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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

----------------

FORM 10-Q
----------------

(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ____________ TO ____________.

COMMISSION FILE NUMBER 000-30715

COSINE COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 94-3280301
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)

3200 BRIDGE PARKWAY, REDWOOD CITY, CA 94065
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: (650) 637-4777

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Although the Registrant has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the period that the
Registrant was required to file such reports, the Registrant did not become
subject to such filing requirements until the registration of certain shares of
its Common Stock pursuant to a Registration Statement on Form S-1 which was
declared effective by the Securities and Exchange Commission on September 25,
2000.

There were 103,428,126 shares of the Company's Common Stock, par value
$.0001, outstanding on April 30, 2001.

Exhibit index on page 20.

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COSINE COMMUNICATIONS, INC.

FORM 10-Q

QUARTER ENDED MARCH 31, 2001

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Page
----

Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000 3
Condensed Consolidated Statements of Operations for the Three Months Ended March
31, 2001 and March 31, 2000 4
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March
31, 2001 and March 31, 2000 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17

PART II. OTHER INFORMATION

Item 2. Change in Securities and Use of Proceeds 18
Item 6. Exhibits and Reports on Form 8-K 18

Signature 19

Exhibit Index 20

PAGE 2 OF 21
3

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

COSINE COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)

MARCH 31, DECEMBER 31,
2001 2000*
--------- ------------
(UNAUDITED)

ASSETS
Current assets:
Cash and cash equivalents ................................................... $ 113,356 $ 126,139
Short-term investments ...................................................... 137,483 162,143
Accounts receivable:
Trade (net of allowance for doubtful accounts of $71 and $631
at March 31, 2001 and December 31, 2000, respectively) .................... 10,993 6,093
Other ...................................................................... 683 791
Inventory ................................................................... 15,129 10,634
Prepaid expenses and other current assets ................................... 14,628 14,174
--------- ---------
Total current assets ................................................ 292,272 319,974
Property and equipment, net ................................................. 32,892 32,739
Other assets ................................................................ 1,234 1,215
--------- ---------
$ 326,398 $ 353,928
========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................................ $ 4,658 $ 7,134
Provision for warranty claims ............................................... 3,266 3,741
Accrued other liabilities ................................................... 9,871 7,478
Accrued compensation ........................................................ 7,130 4,810
Note payable ................................................................ -- 223
Deferred revenue ............................................................ 11,107 7,643
Current portion of equipment and working capital loans ...................... 2,637 2,674
Current portion of obligations under capital lease .......................... 3,235 3,160
Other current liabilities ................................................... 6 84
--------- ---------
Total current liabilities ........................................... 41,910 36,947
Long-term portion of equipment and working capital loans ...................... 3,888 4,541
Long-term portion of obligations under capital lease .......................... 4,555 5,391
Accrued rent .................................................................. 2,264 2,154
Other long-term liabilities ................................................... 127 132
Commitments and contingencies
Stockholders' equity:
Preferred stock, 3,000,000 authorized, none issued and outstanding at March
31, 2001 and December 31, 2000
Common stock, $.0001 par value, 300,000,000 shares authorized at March 31,
2001 and December 31, 2000, 103,488,608 and 103,697,827 shares issued and
outstanding at March 31, 2001 and December 31, 2000, respectively ......... 10 10
Additional paid-in capital .................................................. 602,055 634,261
Notes receivable from stockholders .......................................... (34,864) (36,521)
Accumulated other comprehensive income ...................................... 782 2,286
Deferred compensation ....................................................... (49,212) (92,002)
Accumulated deficit ......................................................... (245,117) (203,271)
--------- ---------
Total stockholders' equity .......................................... 273,654 304,763
--------- ---------
$ 326,398 $ 353,928
========= =========

* Amounts as of December 31, 2000 are derived from the December 31, 2000 audited
financial statements.

See accompanying notes.

PAGE 3 OF 21
4

COSINE COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

THREE MONTHS ENDED
MARCH 31,
-----------------------
2001 2000
-------- --------

Revenue .............................................. $ 6,055 $ 2,369
Cost of goods sold (1) ............................. 8,845 2,894
-------- --------
Gross loss ........................................... (2,790) (525)
-------- --------
Operating expenses:
Research and development (2) ....................... 18,697 15,406
Sales and marketing (3) ............................ 16,370 5,427
General and administrative (4) ..................... 6,983 3,170
-------- --------
Total operating expenses ................... 42,050 24,003
-------- --------
Loss from operations ................................. (44,840) (24,528)
-------- --------
Other income (expenses):
Interest income and other .......................... 3,795 694
Interest expense (5) ............................... (488) (316)
-------- --------
Total other income (expenses) .............. 3,307 378
-------- --------
Loss before income tax provision ..................... (41,533) (24,150)
Income tax provision ............................... 313 --
-------- --------
Net loss ............................................. (41,846) (24,150)
Deemed dividend to series D preferred stockholders ... -- (2,500)
-------- --------
Net loss allocable to common stockholders ............ $(41,846) $(26,650)
======== ========
Basic and diluted net loss per common share .......... $ (0.44) $ (3.22)
======== ========
Shares used in computing per share amounts ........... 94,979 8,282
======== ========

