification of the Chief Financial Officer
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32
.1

Filed herewith Certification of the Chief Executive Officer and
    Chief Financial Officer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.     (1)
    
    Portions of Exhibit 10.6.1 have been omitted and filed
    separately with the Securities and Exchange Commission pursuant
    to a request for confidential treatment. 45




---



##### 



INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
   
 PageReport of BDO Seidman, LLP, Independent
    Registered Public Accounting Firm


47Report of BDO Seidman, LLP, Independent
    Registered Public Accounting Firm on Internal Control Over
    Financial Reporting


48Consolidated Balance Sheets as of
    December 31, 2007 and January 1, 2007


49Consolidated Statements of Operations for the
    Fiscal Years Ended December 31, 2007, January 1, 2007
    and January 2, 2006


50Consolidated Statements of Stockholders
    Equity for the Fiscal Years Ended December 31, 2007,
    January 1, 2007 and January 2, 2006


51Consolidated Statements of Cash Flows for the
    Fiscal Years Ended December 31, 2007, January 1, 2007
    and January 2, 2006


52Notes to Consolidated Financial Statements for
    the Fiscal Years Ended December 31, 2007, January 1,
    2007 and January 2, 2006


53-70   46




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm          ,
    Internal Control  Integrated Framework
  
    47




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm on
    Internal Control Over Financial Reporting      Internal Control  Integrated
    Framework
            
    48




---



##### Table of Contents



Cosi,
    Inc.
 Consolidated
    Balance Sheets
    As of December 31, 2007 and January 1, 2007  December 31,


January 1,2007


2007(Dollars in thousands)ASSETSCurrent assets:Cash and cash equivalents

$
6,308.5


$
938.4Investments






18,961.5Accounts receivable, net


657.8



1,950.9Inventories


1,045.7



915.0Prepaid expenses and other current assets


3,795.7



4,032.8Assets held for sale


121.9



Assets of discontinued operations


35.8



4,526.4Total current assets


11,965.4



31,325.0Furniture and fixtures, equipment and leasehold improvements, net


42,476.6



41,879.8Intangibles, security deposits and other assets


1,970.0



2,552.3Total assets

$
56,412.0


$
75,757.1LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
2,105.8


$
4,898.1Accrued expenses


9,014.3



8,240.4Deferred franchise revenue


782.5



1,172.5Current liabilities of discontinued operations


285.4



383.5Current portion of other long-term liabilities


465.1



536.9Total current liabilities


12,653.1



15,231.4Deferred franchise revenue


2,730.0



2,345.0Other long-term liabilities, net of current portion


7,183.1



7,549.4Total liabilities


22,566.2



25,125.8Commitments and contingenciesStockholders equity:Common stock  $.01 par value;
    100,000,000 shares authorized, 41,052,170 and
    39,910,114 shares issued, respectively


410.5



399.1Additional paid-in capital


275,186.9



271,200.3Treasury stock, 239,543 shares at cost


(1,197.7
)


(1,197.7
)Accumulated deficit


(240,553.9
)


(219,770.4
)Total stockholders equity


33,845.8



50,631.3Total liabilities and stockholders equity

$
56,412.0


$
75,757.1    49




---



##### Table of Contents



Cosi,
    Inc
 Consolidated
    Statements of Operations
    For the Fiscal Years Ended December 31, 2007,
    January 1, 2007 and January 2, 2006  December 31,


January 1,


January 2,2007


2007


2006(Dollars in thousands, except per share data)Revenues:Restaurant net sales

$
132,414.1


$
122,849.3


$
114,036.3Franchise fees and royalties


2,142.2



849.2



100.50Total revenues


134,556.3



123,698.5



114,136.8Costs and expenses:Cost of food and beverage


30,972.5



28,170.5



27,103.6Restaurant labor and related benefits


45,994.7



40,781.5



37,263.7Occupancy and other restaurant operating expenses


38,369.0



32,044.7



27,726.3115,336.2



100,996.7



92,093.6General and administrative expenses


21,019.4



21,910.5



21,320.4Stock-based compensation expense


1,953.9



4,977.7



2,944.2Depreciation and amortization


8,823.2



7,196.3



6,515.9Restaurant pre-opening expenses


710.3



1,450.8



823.7Provision for losses on asset impairments and disposals


3,844.7



248.7



675.4Closed store costs


261.9







Lease termination expense (benefit), net


346.9



(231.5
)


