##### 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 April 3, 2006
 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
 COSI, 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 þ o
 o þ




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##### 



COSI, INC.
 
 Page NumberPART I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (Unaudited)Consolidated Balance Sheets  as of April 3, 2006 and January 2, 2006
    
    
    3Consolidated Statements of Operations  Three month periods ended
April 3, 2006 and April 4, 2005
    
    
    4Consolidated Statement of Stockholders Equity  Three month period ended
April 3, 2006
    
    
    5Consolidated Statements of Cash Flows  Three month periods ended April 3,
2006 and April 4, 2005
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    7-13Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    14-23Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    23Item 4.
    
    Controls and Procedures
    
    
    24PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    23Item 1A.
    
    Risk Factors
    
    
    23Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    24Item 6.
    
    Exhibits
    
    
    24SIGNATURES
    
    
    25EXHIBIT INDEX
    
    
    26CERTIFICATIONS
    
    27-29302 Certification of Chief Executive Officer302 Certification of Chief Financial OfficerSection 906 Certification
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Cosi, Inc.
 
 Consolidated Balance Sheets
As of April 3, 2006 and January 2, 2006
 (dollars in thousands, except per share data)
 April 3, 2006
    
    
    January 2, 2006(Unaudited)
    
    
    (Note 1)AssetsCurrent assets:Cash and cash equivalents
    
    $
    5,914.1
    
    
    $
    1,952.3Investments
    
    
    26,909.0
    
    
    
    32,917.5Accounts receivable, net of allowances of $10.0 and $8.0, respectively
    
    
    1,390.2
    
    
    
    496.2Inventories
    
    
    791.1
    
    
    
    914.6Prepaid expenses and other current assets
    
    
    3,160.2
    
    
    
    3,672.7Total current assets
    
    
    38,164.6
    
    
    
    39,953.3Furniture and fixtures, equipment and leasehold improvements, net
    
    
    34,051.4
    
    
    
    33,502.7Intangibles, security deposits and other assets, net
    
    
    2,904.7
    
    
    
    3,088.0Total assets
    
    $
    75,120.7
    
    
    $
    76,544.0Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    2,786.8
    
    
    $
    2,689.2Accrued expenses
    
    
    8,291.0
    
    
    
    9,837.2Deferred franchise revenue
    
    
    1,572.5
    
    
    
    510.0Current portion of other long-term liabilities
    
    
    515.5
    
    
    
    345.0Current portion of long-term debt
    
    
    15.8
    
    
    
    18.8Total current liabilities
    
    
    13,181.6
    
    
    
    13,400.2Long-term debt, net of current portion
    
    
    99.8
    
    
    
    99.9Other long-term liabilities, net of current portion
    
    
    6,667.6
    
    
    
    6,835.5Total liabilities
    
    
    19,949.0
    
    
    
    20,335.6Commitments and contingenciesStockholders equity:Common stock  $.01 par value; 100,000,000 shares authorized,
39,313,247 and 38,478,796 shares issued and outstanding, respectively
    
    
    393.1
    
    
    
    384.8Additional paid-in capital
    
    
    267,347.4
    
    
    
    268,330.5Unearned stock compensation
    
    
    
    
    
    
    (3,866.4
    )Treasury stock, 239,543 shares at cost
    
    
    (1,197.7
    )
    
    
    (1,197.7
    )Accumulated deficit
    
    
    (211,371.1
    )
    
    
    (207,442.8
    )Total stockholders equity
    
    
    55,171.7
    
    
    
    56,208.4Total liabilities and stockholders equity
    
    $
    75,120.7
    
    
    $
    76,544.0
 The accompanying notes are an integral part of these consolidated financial statements.
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Cosi, Inc.
 