(1) Cost of goods sold includes $881 in 2001 and $294 in 2000 of non-cash
charges related to equity issuances.

(2) Research and development expenses include $5,245 in 2001 and $4,095 in
2000 of non-cash charges related to equity issuances.

(3) Sales and marketing expenses include $3,730 in 2001 and $1,798 in 2000
of non-cash charges related to equity issuances.

(4) General and administrative expenses include $2,299 in 2001 and $1,811 in
2000 of non-cash charges related to equity issuances.

(5) Interest expense includes $42 in 2001 and $12 in 2000 of non-cash
charges related to equity issuances.

See accompanying notes.

PAGE 4 OF 21
5

COSINE COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

THREE MONTHS ENDED
MARCH 31,
-------------------------
2001 2000
--------- ---------

OPERATING ACTIVITIES:
Net loss ....................................................... $ (41,846) $ (24,150)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation ................................................. 3,332 1,032
Amortization of warrants issued for services ................. 1,013 1,224
Common stock issued for services ............................. -- 62
Amortization of deferred stock compensation .................. 12,163 7,640
Non-cash charges on options granted to acquire goods and
services ................................................... (22) 254
Change in operating assets and liabilities:
Accounts receivable (trade) ................................ (4,988) (5,055)
Other receivables .......................................... 108 (1,536)
Inventory .................................................. (4,495) (952)
Prepaid expenses and other current assets .................. (682) 620
Other assets ............................................... (19) (471)
Accounts payable ........................................... (2,476) 3,235
Accrued liabilities ........................................ 1,918 2,911
Accrued compensation ....................................... 2,320 1,090
Note payable ............................................... (223) 223
Deferred revenue ........................................... 2,679 988
Deferred rent .............................................. 110 92
Other liabilities .......................................... (83) (95)
--------- ---------
Net cash used in operating activities .......................... (31,191) (12,888)
INVESTING ACTIVITIES:
Capital expenditures ........................................... (3,485) (5,591)
Purchase of short-term investments ............................. (41,684) (4,874)
Proceeds from sales and maturities of short-term investments ... 64,928 13,935
--------- ---------
Net cash provided by investing activities .................... 19,759 3,470
FINANCING ACTIVITIES:
Proceeds from equipment and working capital loans and
capital leases .............................................. -- 3,023
Principal payments of equipment and working capital loans
and capital leases .......................................... (1,451) (647)
Proceeds from issuance of preferred stock, net ................. -- 4,974
Proceeds from issuance of common stock, net .................... -- 1,058
Proceeds from notes receivable from stockholders ............... 100 --
--------- ---------
Net cash (used) provided by financing activities ............. (1,351) 8,408
--------- ---------
Net decrease in cash and cash equivalents ...................... (12,783) (1,010)
Cash and cash equivalents at the beginning of the period ....... 126,139 20,089
--------- ---------
Cash and cash equivalents at the end of the period ............. $ 113,356 $ 19,079
========= =========
SUPPLEMENTAL INFORMATION:
Cash paid for interest ......................................... $ 446 $ 304
========= =========
Capital lease obligations incurred ............................. -- $ 1,536
========= =========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Issuance and remeasurement of warrants ......................... -- $ 16,748
========= =========
Notes receivable received from stockholders (in exchange for
issuance of common stock) .................................... -- $ 7,470
========= =========

See accompanying notes.

PAGE 5 OF 21
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COSINE COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The unaudited condensed consolidated financial statements have been
prepared by CoSine Communications, Inc. pursuant to the rules and regulations of
the Securities and Exchange Commission and include the accounts of CoSine
Communications, Inc. and its wholly owned subsidiaries ("CoSine" or
collectively, the "Company".) Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. In the opinion of management, all adjustments (consisting
of normal recurring items) necessary for a fair presentation have been included.
The results of operations for the three months ended March 31, 2001 are not
necessarily indicative of the results to be expected for the entire year. These
unaudited condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and the notes
included in CoSine's Annual Report filed on Form 10-K for the year ended
December 31, 2000.