(178.8
)Gain on sale of assets


(23.3
)


(482.3
)


(1,431.7
)Total costs and expenses


152,273.2



136,066.9



122,762.7Operating loss


(17,716.9
)


(12,368.4
)


(8,625.9
)Interest income


524.1



1,411.5



802.0Interest expense


(42.3
)


(9.3
)


(34.0
)Allowance for stockholders notes receivables










(261.1
)Other income


704.8



77.5



103.6Loss from continuing operations


(16,530.3
)


(10,888.7
)


(8,015.4
)Discontinued operations:Operating loss from discontinued operations


(903.1
)


(1,182.9
)


(1,905.6
)Asset impairments of discontinued operations


(3,350.1
)


(256.0
)


(3,205.0
)Loss from discontinued operations


(4,253.2
)


(1,438.9
)


(5,110.6
)Net loss


(20,783.5
)


(12,327.6
)


(13,126.0
)Per Share Data:Loss per share, basic an dilutedContinuing operations

$
(0.42
)

$
(0.28
)

$
(0.23
)Discontinued operations

$
(0.11
)

$
(0.04
)

$
(0.15
)$
(0.53
)

$
(0.32
)

$
(0.38
)Weighted average common shares outstanding


39,332,226



38,207,173



34,928,990    50




---



##### Table of Contents



Cosi,
    Inc.



Consolidated
    Statements of Stockholders Equity
    For the Fiscal Years Ended December 31, 2007,
    January 1, 2007 and January 2, 2006  Common Stock





Treasury StockAdditional


Unearned


Shares of


Amount


StockholdersNumber of





Paid In


Stock


Treasury


Treasury


Notes


AccumulatedShares


Amount


Capital


Compensation


Stock


Stock


Receivable


Deficit


Total(Dollars in thousands, except share data)Balance, January 3, 2005


30,819,716


$
308.2


$
225,519.7


$
(900.0
)









$
(1,458.8
)

$
(194,316.8
)

$
(29,152.3
)Issuance of common stock, net of issuance costs


5,837,563



58.4



34,253.9























34,312.3Issuance of restricted stock, net of forfeitures


885,610



8.9



5,271.3



(5,155.1
)


















125.0Stock compensation










844.7























844.7Amortization of unearned stock compensation














2,188.7



















2,188.7Exercise of warrants


115,958



1.2



(1.2
)






















Exercise of stock options


819,949



8.2



2,442.0























2,450.2Allowance for stockholders notes receivable


























261.1







261.1Return of shares for notes receivable from stockholders


















239,543



(1,197.7
)


1,197.7







Net loss






























(13,126.0
)


(13,126.0
)Balance, January 2, 2006


38,478,796



384.8



268,330.5



(3,866.4
)


239,543



(1,197.7
)






(207,442.8
)


56,208.4Adoption of FAS 123R










(3,866.4
)


3,866.4



















Issuance of restricted stock, net of forfeitures


815,000



8.2



(8.2
)






















Stock-based compensation


11,376



0.1



5,020.6























5,020.7Exercise of warrants


263,302



2.6



440.6























443.2Exercise of stock options


341,640



3.4



1,283.2























1,286.6Net loss






























(12,327.6
)


(12,327.6
)Balance, January 1, 2007


39,910,114



399.1



271,200.3







239,543



(1,197.7
)






(219,770.4
)


50,631.3Issuance of restricted stock, net of forfeitures


147,932



1.4



(1.4
)






















Stock-based compensation










1,968.4























1,968.4Exercise of warrants


699



0.1



(0.1
)






















Exercise of stock options


989,240



9.9



2,019.7























2,029.6Net loss






























(20,783.5
)


(20,783.5
)Balance, December 31, 2007


41,047,985


$
410.5


$
275,186.9


$




239,543


$
(1,197.7
)

$



$
(240,553.9
)

$
33,845.8    51




---



##### Table of Contents



Cosi,
    Inc.