 Consolidated Statements of Operations
For the Three Month Period Ended April 3, 2006 and April 4, 2005
 (dollars in thousands, except per share data)
 Three Months EndedApril 3,
    
    
    April 4,2006
    
    
    2005(Unaudited)
    
    
    (Unaudited)Revenues:Restaurant net sales
    
    $
    29,457.7
    
    
    $
    27,205.1Franchise fees and royalties
    
    
    187.3
    
    
    
    Total revenues
    
    
    29,645.0
    
    
    
    27,205.1Costs and expenses:Cost of food and beverage
    
    
    6,975.1
    
    
    
    6,673.8Labor and related benefits
    
    
    9,876.8
    
    
    
    9,438.5Occupancy and other operating expenses
    
    
    7,463.2
    
    
    
    6,752.024,315.1
    
    
    
    22,864.3General and administrative expenses
    
    
    5,553.5
    
    
    
    5,180.7Stock-based compensation expense
    
    
    1,940.4
    
    
    
    231.2Depreciation and amortization
    
    
    1,832.1
    
    
    
    1,765.1Restaurant pre-opening expenses
    
    
    265.3
    
    
    
    21.9Lease termination expense
    
    
    26.6
    
    
    
    Total costs and expenses
    
    
    33,933.0
    
    
    
    30,063.2Operating loss
    
    
    (4,288.0
    )
    
    
    (2,858.1
    )Interest income
    
    
    361.7
    
    
    
    30.8Interest expense
    
    
    (2.3
    )
    
    
    (6.3
    )Allowance for notes receivable from
stockholders
    
    
    
    
    
    
    16.8Other income (expense)
    
    
    0.3
    
    
    
    21.2Net loss
    
    $
    (3,928.3
    )
    
    $
    (2,795.6
    )Per Share Data:Net loss per share, basic and diluted
    
    $
    (0.10
    )
    
    $
    (0.09
    )Weighted average shares outstanding:
    
    
    37,812,590
    
    
    
    31,200,458
 The accompanying notes are an integral part of these consolidated financial statements.
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Cosi, Inc.
 
 Consolidated Statement of Stockholders Equity
For the Three Months Ended April 3, 2006
 (unaudited)
(dollars in thousands, except share data)
 Common Stock
    
    
    
    
    
    
    Treasury StockAdditional
    
    
    UnearnedNumber of
    
    
    
    
    
    
    Paid In
    
    
    Stock
    
    
    Number of
    
    
    
    
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Capital
    
    
    Compensation
    
    
    Shares
    
    
    Amount
    
    
    Deficit
    
    
    TotalBalance, January 2, 2006
    
    
    38,478,796
    
    
    $
    384.8
    
    
    $
    268,330.5
    
    
    $
    (3,866.4
    )
    
    
    239,543
    
    
    $
    (1,197.7
    )
    
    $
    (207,442.8
    )
    
    $
    56,208.4Exercise of options
    
    
    198,979
    
    
    
    1.9
    
    
    
    919.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    921.0Adoption of FAS 123R
    
    
    
    
    
    
    
    
    
    
    (3,866.4
    )
    
    
    3,866.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of restricted stock
    
    
    485,000
    
    
    
    4.9
    
    
    
    (4.9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    1,954.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,954.1Exercise of warrants
    
    
    150,472
    
    
    
    1.5
    
    
    
    15.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16.5Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,928.3
    )
    
    
    (3,928.3
    )Balance, April 3, 2006
    
    
    39,313,247
    
    
    $
    393.1
    
    
    $
    267,347.4
    
    
    $
    
    
    
    
    239,543
    
    
    $
    (1,197.7
    )
    
    $
    (211,371.1
    )
    
    $
    55,171.7
 The accompanying notes are an integral part of these consolidated financial statements.
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Cosi, Inc.
 
 Consolidated Statements of Cash Flows
For the Three Month Periods Ended April 3, 2006 and April 4, 2005
 (dollars in thousands)
 April 3, 2006
    
    
    April 4, 2005(Unaudited)
    
    
    (Unaudited)Cash flows from operating activities:Net loss
    
    $
    (3,928.3
    )
    
    $
    (2,795.6
    )Adjustments to reconcile net loss to net cash provided by
(used in) operating activitiesDepreciation and amortization
    
    
    1,832.1
    
    
    
    1,765.1Non-cash portion of asset disposals
    
    
    17.4
    
    
    
    3.4Recovery for bad debts
    
    
    2.0
    
    
    
    21.0Stock-based compensation expense
    
    
    1,954.1
    
    
    
    251.7Reserve on notes receivable from stockholders
    
    
    
    
    
    
    (16.8
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (896.0
    )
    
    
    (19.8
    )Inventories
    
    
    123.5
    
    
    