2. CUSTOMER CONCENTRATION

Currently a small number of customers account for a substantial portion
of CoSine's revenues, and the loss of any one customer could have a material
impact on operations.

3. INVENTORIES

Net inventories, stated at the lower of cost (first-in, first-out) or
market, consisted of the following, in thousands:

MARCH 31, DECEMBER 31,
2001 2000
------- -------
(UNAUDITED)

Raw materials $ 1,643 $ 832
Semi-finished goods 10,764 7,554
Finished goods 2,722 2,248
------- -------
$15,129 $10,634
======= =======

Included in net finished goods inventory at March 31, 2001 and December
31, 2000 were $1,055,000 and $415,000, respectively, of goods awaiting customer
acceptance. Included in net semi-finished goods at March 31, 2001 and December
31, 2000 were $1,348,000 and $1,158,000, respectively, of goods used for
customer evaluation purposes.

4. NET LOSS PER COMMON SHARE

Basic net loss per common share is calculated based on the
weighted-average number of common shares outstanding during the periods
presented, less the weighted-average shares outstanding which are subject to
CoSine's right of repurchase. Diluted net loss per common share would give
effect to the dilutive effect of common stock equivalents consisting of
convertible preferred stock, stock options and warrants (calculated using the
treasury stock method). Potentially dilutive securities have been excluded from
the diluted net loss per common share computations, as their inclusion would be
antidilutive. These securities amounted to 18,314,000 shares and 74,509,000
shares for the three months ended March 31, 2001 and 2000, respectively.

The calculations of basic and diluted net loss per share are shown
below, in thousands, except per share data:

THREE MONTHS ENDED
MARCH 31,
--------------------------
2001 2000
----------- ----------

PAGE 6 OF 21
7

--------------------------
(UNAUDITED)

Net loss allocable to common stockholders $ (41,846) $ (26,650)
Basic and diluted:
Weighted-average shares of common stock
outstanding 103,566 15,246
Weighted-average shares subject to repurchase (8,587) (6,964)
--------- ---------
Weighted-average shares used in basic
and diluted net loss per common share 94,979 8,282
========= =========
Basic and diluted net loss per common share $ (0.44) $ (3.22)
========= =========

5. COMPREHENSIVE LOSS

The components of comprehensive loss are shown below, in thousands:

THREE MONTHS ENDED
MARCH 31,
-----------------------
2001 2000
-------- --------
(UNAUDITED)

Net loss $(41,846) $(24,150)
Other comprehensive losses:
Unrealized losses on investments (1,416) (39)
Translation adjustment (88) --
-------- --------
Total other comprehensive loss (1,504) (39)
-------- --------
Comprehensive loss $(43,350) $(24,189)
======== ========

6. SEGMENT REPORTING

CoSine operates in only one operating segment. Enterprise-wide
information is provided in accordance with Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information." Substantially all of CoSine's assets are located in the United
States.

Revenues from customers by geographic region for the three months ended
March 31, 2001 and 2000, respectively, were as follows, in thousands:

Receipts from sales, Receipts for equity
including equity issued in issued in connection
Region connection with sales with sales Revenue
------------------------------------------------------------------------------------
2001
------------------------------------------------------------------------------------
(UNAUDITED)

Europe $1,047 $158 $ 889
Asia Pacific 3,148 -- 3,148
United States 2,816 798 2,018
----- ---- -----
Total $7,011 $956 $6,055
====== ==== ======
2000
(UNAUDITED)
Europe $1,726 $ 153 $1,573
United States 1,814 1,018 796
----- ----- -----
Total $3,540 $1,171 $2,369
====== ====== ======

7. RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative Financial
Instruments and for Hedging Activities," (SFAS 133) which provides a

PAGE 7 OF 21
8

comprehensive and consistent standard for the recognition and measurement of
derivatives and hedging activities. SFAS 133 is effective for fiscal years
beginning after June 15, 2000. CoSine does not currently hold any derivative
financial instruments or engage in hedging activities. CoSine adopted SFAS 133
in the first quarter of 2001, effective January 1, 2001. Adoption of SFAS 133
did not have a material impact on CoSine's financial position or results of
operations.

8. SUBSEQUENT EVENT

Subsequent to the close of the first quarter 2001, CoSine undertook a
restructuring program, in which 10-12% of the workforce will be eliminated. We
anticipate a one-time charge of approximately $2.5 million related to severance
and other restructuring costs in the second quarter of 2001.