Consolidated
    Statements of Cash Flows
    For the Fiscal Years Ended December 31, 2007,
    January 1, 2007 and January 2, 2006  December 31,


January 1,


January 2,2007


2007


2006(In thousands)Cash flows from operating activities:Net loss

$
(20,783.5
)

$
(12,327.6
)

$
(13,126.0
)Adjustments to reconcile net loss to net cash (used in)provided by operating activitiesDepreciation and amortization


9,232.7



7,767.3



7,425.1Gain on sale of assets


(23.3
)


(482.3
)


(1,431.7
)Non-cash portion of asset impairments and disposals


7,194.8



504.7



3,828.1Non-cash portion of store closing costs


370.3







Provision for bad debts


0.8



4.5



147.5Stock-based compensation expense


1,968.4



5,020.6



3,033.4Allowance for stockholders notes receivable










261.1Changes in operating assets and liabilities:Accounts receivable


1,292.3



(1,459.1
)


(30.6
)Inventories


(86.6
)


(72.3
)


(24.1
)Prepaid expenses and other current assets


237.1



(360.0
)


(1,357.6
)Other assets


170.9



306.8



(799.0
)Accounts payable and accrued expenses


(1,073.9
)


1,159.8



(1,889.0
)Deferred franchise revenue


(5.0
)


3,007.5



510.0Lease termination reserve


(171.3
)


(194.8
)


(311.4
)Other liabilities


(693.6
)


1,074.1



(485.1
)Net cash (used in) provided by operating activities


(2,369.9
)


3,949.2



(4,249.2
)Cash flows from investing activities:Capital expenditures


(14,362.7
)


(21,307.2
)


(9,768.6
)Proceeds from sale of assets


650.0



775.0



1,284.1Purchases of investments


(20,776.8
)


(171,682.5
)


(145,433.7
)Redemptions of investments


39,738.3



185,638.5



122,477.7Return (payment) of security deposits, net


478.6



(97.9
)


(95.3
)Net cash provided by (used in) investing activities


5,727.4



(6,674.1
)


(31,535.8
)Cash flows from financing activities:Proceeds from issuance of common stock


2,029.6



1,286.6



36,887.4Exercises of warrants






443.2



Principal payments on long-term debt


(17.0
)


(18.8
)


(239.7
)Net cash provided by financing activities


2,012.6



1,711.0



36,647.7Net increase (decrease) in cash and cash equivalents


5,370.1



(1,013.9
)


862.6Cash and cash equivalents, beginning of year


938.4



1,952.3



1,089.7Cash and cash equivalents, end of year

$
6,308.5


$
938.4


$
1,952.3Supplemental disclosures of cash flow information:Cash paid for:Interest

$
42.3


$
9.3


$
24.3Corporate franchise and income taxes

$
300.0


$
268.0


$
206.9    52




---



##### Table of Contents



COSI,
    INC.
  Notes
    to Consolidated Financial Statements
 For the Fiscal Years Ended December 31, 2007,
    January 1, 2007 and January 2, 2006
  1.
    Organization
    and Summary of Significant Accounting Policies  Organization
      Fiscal
    Year
    Basis
    of Presentation
    Cash
    and Cash Equivalents
    Investments
    Accounting for Certain
    Investments in Debt and Equity Securities held-to-maturity
    AccruedCost Basis


Interest


Total(In thousands)January 1, 2007Debt securities issued by the U.S. Treasury and other U.S.
    government corporations and agencies

$
18,679.6


$
281.9


$
18,961.5$
18,679.6


$
281.9


$
18,961.5  53




---



##### Table of Contents



COSI,
    INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Concentration
    of Credit Risks
      Accounts
    Receivable
    Inventories
    Assets
    Held for Sale
    Furniture
    and Fixtures, Equipment and Leasehold Improvements
      Long-Lived
    Assets
  restaurant-by-restaurant
     54




---



##### Table of Contents



COSI,
    INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Accounting
    for Lease Obligations
    Intangibles,
    Security Deposits and Other Assets
    Goodwill and Other
    Intangible Assets
  Lease
    Termination Charges
     55




---



##### Table of Contents



COSI,
    INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    (In thousands)Balance as of January 3, 2005

$
937.0Benefit from reversal of prior charges


(178.8
)Deductions


(16.0
)(a)Balance as of January 2, 2006


742.2Benefit from reversal of prior charges


(231.5
)Deductions


(80.0
)(a)Balance as of January 1, 2007

$
430.7Charged to costs and expenses


346.9Deductions


(518.1
)(a)Balance as of December 31, 2007

$
259.5     (a)
    
    Payments to landlords for lease obligations.  Other
    Liabilities
    Income
    Taxes
    Accounting for Uncertainty in Income Taxes, an
    interpretation of FASB Statement No. 109
     56