    34.7Prepaid expenses and other current assets
    
    
    512.5
    
    
    
    (1,018.9
    )Other assets
    
    
    205.4
    
    
    
    (115.6
    )Accounts payable
    
    
    97.6
    
    
    
    (1,007.4
    )Accrued expenses
    
    
    (1,260.8
    )
    
    
    (2,504.0
    )Other liabilities
    
    
    1,575.0
    
    
    
    (64.2
    )Net cash provided by (used in) operating activities
    
    
    234.5
    
    
    
    (5,466.4
    )Cash flows from investing activities:Capital expenditures
    
    
    (2,380.9
    )
    
    
    (323.2
    )Decrease in accounts payable for capital expenditures
    
    
    (781.2
    )
    
    
    Purchase of investments
    
    
    (66,232.9
    )
    
    
    Redemption of investments
    
    
    72,241.4
    
    
    
    7,973.3Net payment of security deposits
    
    
    (22.1
    )
    
    
    (22.8
    )Net cash provided by investing activities
    
    
    2,824.3
    
    
    
    7,627.3Cash flows from financing activities:Net proceeds from issuance of common stock
    
    
    906.0
    
    
    
    1,882.5Principal payments on long-term debt
    
    
    (3.0
    )
    
    
    (16.1
    )Net cash provided by financing activities
    
    
    903.0
    
    
    
    1,866.4Net increase in cash and cash equivalents
    
    
    3,961.8
    
    
    
    4,027.3Cash and cash equivalents, beginning of period
    
    
    1,952.3
    
    
    
    1,089.7Cash and cash equivalents, end of period
    
    $
    5,914.1
    
    
    $
    5,117.0Supplemental disclosures of cash flow information:Cash paid for:Interest
    
    $
    2.3
    
    
    $
    4.5Corporate franchise and income taxes
    
    $
    112.3
    
    
    $
    84.3
 The accompanying notes are an integral part of these consolidated financial statements.
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COSI, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Note 1  Basis of Presentation
      Note 2  Investments
 Accounting for Certain Investments in Debt and Equity
Securities
  UnrealizedPre-TaxCost Basis
    
    
    Net Gains
    
    
    Fair Value(in thousands)Debt securities issued by the U.S. Treasury and
other U.S. government corporations and agencies
    
    $
    19,831.4
    
    
    $
    84.6
    
    
    $
    19,916.0Debt securities issued by states of the United States
and political subdivisions of the states
    
    
    5,000.0
    
    
    
    
    
    
    
    5,000.0Corporate debt securities
    
    
    1,992.2
    
    
    
    0.80
    
    
    
    1,993.0$
    26,823.6
    
    
    $
    85.4
    
    
    $
    26,909.0
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COSI, INC.  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)  continued
 Note 3  Stock-Based Compensation
  For the Three Months Ended(in thousands)April 3, 2006
    
    
    April 4, 2005Stock options variable accounting
    
    $
    
    
    
    $
    71.7Stock option compensation expense
    
    
    273.9
    
    
    
    Restricted stock compensation expense
    
    
    1,680.2
    
    
    
    180.0Total non-cash stock compensation expense
    
    
    1,954.1
    
    
    
    251.7Non-cash compensation included in labor and related benefits
    
    
    13.7
    
    
    
    20.5Separately captioned stock compensation expense
    
    $
    1,940.4
    
    
    $
    231.2
  Share-Based Payments Accounting for
Stock-Based Compensation
  8




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COSI, INC.  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)  continued
 Three Months EndedApril 4, 2005(dollars in thousandsexcept per share data)Net loss as reported
    
    $
    (2,795.6
    )Add: stock-based compensation expense included in
reported net loss
    
    
    251.7Deduct: Total stock-based employee compensation
expense determined under the fair value based
method for all awards
    
    
    (781.6
    )Pro forma net loss
    
    $
    (3,325.5
    )Net loss per common share: basic and dilutedAs reported
    
    $
    (0.09
    )Pro forma
    
    $
    (0.11
    )
    9




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COSI, INC.  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)  continued
    NOTE 4  Warrants
   10




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COSI, INC.  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)  continued
  NOTE 5  Inventories
  NOTE 6  Furniture and Fixtures, Equipment, and Leasehold Improvements
  As of
    