PAGE 8 OF 21
9

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains 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 these
forward-looking statements. We use words such as "anticipate," "believe,"
"plan," "expect," "future," "intend" and similar expressions to identify
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, product development, commercialization and technology
difficulties, manufacturing costs, the impact of competitive products, pricing
pressures, changing customer requirements, timely availability and acceptance of
new products, changes in economic conditions in the various markets we serve and
those factors discussed in the section entitled "Management's Discussion and
Analysis of Financial Position and Results of Operations - Risk Factors."
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's opinions only as of the date hereof. We
undertake no obligation to revise or publicly release the results of any
revision to these forward-looking statements.

OVERVIEW

From our incorporation on April 14, 1997 through December 31, 1999, we
were a development stage enterprise, and our operating activities were primarily
devoted to increasing our research and development capabilities, designing our
hardware, developing our software and testing our products. In March 2000, after
extensive field-testing of our Internet Protocol (IP) service delivery platform,
we recognized revenue from product shipments to our first customers and
therefore ceased to be classified as a development stage enterprise. We market
our products through our direct sales force and through resellers to service
providers in Asia, Europe and the Americas. We provide customer service and
support for our products.

The market for our IP service delivery platform is new and evolving, and
the volume and timing of orders are difficult to predict. A customer's decision
to purchase our platform typically involves a significant commitment of its
resources and a lengthy evaluation, testing and product qualification process.
Long sales and implementation cycles for our platform may cause our revenue and
operating results to vary significantly and unexpectedly from quarter to
quarter.

RESULTS OF OPERATIONS

For the three months ended March 31, 2001 and 2000, we reported a basic
and diluted net loss per common share of $0.44 and $3.22, respectively. The
effect of non-cash charges related to equity issuances increased net loss per
common share by $0.14 and $1.11 for the three months ended March 31, 2001 and
2000, respectively.

REVENUE

For the three months ended March 31, 2001, revenue was $6.1 million of
which 42% was from hardware sales, 11% was from software sales and 47% was from
sales of services. Receipts from sales, including equity issued in connection
with sales, were $7.0 million. For the three months ended March 31, 2000,
revenue was $2.4 million of which 75% was from hardware sales, 22% was from
software sales and 3% was from sales of services. Receipts from sales, including
equity issued in connection with sales were $3.5 million.

Below is a reconciliation of revenue for the three months ended March
31, 2001 and 2000 as presented in our statement of operations to show the
separate components as indicated (in thousands):

THREE MONTHS
ENDED MARCH 31,
------------------
2001 2000
------ ------

Receipts from sales, including equity issued in
connection with sales $7,011 $3,540
Less: Receipts for equity issued in connection with sales 956 1,171
------ ------
Revenue $6,055 $2,369
====== ======

During the year ended December 31, 2000 we issued the following warrants
to customers:

PAGE 9 OF 21
10

A warrant exercisable for 1,233,499 shares of our series C preferred
stock at an exercise price of $0.81 per share issued to Qwest upon receipt of a
purchase order from Qwest Communications for $18.3 million of our products and
services;

A warrant exercisable for 200,000 shares of our common stock at an
exercise price of $4.00 per share issued to AduroNet Ltd. upon receipt of a
purchase order from AduroNet for $20.7 million of our products and services; and

A warrant exercisable for 468,849 shares of our common stock at an
exercise price of $3.73 per share issued to BroadBand Office upon receipt of a
purchase order from BroadBand Office for $20.0 million of our products and
services.

We calculated the fair value of these customer-related warrants to be
$16.2 million ($10.3 million in the case of Qwest, $1.8 million in the case of
AduroNet and $4.1 million in the case of BroadBand Office). These values were
calculated using the Black-Scholes option pricing model, using volatility of
0.6, a risk-free interest rate of 5% and an expected life of four years. Of this
amount, $1.0 million and $1.2 million were excluded from revenue for the three
months ended March 31, 2001 and 2000, respectively.

NON-CASH CHARGES RELATED TO EQUITY ISSUANCES

During the three months ended March 31, 2001 and 2000, we amortized
$12.2 million and $8.0 million, respectively of non-cash charges related to
equity issuances. These amounts do not include the amortization of customer
warrants described above. The equity issuances which impacted cost of goods sold
and operating expenses included warrants issued to suppliers for services, stock
options granted to employees and consultants, stock issued in lieu of cash
compensation to suppliers and the value of unvested shares issued upon exercise
of unvested employee stock options for full recourse promissory notes that were
converted to non-recourse obligations.