---



##### Table of Contents



COSI,
    INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Revenue
    Recognition
  Restaurant Net Sales.
  Franchise Fees and Royalties.
  Gift Card Sales.
  Gain
    on Sale of Assets
    Restaurant
    Pre-opening Expenses
    Advertising
    Costs
    Net
    Loss Per Share
  In-the-money Out-of-the-money
 57




---



##### Table of Contents



COSI,
    INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Stock-Based
    Compensation
  Share-Based
    Payment
      Pro
    Forma:
  Fiscal Year2005(In thousands,except per share data)Net loss as reported

$
(13,126.0
)Add: Stock-based compensation expense included in reported net
    loss


3,158.5Deduct: Total stock-based compensation expense determined under
    the fair value based method for all awards


(4,063.6
)Pro forma net loss

$
(14,031.1
)Net loss per common share: basic and dilutedAs reported

$
(0.38
)Pro forma

$
(0.40
)   Fair
    Value of Financial Instruments
    Segment
    Information
   58




---



##### Table of Contents



COSI,
    INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Accounting
    Estimates
    Reclassifications
    2.
    Accounts
    Receivable    Fiscal Year2007


2006(In thousands)Reimbursements due from landlords

$
200.0


$
1,111.3Accounts receivable, trade


187.3



172.1Receivables due from franchisees


157.4



517.5Other


115.8



153.5Total receivables


660.5



1,954.4Less allowance for doubtful accounts


(2.7
)


(3.5
)Accounts receivable, net

$
657.8


$
1,950.9     (In thousands)Balance as of January 3, 2005


152.4Benefit from accrual reversals


(72.1
)Deductions


(72.3
)(a)Balance as of January 2, 2006


8.0Charged to costs and expenses


13.0Deductions


(17.5
)(a)Balance as of January 1, 2007

$
3.5Charged to costs and expenses


12.1Deductions


(12.9
)(a)Balance as of December 31, 2007

$
2.7     (a)
    
    Write-off of uncollectible accounts. 59




---



##### Table of Contents



COSI,
    INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   3.
    Prepaid
    Expenses and Other Current Assets  :
  Fiscal Year2007


2006(In thousands)Prepaid rent

$
1,708.9


$
1,542.0Prepaid insurance


1,704.8



1,915.9Other


382.0



574.9Prepaid expenses and other current assets

$
3,795.7


$
4,032.8   4.
    Discontinued
    Operations      Fiscal Year2007(In thousands)Leasehold improvements

$
138.5Restaurant equipment


140.8Furniture and fixtures


48.5Computer and telephone equipment


110.8Total furniture and fixtures, equipment and leasehold
    improvements


438.6Less accumulated depreciation and amortization


(316.7
)Total assets held for sale, net

$
121.9     Accounting for the
    Impairment or Disposal of Long-Lived Assets,
 60




---



##### Table of Contents



COSI,
    INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    As ofDecember 31,


January 1,2007


2007(In thousands)Current assets:Inventories

$
27.8


$
71.9Other current assets


8.0



326.8Total current assets of discontinued operations


35.8



398.7Furniture and fixtures, equipment and leasehold improvements, net






4,127.7
(a)Total assets of discontinued operations

$
35.8


$
4,526.4Current liabilities:Accrued expenses

$
161.9


$
310.1Other current liabilities


123.5



73.4Total current liabilities of discontinued operations

$
285.4


$
383.5     (a)
    
    Includes fixed assets of both the Macys and Seattle
    locations.    Fiscal Year2007


2006


2005(In thousands)RevenuesRestaurant net sales

$
3,203.3


$
3,189.0


$
3,043.7Costs and expensesCost of food and beverage


949.1



986.5



1,101.7Restaurant labor and related expenses


1,580.2



1,691.8



1,910.4Occupancy and other restaurant operating expenses


1,167.6



962.6



868.23,696.9



3,640.9



3,880.3Depreciation and amortization


409.5



571.0



909.2Restaurant pre-opening expenses






160.0



159.8Total costs and expenses


4,106.4



4,371.9



4,949.3Operating loss from discontinued operations

$
(903.1
)

$
(1,182.9
)

$
(1,905.6
)  61




---



##### Table of Contents



COSI,
    INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  5.
    Furniture
    and Fixtures, Equipment and Leasehold Improvements    Fiscal Year2007


