CoSine Communications Announces Second Quarter Fiscal 2005 Financial Results


SAN JOSE, Calif., Aug. 1, 2005 (PRIMEZONE) -- CoSine Communications, Inc. (Pink Sheets:COSN), a provider of customer support services for managed, network-based IP and broadband service providers, today announced revenue for the quarter ended June 30, 2005 of $699,000 and a net loss of $633,000 or $0.06 loss per share, as compared to revenue of $2.6 million and a net loss of $ 9.7 million or $0.96 loss per share for the quarter ended June 30, 2004.

About Cosine Communications

CoSine Communications was founded in 1998 as a global telecommunications equipment supplier to empower service providers to deliver a compelling portfolio of managed, network-based IP and broadband services to consumers and business customers. Currently, CoSine's business consists primarily of a customer service capability operated under contract by a third party.

Safe Harbor Warning

"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements, which include, among others, statements concerning CoSine's expected financial performance, exploration of strategic alternatives, and business outlook, expected performance and developments. The company uses words such as "anticipate," "believe," "plan," "expect," "future," "intend" and similar expressions to identify forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements.

Factors that might cause such a difference include, but are not limited to, Cosine's ability to identify and acquire new business operations while continuing to provide support to CoSine's existing customers and continuing to offer CoSine's intellectual property for license or sale and the reactions, either positive or negative, of investors, competitors, customers, and others to CoSine's strategic direction and to any specific strategic alternative or opportunity selected by CoSine, all as may be discussed in more detail on pages 30 through 36 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2004 and our Form 10 - Q filings. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's opinions only as of the date hereof. CoSine undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements.



                 CoSine Communications, Inc.
             CONSOLIDATED STATEMENT OF OPERATIONS
            (in thousands, except per share data)

                         Three months Ended      Six months ended
                               June 30,              June 30,
                           2005       2004         2005       2004
                       -------------------- -----------------------
 Revenue:
  Product              $     --    $  1,819    $    216    $  5,537
  Service                   699         749       1,380       1,486
                       --------    --------    --------    --------
  Total revenue             699       2,568       1,596       7,023
 Cost of revenue            389       1,435         843       2,932
                       --------------------    --------------------
                                               
 Gross profit               310       1,133         753       4,091

 Operating
  expenses:
  Research and
   development               --       4,352         103       9,607
  Sales and
   marketing                 --       3,155         105       6,538
  General and
   administrative         1,098       1,197       2,403       2,905
  Restructuring
   and impairment
   charges                   --       2,308         (91)      2,343
                        -------------------------------------------   
  Total operating
   expenses               1,098      11,012       2,520      21,393
                        -------------------------------------------
 Loss from
  operations               (788)     (9,879)     (1,767)    (17,302)

 Interest income
  and expense and
  other, net                166         141         279         222
                        -------------------------------------------                      
                                               
 Loss before income
  tax (benefits)
  provision                (622)     (9,738)     (1,488)    (17,080)

 Income tax
  (benefits)
   provision                 11         (32)         23          11
                        ----------------------  --------------------                    

 Net loss              $   (633)   $ (9,706)   $ (1,511)   $(17,091)
                        ======================  ==================== 
 Basic and diluted
  net loss per share   $  (0.06)   $  (0.96)   $  (0.15)   $  (1.70)

 Shares used in
  computing basic
  and diluted net
  loss per share         10,091      10,062      10,097      10,035


                       CoSine Communications, Inc.
                CONDENSED CONSOLIDATED BALANCE SHEETS
                            (in thousands)


                                June 30, 2005    December 31,
                                  (Unaudited)        2004 (a)
 ASSETS                         ----------------------------
 Current assets:
 Cash and cash equivalents         $ 12,749          $ 9,203
 Short-term investments              10,342           15,710
 Accounts receivable, trade             220            1,328
 Other receivables                       94              483
 Prepaid expenses and other
  current assets                        530              949
                                -----------------------------
 Total current assets                23,935           27,673
 Long-term deposits                     370              150
                                -----------------------------
                                   $ 24,305         $ 27,823
                                =============================

 LIABILITIES AND STOCKHOLDERS'
  EQUITY
 Current liabilities:
    Accounts payable                  $ 203            $ 252
 Accrued warranty liability             100              157
 Other accrued liabilities            1,368            3,129
 Accrued compensation                    --              412
 Deferred revenue                       332              509
                                -----------------------------
 Total current liabilities            2,003            4,459
                                -----------------------------
 Total liabilities                    2,003            4,459
                                =============================

 Stockholders' equity:
 Common stock                             1                1
 Additional paid-in capital         538,947          540,028
 Notes receivable from
  stockholders                           --           (1,520)
 Accumulated other
  comprehensive income                  624              614
 Accumulated deficit               (517,270)        (515,759)
                                -----------------------------
 Total stockholders' equity          22,302           23,364
                                =============================
                                   $ 24,305         $ 27,823
                                =============================

  (a) Amounts are derived from the
      December 31, 2004 audited financial
      statements.


            

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