COST OF GOODS SOLD

For the three months ended March 31, 2001, cost of goods sold was $8.8
million, of which $2.7 million or 31% represented materials, labor, production
overhead and the costs of providing services, $5.2 million or 59% represented
inventory reserve provisions and $0.9 million or 10% represented amortization of
deferred compensation related to the options granted to employees in
manufacturing operations. For the three months ended March 31, 2000, cost of
goods sold was $2.9 million, of which $1.2 million or 44% represented material,
labor and production overhead, $0.8 million or 26% represented warranty costs,
$0.6 million or 20% represented inventory reserve provisions and $0.3 million or
10% represented amortization of deferred compensation.

GROSS LOSS

For the three months ended March 31, 2001 and 2000, gross loss was $2.8
million and $0.5 million, respectively.

RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses were $18.7 million and $15.4 million
for the three months ended March 31, 2001 and 2000, respectively, an increase of
$3.3 million or 21%. This primarily resulted from increased headcount and
related employee expenses, increased non-cash charges related to the issuance of
stock options to employees and consultants, and increased facilities costs.
Non-cash charges related to stock options granted to employees and consultants
were $5.2 million and $4.1 million for the three months ended March 31, 2001 and
2000, respectively.

SALES AND MARKETING EXPENSES

Sales and marketing expenses were $16.4 million and $5.4 million for the
three months ended March 31, 2001 and 2000, respectively, an increase of $10.9
million or 202%. This primarily resulted from increased headcount and related
employee expenses, increased non-cash charges related to the issuance of stock
options to employees and consultants, increased travel-related expenses, and
increased expenses associated with lending products to customers for evaluation
purposes. Non-cash charges related to stock options granted to employees and
consultants were $3.7 million and $1.8 million for the three months ended March
31, 2001 and 2000, respectively.

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GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses were $7.0 million and $3.2 million
for the three months ended March 31, 2001 and 2000, respectively. General and
administrative expenses increased $3.8 million or 120% in 2001 when compared
with the same period of 2000. This was primarily a result of increased headcount
and related employee expenses, increased professional services and other outside
services, and increased communications and general business insurance costs.
General and administrative non-cash charges related to stock options granted to
employees and consultants were $2.3 million and $1.8 million for the three
months ended March 31, 2001 and 2000, respectively.

INTEREST AND OTHER INCOME

For the three months ended March 31, 2001, interest and other income was
$3.8 million, an increase of $3.1 million from the comparable period in 2000.
This reflects increased levels of cash and short-term investments as a result of
cash received from our September 2000 initial public offering and the private
placement of series E convertible preferred stock in May of 2000.

INTEREST EXPENSE

For the three months ended March 31, 2001, interest expense was $0.5
million compared with $0.3 million of interest expense in 2000. This increase
reflects an increase in equipment loans and capital leases.

INCOME TAX PROVISION

The provision for income taxes of $0.3 million for the three months
ended March 31, 2001 was composed entirely of foreign corporate income taxes.
The foreign corporate income taxes are a function of our international expansion
and the establishment of subsidiaries in various countries. The provision for
income taxes is based on income taxes on minimum profits the foreign operations
generated for services provided to us.

DEEMED DIVIDEND

In March 2000, we sold 625,000 shares of series D redeemable convertible
preferred stock at $8.00 per share for which we received proceeds of $5.0
million. At the date of issuance, we believed that the per share price of $8.00
represented the fair value of the preferred stock. After our initial public
offering process began, we reevaluated and increased the fair value of our
common stock at March 2000. The increase in fair value resulted in a beneficial
conversion feature of $2.5 million, which we recorded as a deemed dividend to
preferred stockholders in 2000. We recorded the deemed dividend at the date of
issuance by offsetting charges and credits to stockholders' equity. The
preferred stock dividend increased the net loss allocable to common stockholders
in the calculation of basic and diluted net loss per common share for the three
months ended March 31, 2000.

LIQUIDITY AND CAPITAL RESOURCES

Prior to our initial public offering in September 2000, we financed our
operations primarily through sales of convertible preferred stock for net
proceeds of $166.6 million, plus equipment and working capital loans and capital
leases. Upon the closing of our initial public offering on September 29, 2000,
we received cash proceeds, net of underwriters' discounts and offering expenses,
totaling $242.5 million, and all of our convertible preferred stock was
converted into 69.6 million shares of common stock.

We believe that we possess sufficient liquidity and capital resources to
fund our operating and working capital requirements for at least the next 12
months. We may require additional funds to support other purposes and may seek
to raise these additional funds through debt or equity financing or from other
sources. There can be no assurances that additional funding will be available at
all, or that if available, such financing will be obtainable on terms favorable
to us.

CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

At March 31, 2001, cash, cash equivalents and short-term investments
were $250.8 million. This compares with $288.3 million at December 31, 2000.