    
    As ofApril 3,
    
    
    January 2,(in thousands)
    
    2006
    
    
    2006Leasehold improvements
    
    $
    39,218.3
    
    
    $
    38,213.4Furniture and fixtures
    
    
    10,394.9
    
    
    
    10,130.0Restaurant equipment
    
    
    14,225.6
    
    
    
    14,017.4Computer and telephone equipment
    
    
    9,596.9
    
    
    
    9,321.3Construction in progress
    
    
    1,574.4
    
    
    
    1,250.8Vehicles
    
    
    29.7
    
    
    
    75,039.8
    
    
    
    72,932.9Less: accumulated depreciation and
amortization
    
    
    (40,988.4
    )
    
    
    (39,430.2
    )Net furniture and fixtures, equipment
and leasehold improvements
    
    $
    34,051.4
    
    
    $
    33,502.7
 11




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COSI, INC.  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)  continued
 Note 7  Accrued Expenses
  April 3,
    
    
    January 2,(in thousands)
    
    2006
    
    
    2006Payroll and related benefits and taxes
    
    $
    3,314.2
    
    
    $
    2,933.3Professional and legal costs
    
    
    361.6
    
    
    
    453.6Taxes payable
    
    
    925.9
    
    
    
    673.6Rent obligations
    
    
    244.6
    
    
    
    529.7Gift cards/certificates
    
    
    370.7
    
    
    
    438.9Utilities
    
    
    595.8
    
    
    
    649.9New restaurant construction
    
    
    172.8
    
    
    
    954.0Insurance
    
    
    597.7
    
    
    
    1,235.5Unearned revenue
    
    
    592.5
    
    
    
    601.2Other
    
    
    1,115.2
    
    
    
    1,367.5Accrued expenses
    
    $
    8,291.0
    
    
    $
    9,837.2
 Note 8  Long-Term Debt
 Notes Payable:
   NOTE 9  Earnings Per Share
  NOTE 10  Lease Termination Costs
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COSI, INC.  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)  continued
  NOTE 11  Contingencies
  13




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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 April 3, 2006, and April 4, 2005 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
2005 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 Ended
    
    For the Three Months EndedApril 3, 2006
    
    April 4, 2005Company-
    
    
    
    
    
    
    
    
    
    Company-Owned
    
    Franchise
    
    Total
    
    Owned
    
    Franchise
    
    TotalRestaurants at beginning of period
    
    
    96
    (a)
    
    
    5
    
    
    
    101
    
    
    
    92
    
    
    
    
    
    
    
    92New restaurants opened
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Restaurants permanently closed
    
    
    4
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    Restaurants at end of period
    
    
    94
    (a)
    
    
    5
    
    
    
    99
    
    
    
    92
    
    
    
    
    
    
    
    92
 
 (a)
    
    Includes two company-owned locations that currently remain closed as a result of Hurricane Wilma.
Their re-opening as yet undertermined.      14




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CRITICAL ACCOUNTING POLICIES
   Long lived assets Accounting for
the Impairment or
Disposal of Long Lived Assets
 Lease termination costs
 15




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Accounting
for Costs
Associated with Exit or Disposal Activities,
 Stock options Share-Based Payments Accounting for Stock-Based Compensation
 Furniture and Fixtures, Equipment, and Leasehold Improvements
 Inventories:
 Accounting for Lease Obligations: Accounting for Operating Leases with Scheduled Rent Increases
 Landlord Allowances Issues Relating to Accounting for Leases
 Income taxes
  Restaurant Net Sales.
 Franchise Fees and Royalties.
 16




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Gift Card Sales
    Cost of food and beverage.
 Labor and related benefits.
 Occupancy and other operating expenses.
 General and administrative expenses.
 Stock compensation expense.
 Depreciation and amortization.
 Restaurant pre-opening expenses.
 17




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RESULTS OF OPERATIONS
  Three Months EndedApril 3,
    
    April 4,2006
    
    2005Revenues:Restaurant net sales
    
    
    99.4
    %
    
    
    100.0
    %Franchise fees and royalties
    
    
    0.6
    
    
    
    0.0Total revenue
    
    
    100.0
    
    
    