2006(In thousands)Leasehold improvements

$
48,747.3


$
45,055.4Restaurant equipment


19,585.2



18,520.6Furniture and fixtures


14,039.9



10,999.7Computer and telephone equipment


11,882.9



10,588.8Construction in progress


174.2



378.5Vehicles


29.7



29.7Total furniture and fixtures, equipment and leasehold
    improvements


94,459.2



85,572.7Less accumulated depreciation and amortization


(51,982.6
)


(43,692.9
)Furniture and fixtures, equipment and leasehold improvements, net

$
42,476.6


$
41,879.8     6.
    Intangibles,
    Security Deposits and Other Assets    Fiscal Year2007


2006(In thousands)Security deposits

$
983.1


$
1,384.6Liquor licenses


392.0



438.2Trademarks


195.0



195.0Other


399.9



534.5Total other assets

$
1,970.0


$
2,552.3   7.
    Accrued
    Expenses    Fiscal Year2007


2006(In thousands)Payroll and related benefits and taxes

$
2,146.3


$
2,225.6Insurance


1,648.9



1,281.5Taxes other than income taxes


884.0



897.1Unredeemed gift cards/certificates


846.0



666.5Utilities


938.9



588.8Deferred credits


514.0



560.6Rent


483.9



470.6Professional and legal


379.9



394.8New restaurant construction


70.5



716.5Other


1,101.9



438.4Total accrued expenses

$
9,014.3


$
8,240.4  62




---



##### Table of Contents



COSI,
    INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  8.
    Income
    Taxes    Fiscal Year2007


2006(In thousands)Deferred tax assets:Net operating loss carryforward

$
62,434.5


$
53,652.2Depreciation expense and impairment of long-lived assets


14,290.5



13,506.4Contractual lease increases


2,120.3



2,080.9Deferred franchise revenue


1,153.8



891.1Stock-based compensation


409.4



408.0Lease termination accrual


228.8



163.7Accrued expenses


129.8



123.9Allowance for doubtful accounts


1.7



1.3Total deferred tax assets


80,768.8



70,827.5Valuation allowance


(80,768.8
)


(70,827.5
)Net deferred taxes

$



$
       Fiscal Year EndedDecember 31,


January 1,


January 2,2007


2007


2006Statutory federal income tax rate


35.0
%


35.0
%


35.0
%State income taxes


3.0



3.0



3.038.0



38.0



38.0Less valuation allowance


(38.0
)


(38.0
)


(38.0
)Effective Tax Rate


0.0
%


0.0
%


0.0
%   9.
    Stockholders
    Equity  Common
    Stock Purchase Rights
     63




---



##### Table of Contents



COSI,
    INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
          Stock
    Purchase Warrants
   64




---



##### Table of Contents



COSI,
    INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  10.
    Stock-Based
    Employee Compensation  Share-Based Payments Accounting for Stock-Based Compensation
        For the Fiscal Year EndedDecember 31,


January 1,


January 2,2007


2007


2006(In thousands)Stock options variable accounting

$



$



$
844.7Stock option compensation expense


363.3



1,073.5



Restricted stock compensation expense


1,496.8



3,822.1



2,188.7Awards of restricted stock to non-employee directors


108.3



125.0



125.0Total non-cash stock-based compensation expense


1,968.4



5,020.6



3,158.4Non-cash compensation included in labor and related benefits


14.5



42.9



214.2Separately captioned stock compensation expense

$
1,953.9


$
4,977.7


$
2,944.2    65




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##### Table of Contents



COSI,
    INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    2005Expected dividend yield


0
%Expected stock price volatility


68
%Average risk-free interest rate


3.79
%Average expected life of options


5Weighted average grant date fair value

$
3.89   paid-in-capital
      WeightedWeighted


Average


AggregateNumber of


Average Exercise


Remaining


IntrinsicOptions


Price


Contractual Term


Value(In thousands)Outstanding as of January 3, 2005


5,256,950


$
5.26Granted


146,845


$
6.54Exercised


(819,949
)

$
2.99Cancelled/Expired


(386,771
)

$
5.07Outstanding as of January 2, 2006


4,197,075


$
6.09Granted


Exercised


(341,640
)

$
3.99Cancelled/Expired


(576,427
)

$
2.31Outstanding as of January 1, 2007


3,279,008


$
6.32



5.9


$
4,338.5Granted






Exercised


(989,240
)

$
2.06Cancelled/Expired


(505,350
)

$
4.95Outstanding as of December 31, 2007


1,784,418


$
7.76



3.9


$
1.1Exercisable as of December 31, 2007


1,638,067


$
7.98



3.6


$
0.9    66




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##### Table of Contents



COSI,
    INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    WeightedAverageTotal Exercisable at the End of the Year:

Options


Exercise PriceAs of December 31, 2007


1,638,067


$
7.98As of January 1, 2007


3,040,567


$
6.58As of January 2, 2006


2,794,564


$
6.87     Options OutstandingWeighted





Options ExercisableAverage


Weighted





WeightedNumber of


Remaining


Average


Number of


AverageOptions


Contractual


Exercise


Options


ExerciseRange of Exercise Prices

Outstanding


Life in Years


Price


Exercisable


Price$1.36 - $2.04


3,060



1.2


$
1.90



2,895


$
1.93$2.09 - $3.14


422,851



5.5



2.75



421,541



2.75$4.33 - $6.50


451,172



5.9



5.14



313,650



5.09$6.52 - $9.78


162,364



0.7



8.76



155,010



8.85$9.84 - $12.25


744,971



2.4



12.00



744,971



12.001,784,418



3.9


$
7.76



1,638,067


$
7.98      67




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##### Table of Contents



COSI,
    INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Number of


WeightedShares of


Average Grant-DateRestricted Stock


Fair ValueNon-vested at January 3, 2005


526,323


$
1.62Granted


860,000



5.99Vested


698,323



2.70Forfeited






Non-vested at January 2, 2006


688,000



5.99Granted


869,000



8.66Vested


353,300



7.46Forfeited


(54,000
)


7.74Non-vested at January 1, 2007


1,149,700



7.48Granted


698,250



3.73Vested


353,700



6.44Forfeited


(574,450
)


7.04Non-vested at December 31, 2007


919,800


$
5.31     11.
    Defined
    Contribution Plan    12.
    Commitments
    and Contingencies  Commitments
    Fiscal Year

Amount(In thousands)2008

$
15,382.82009


14,711.82010


13,415.12011


11,566.72012


9,792.9Thereafter


20,546.2$
85,415.5  68




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##### Table of Contents



COSI,
    INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
                Purchase
    Commitments
   69




---



##### Table of Contents



COSI,
    INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Coca-Cola
    Self-Insurance
    Litigation
   70




---



##### Table of Contents



SIGNATURES
      By:
    /s/  WILLIAM
    KOZIEL    (Principal Financial Officer and
 Principal Accounting Officer)
      Signature

Title

Date/s/  WILLIAM
    D. FORRESTWilliam
    D. Forrest

Chairman of the Board

March 17, 2008/s/  JAMES
    F. HYATTJames
    F. Hyatt

Chief Executive Officer, President and Director (Principal
    Executive Officer)

March 17, 2008/s/  WILLIAM
    E. KOZIELWilliam
    E. Koziel

Chief Financial Officer, Secretary and Treasurer (Principal
    Financial Officer and Principal Accounting Officer)

March 17, 2008/s/  ELI
    COHENEli
    Cohen

Director

March 17, 2008/s/  CREED
    L. FORD IIICreed
    L. Ford III

Director

March 17, 2008/s/  MARK
    DEMILIOMark
    Demilio

Director

March 17, 2008/s/  ROBERT
    MERRITTRobert
    Merritt

Director

March 17, 2008/s/  MICHAEL
    ODONNELLMichael
    ODonnell

Director

March 17, 2008/s/  KARL
    S. OKAMOTOKarl
    S. Okamoto

Director

March 17, 2008  71




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber

Description of Exhibit2
.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 3.1 to the Companys Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended October 1, 2007).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

Rights Agreement between Cosi, Inc. and American Stock Transfer
    and Trust Company as Rights Agent 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
.3

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

Supplemental Registration Rights Agreement, dated as of
    August 5, 2003 by and among the Company and the parties
    thereto (Filed as Exhibit 4.4.2 to the Companys
    Registration Statement on
    Form S-1,
    file #333-107689).4
.5

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
.6

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. (Filed as Exhibit 4.9 to
    the Companys Registration Statement on
    Form S-1/A,
    file #333-107689).4
.7

Letter 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. (Filed as Exhibit 4.10 to
    the Companys Registration Statement on
    Form S-1/A,
    file #333-107689).10
.1

Cosi, Inc. 2005 Omnibus Long-Term Incentive Plan (Filed as
    Exhibit C to the Companys Proxy Statement on
    Schedule 14A filed on March 31, 2005, file #000-50052.10
.2

Cosi 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 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