PAGE 11 OF 21
12

OPERATING ACTIVITIES

We used $31.2 million and $12.9 million in cash for operations for the
three months ended March 31, 2001 and 2000, respectively. This was primarily the
result of higher operating expenses due to additional headcount and related
employee expenses, and increased costs of information technology, facilities,
product development, marketing and professional services related to the
expansion of our business.

INVESTING ACTIVITIES

For the three months ended March 31, 2001 and 2000, we received $21.2
million and $3.5 million, respectively, in cash from investing activities. This
reflects an increase of $15.6 million for net proceeds from the sale of
short-term investments and a decrease in capital expenditures of $2.1 million.

FINANCING ACTIVITIES

For the three months ended March 31, 2001, we used $1.4 million in cash
from financing activities and for the comparable period of 2000 we provided $8.4
million in cash from financing activities. This reflects the issuance of
preferred stock and common stock in 2000 of $5.0 million and $1.1 million,
respectively, with no such issuances in 2001.

SUBSEQUENT EVENT

OUTLOOK

The long-term growth outlook for capital spending in the
telecommunications industry appears healthy. However, due to reductions in
capital spending commitments by our customers and uncertainty within the
telecommunications industry, the current and short-term outlook for growth is
not optimistic. There is a decided lack of capital availability for many
emerging service providers and with the caution being exercised by larger
service providers, capital spending in the industry as a whole has slowed. While
we believe this is a short-term phenomenon, it has had and will continue to have
a direct impact on our operations for at least the current fiscal year. We
anticipate that these capital spending trends will continue to adversely affect
our revenue growth dramatically for at least the current fiscal year. This is
evidenced by a slowdown in bookings coupled with our decision not to ship
product to customers that represent unsuitable credit risks. As capital
continues to be scarce, we believe that pricing will continue to be under
pressure as each potential customer attempts to improve returns on capital.

RISK FACTORS

RISKS RELATED TO OUR BUSINESS

WE HAVE A HISTORY OF LOSSES THAT WE EXPECT WILL CONTINUE, AND IF WE NEVER
ACHIEVE PROFITABILITY WE MAY CEASE OPERATIONS.

At March 31, 2001, we had an accumulated deficit of $245.1 million. We
have incurred net losses since our incorporation. We have only recently begun to
recognize revenue, and we cannot be certain that our revenue will grow or that
we will generate sufficient revenue to become profitable. If we do not achieve
profitability, we may cease operations.

We have incurred significant expenses in the past. For example, for the
fiscal year ended December 31, 2000, we incurred research and development, sales
and marketing and general and administrative expenses of $169.2 million.
Although we cannot quantify the amount, we expect expenses to continue to
increase through 2001 and to continue to incur losses.

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13

THE LIMITED SALES HISTORY OF OUR IP SERVICE DELIVERY PLATFORM MAKES FORECASTING
OUR REVENUE DIFFICULT, WHICH MAY IMPAIR OUR ABILITY TO MANAGE OUR BUSINESS.

We were founded in April 1997, shipped our first test IP service
delivery platform product in March 1999, and sold our first IP service delivery
platform product in March 2000. We have limited meaningful historical financial
data upon which to forecast our revenue.

IF OUR CUSTOMERS ARE UNABLE TO GENERATE SALES OF SERVICES DELIVERED USING OUR
PRODUCTS AND TO MANAGE DELIVERY OF THESE SERVICES TO THEIR CUSTOMERS, WE MAY BE
UNABLE TO SELL OUR PRODUCTS.

Our future success depends on network service providers, who are our
customers, generating revenue from the sale of services delivered using our
products. Sales of our products may decline or be delayed if our customers do
not successfully introduce commercial services derived from our IP service
delivery platform or if our customers do not generate revenue from these
services sufficient to realize an attractive return on their investment in our
IP service delivery platform.

Our ability to generate future revenue also depends on whether network
service providers successfully:

o sell and deliver services using our IP service delivery platform to
their customers; and

o forecast market trends and identify the services and features that
our products should offer their customers.

IF OUR IP SERVICE DELIVERY PLATFORM DOES NOT RAPIDLY ACHIEVE MARKET ACCEPTANCE,
WE MAY BE UNABLE TO ACHIEVE PROFITABILITY.

Our products offer a new approach for delivering services by network
service providers, which may perceive our products as being more expensive than
the other technologies and products they purchase. If network service providers
do not accept our IP service delivery platform as a method for delivering
services to their customers, our ability to increase our revenue, achieve
profitability and continue operations would be harmed. Our success also depends
on third-party software providers recognizing the advantages of our service
delivery method and on our ability to effectively support their software
development efforts.