    100.0Costs and expenses:Cost of food and beverage(1)
    
    
    23.7
    
    
    
    24.5Labor and related benefits(1)
    
    
    33.5
    
    
    
    34.7Occupancy and other operating expenses(1)
    
    
    25.3
    
    
    
    24.882.5
    
    
    
    84.0General and administative expenses
    
    
    18.7
    
    
    
    19.0Stock compensation expense
    
    
    6.5
    
    
    
    0.8Depreciation and amortization
    
    
    6.2
    
    
    
    6.5Restaurant pre-opening expenses
    
    
    0.9
    
    
    
    0.2Lease termination expense
    
    
    0.1
    
    
    
    Total costs and expenses
    
    
    114.9
    
    
    
    110.5Operating loss
    
    
    (14.5
    )
    
    
    (10.5
    )Other income (expense):Interest income
    
    
    1.2
    
    
    
    0.1Interest expense
    
    
    
    
    
    
    Allowance for stockholders notes receivables
    
    
    
    
    
    
    Other income
    
    
    
    
    
    
    0.1Net loss
    
    
    (13.3
    )%
    
    
    (10.3
    )%
 
 (1)
    
    As a percentage of restaurant net sales Restaurant Net Sales
  Franchise Fees and Royalties
  18




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Costs and Expenses
 Cost of food and beverage
 Labor and related benefits.
 Occupancy and other operating expenses
 General and administrative costs
 Stock compensation expense. Share-Based
Payment, , Accounting for Stock-Based Compensation, . Accounting for Stock Issued to Employees
 Depreciation and amortization
 Restaurant pre-opening expenses
 19




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Lease termination costs
 Reserve for notes receivable from stockholders.
 Interest income and expense
 Other income
 LIQUIDITY AND CAPITAL RESOURCES
      20




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##### Table of Contents



Contractual Obligations:
    
    
    
    
    
    Payments Due by Period (in thousands)Due2nd through
    
    
    Due
    
    
    Due
    
    
    DueTotal
    
    
    4th Quarter
    
    
    Fiscal 2007
    
    
    Fiscal 2009
    
    
    AfterDescription
    
    Obligations
    
    
    Fiscal 2006
    
    
    to Fiscal 2008
    
    
    to Fiscal 2010
    
    
    Fiscal 2010Long-term debt (1)
    
    $
    150.0
    
    
    $
    25.0
    
    
    $
    50.0
    
    
    $
    50.0
    
    
    $
    25.0Operating leases (2) (3)
    
    
    83,490.4
    
    
    
    10,205.3
    
    
    
    26,530.0
    
    
    
    22,504.4
    
    
    
    24,250.7Purchase obligations (4)
    
    
    2,000.0
    
    
    
    2,000.0
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash
obligations
    
    $
    85,640.4
    
    
    $
    12,230.3
    
    
    $
    26,580.0
    
    
    $
    22,554.4
    
    
    $
    24,275.7
 
 (1)
    
    Amounts shown include aggregate scheduled interest payments of $0.03 million.(2)
    
    Amounts shown are net of an aggregate $1.0 million of sublease rental income due
under non-cancelable subleases.(3)
    
    Includes approximately an aggregate $0.8 million of obligations on leases for restaurants
that have been closed as of April 3, 2006.(4)
    
    Primarily contractual obligations related to new restaurant construction.  PURCHASE COMMITMENTS
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##### Table of Contents



CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
  
    
    the cost of our principal food products and supply and delivery shortages or interruptions;
    
    labor shortages or increased labor costs;
    
    changes in consumer preferences and demographic trends;
    
    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;
    
    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
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##### Table of Contents




    
    adverse economic conditions.
  
 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
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##### Table of Contents



Item 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  (a) Issuances of Shares of Common Stock
  (b) Exercise of Warrants
     
 Item 6: EXHIBITS
 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.
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##### Table of Contents



SIGNATURES
  COSI, INC.Date: May 10, 2006
    
    By: /s/ KEVIN ARMSTRONGKevin ArmstrongChief Executive OfficerDate: May 10, 2006
    
    By: /s/ WILLIAM KOZIELWilliam KozielChief Financial Officer (chief
accounting officer)
Treasurer and Secretary
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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.
 26