Cosi Sandwich Bar, Inc. Incentive Stock Option Plan (Filed as
    Exhibit 10.4 to the Companys Registration Statement
    on
    Form S-1,
    file #333-86390).10
.5.3

Employment Agreement between Cosi, Inc. and Kevin Armstrong,
    dated May 9, 2005. (Filed as Exhibit 10.51.11 to the
    Companys Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended April 4, 2005).10
.5.4

Separation and Release Agreement between Cosi, Inc. and Cynthia
    Jamison, dated August 17, 2005 (Filed as Exhibit 10.1
    to the Companys Current Report on
    Form 8-K,
    dated August 23, 2005).10
.5.5

Employment Agreement between Cosi, Inc. and William D. Forrest,
    dated December 12, 2005 (Filed as Exhibit 10.1 to the
    Companys Current Report on
    Form 8-K,
    dated December 16, 2005).10
.5.6

Terms of Employment between Cosi, Inc. and William E. Koziel,
    effective as of August 17, 2005 as described in the
    Companys Current Report on
    Form 8-K
    (Filed on August 23, 2005).10
.5.7

Terms of Employment between Cosi, Inc. and Christopher Carroll,
    effective as of May 22, 2006 as described in the
    Companys Current Report on
    Form 8-K
    (Filed on May 25, 2006).10
.5.8

Terms of Employment between Cosi, Inc. and Christopher Ames,
    effective as of November 13, 2006 as described in the
    Companys Current Report on
    Form 8-K
    (Filed on November 17, 2006). 72




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##### Table of Contents



ExhibitNumber

Description of Exhibit10
.5.9

Terms of Employment between Cosi, Inc. and Robert Merritt,
    effective as of March 12, 2007 as described in the
    Companys Current Report on
    Form 8-K
    (Filed on March 12, 2007).10
.5.10

General separation and release agreement by and between the
    Company and Patrick Donnellan, dated August 8, 2007 (Filed
    as Exhibit 10.1 to the Companys Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended October 1, 2007).10
.5.11

Employment agreement, dated as of September 15, 2007 by and
    between the Company and James F. Hyatt (Filed as
    Exhibit 10.1 to the Companys Current Report on
    Form 8-K,
    dated September 18, 2007).10
.5.12

General separation and release agreement by and between the
    Company and Gilbert Melott, dated October 17, 2007 (Filed
    as Exhibit 10.2 to the companys Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended October 1, 2007),10
.6.1

Foodservice Distribution Agreement between Cosi, Inc. and
    Distribution Market Advantage, Inc. dated as of November 1,
    2005.(1)10
.7.1

Cosi, Inc. Form of Area Developer Franchise Agreement (Filed as
    Exhibit 10.6 to the Companys Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 4, 2005).10
.7.2

Cosi, Inc. Form of Area Developer Franchise Agreement (Filed as
    Exhibit 10.6 to the Companys Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended July 4, 2005).10
.8

Form of Senior Secured Note and Warrant Purchase Agreement
    (Filed as Exhibit 10.7 to the Companys Registration
    on
    Form S-1,
    file #333-86390).10
.9

Securities Purchase Agreement dated as of April 27, 2004
    (Filed as Exhibit 10.1 to the Companys Current Report
    on
    Form 8-K,
    dated April 28, 2004).10
.10

Form of Restricted Stock Award Agreement (Filed as
    Exhibit 10.1 to the Companys Current Report on
    Form 8-K,
    dated June 6, 2005).16


Letter from Ernst & Young LLP to the Securities and
    Exchange Commission, dated as of August 13, 2004,
    acknowledging its agreement with the statements made in Current
    Report on
    Form 8-K
    (Filed as Exhibit 16 to the Companys Current Report
    on
    Form 8-K,
    dated August 13, 2004.21


Subsidiaries of Cosi, Inc. (Filed as Exhibit 21.1 to the
    Companys Registration Statement on
    Form S-1,
    file #333-86390)23
.1

Filed herewith Consent of BDO Seidman, LLP, Independent
    Registered Public Accounting Firm31
.1

Filed herewith Certification of the Chief Executive Officer
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31
.2

Filed herewith Certification of the Chief Financial Officer
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32
.1

Certification of the Chief Executive Officer and Chief Financial
    Officer pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.     (1)
    
    Portions of Exhibit 10.6.1 have been omitted and filed
    separately with the Securities and Exchange Commission pursuant
    to a request for confidential treatment. 73