OUR IP SERVICE DELIVERY PLATFORM IS OUR ONLY PRODUCT LINE, AND OUR FUTURE
REVENUE DEPENDS ON ITS COMMERCIAL SUCCESS.

Our IPSX 9000, InVision and InGage products are the only products that
have been shipped to our customers. Our future revenue depends on the commercial
success of our IP service delivery platform product line. If customers do not
adopt, purchase and successfully implement our IP service delivery platform in
large numbers, our revenue will not grow.

OUR PRODUCTS ARE TECHNICALLY COMPLEX AND MAY CONTAIN ERRORS OR DEFECTS THAT ARE
NOT FOUND UNTIL OUR CUSTOMERS PUT OUR PRODUCTS TO FULL USE. ERRORS OR DEFECTS IN
OUR PRODUCTS COULD SERIOUSLY HARM OUR REPUTATION AND OUR ABILITY TO SELL OUR
PRODUCTS.

Our products are more complicated than most networking products. They
can be adequately tested only when put to full use in very large and diverse
networks with high amounts of traffic. Because none of our customers has put our
products to full use, we are unable to assess the likelihood or magnitude of
this risk. Errors or defects in our products could result in:

o loss of current customers and failure to attract new customers or
achieve market acceptance; and

o increased service and warranty costs.

THE LONG SALES CYCLE FOR OUR PLATFORM, AS WELL AS THE EXPECTATION THAT CUSTOMERS
WILL SPORADICALLY PLACE LARGE ORDERS, MAY CAUSE OUR REVENUE AND OPERATING
RESULTS TO VARY SIGNIFICANTLY FROM QUARTER TO QUARTER, AND THE PRICE OF OUR
STOCK TO DECLINE.

A customer's decision to purchase our IP service delivery platform involves a
significant commitment of its resources and a lengthy evaluation, testing and
product qualification process. Network service providers and other

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14

customers with complex networks usually expand their networks in large
increments on a periodic basis. We may receive purchase orders for significant
dollar amounts on an irregular and unpredictable basis. These events may cause
our revenue and operating results to vary significantly and unexpectedly from
quarter to quarter, which could cause our stock price to decline.

IF WE FAIL TO DEVELOP NEW PRODUCTS OR FEATURES, WE WILL HAVE DIFFICULTY
ATTRACTING CUSTOMERS.

Based on our prior experience, we expect that our customers will require
product features that our current IP service delivery platform does not have.
Our products are technically complex, and the development of new products or
features is an uncertain, time-consuming and labor-intensive process. We may
experience design, manufacturing or marketing problems with new products. If we
fail to develop new or enhanced products that meet customer requirements, our
ability to attract and retain customers will be hindered.

WE RELY UPON A LIMITED NUMBER OF CUSTOMERS, AND ANY DECREASE IN REVENUE FROM
THESE CUSTOMERS OR FAILURE TO INCREASE OUR CUSTOMER BASE COULD HARM OUR
OPERATING RESULTS.

The loss of one or more of our customers, a reduction in purchases of
our products by our customers or the decline of our customers' business may
limit our revenue growth and harm our operating results. We do not have
long-term contracts with our customers, and our customers may reduce or
discontinue purchases of our products at any time.

Our future success will depend on attracting additional customers.
Failure to increase our customer base would hinder our growth and harm our
operating results.

IF WE DO NOT EFFECTIVELY MANAGE OUR GROWTH, INTEGRATE NEWLY-HIRED KEY PERSONNEL
AND HIRE ADDITIONAL PERSONNEL, OUR OPERATIONS WILL SUFFER.

The growth of our operations places a significant strain on our
management systems and resources. If we do not effectively manage our growth and
improve our financial and managerial controls and systems, we may be unable to
provide adequate service and support to our customers and our operations will
suffer. We plan to continue to hire a significant number of employees this year,
but we may be unable to hire and retain the kind and number that we need.

We recently hired many of our key executives, including our chief
financial officer and other managerial personnel. These personnel have worked
together for only a short period of time and must learn our business while
performing their regular duties. Our operations could be disrupted if we do not
rapidly integrate these new key personnel.

A FAILURE OF OUR CONTRACT MANUFACTURERS OR OUR SOLE SOURCE AND LIMITED SOURCE
SUPPLIERS TO MEET OUR NEEDS WOULD SERIOUSLY HARM OUR ABILITY TO TIMELY FILL
CUSTOMER ORDERS.

If any of our manufacturers terminates its relationship with us or is
unable to produce sufficient quantities of our products in a timely manner and
at satisfactory quality levels, our ability to fill customer orders on time, our
reputation and our operating results will suffer. Our contract manufacturers do
not have a long-term obligation to supply products to us. Qualifying new
contract manufacturers and starting volume production is expensive and time
consuming and would disrupt our business.

