Cosine Communications (COSN) 8-K Cosine Communications Announces Second Quarter Fiscal 2005 Financial Results

COSINE COMMUNICATIONS ANNOUNCES SECOND QUARTER FISCAL 2005 FINANCIAL RESULTS

SAN JOSE, CALIF., August 1, 2005 -- CoSine Communications, Inc. (COSN.PK), 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.

For additional information contact:

Terry Gibson                         

(408) 236-7518

E-mail: Terry.Gibson@Cosinecom.com

CoSince 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

CoSince Communications, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

	June 30, 2005  (Unaudited)			December 31, 2004 (1)
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

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