We purchase several key components, including field programmable gate
arrays, some integrated circuits and memory devices, and power supplies from a
single source or limited sources. We do not have long-term supply contracts for
these components. If our supply of these components is interrupted, we may be
unable to locate an alternate source in a timely manner or at favorable prices.
Interruption or delay in the supply of these components could cause us to lose
sales to existing and potential customers.

IF WE FAIL TO PREDICT OUR MANUFACTURING REQUIREMENTS ACCURATELY, WE COULD INCUR
ADDITIONAL COSTS OR MANUFACTURING DELAYS.

We provide forecasts of our demand to our contract manufacturers up to
twelve months before scheduled delivery of products to our customers. If we
overestimate our manufacturing requirements, our contract manufacturers may have
excess or obsolete inventory, which would harm our operating results if we were
required to purchase the excess or obsolete inventory. If we underestimate our
requirements, our contract manufacturers may have an inadequate

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15

inventory, which could interrupt manufacturing of our products and result in
delays in shipments and revenue. If we do not accurately anticipate lead times
for components, we may experience component shortages.

IF NECESSARY LICENSES OF THIRD-PARTY TECHNOLOGY ARE TERMINATED OR BECOME
UNAVAILABLE OR TOO EXPENSIVE, OUR COMPETITIVE POSITION AND OUR PRODUCT OFFERING
WILL SUFFER.

We license from third-party suppliers several key software applications
incorporated in our IP service delivery platform, such as firewall software from
Network Associates, Inc. and database software from Oracle Corporation. We will
be required to license technology from other third-party suppliers to enable us
to develop new products or features. Our inability to renew or obtain any
third-party license that we need could require us to obtain substitute
technology of lower quality or at greater cost. Either of these outcomes could
seriously impair our ability to sell our products and harm our operating
results.

INSIDERS CONTINUE TO HAVE SUBSTANTIAL CONTROL OVER US AND THEY COULD DELAY OR
PREVENT A CHANGE IN OUR CORPORATE CONTROL EVEN IF OUR OTHER STOCKHOLDERS WANTED
IT TO OCCUR.

Our executive officers, directors and principal stockholders who hold 5%
or more of the outstanding common stock and their affiliates beneficially own a
significant portion of our outstanding common stock. These stockholders will be
able to exercise significant control over all matters requiring stockholder
approval, including the election of directors and approval of significant
corporate transactions. This could delay or prevent an outside party from
acquiring or merging with us even if our other stockholders wanted it to occur.

RISKS RELATED TO OUR INDUSTRY

THE LONG-TERM GROWTH OUTLOOK FOR CAPITAL SPENDING IN THE TELECOMMUNICATIONS
INDUSTRY DIRECTLY IMPACTS OUR BUSINESS.

Due to reductions in capital spending commitments by our customers and
uncertainty within the telecommunications industry, the current and short-term
outlook for growth is not optimistic. There is a decided lack of capital
availability for many emerging service providers and with the caution being
exercised by larger service providers, capital spending in the industry on a
whole has slowed.

While we believe this is a short-term phenomenon, it has had and will
continue to have a direct impact on our operations for at least the current
fiscal year. We anticipate that these capital spending trends will continue to
adversely affect our revenue growth dramatically for at least the current fiscal
year.

ONGOING POWER SUPPLY PROBLEMS IN CALIFORNIA COULD HARM OUR BUSINESS.

Our corporate headquarters, our research and development activities,
other critical business operations and the majority of our suppliers are located
in California. California has recently experienced ongoing power shortages,
which have resulted in "rolling blackouts." These blackouts could cause
disruptions to our operations and the operations of our suppliers and customers.
Losses incurred for these types of outages are not covered under CoSine's
insurance policies. In addition, California has recently experienced rising
energy costs which could negatively impact our results.

WE PARTICIPATE IN SEVERAL HIGHLY COMPETITIVE MARKETS, AND OUR FAILURE TO COMPETE
SUCCESSFULLY WOULD LIMIT OUR ABILITY TO INCREASE OUR MARKET SHARE AND HARM OUR
BUSINESS.

Competition in the network infrastructure market is intense, and we
expect that competition in the market for IP networking services will also be
intense. If we are unable to compete effectively, our revenue and market share
will be reduced.

We face competition from:

o companies in the network infrastructure market, including Cisco
Systems, Inc., Lucent Technologies, Inc., Nortel Networks
Corporation, Alcatel, Ericsson Business Networks AB and Siemens AG;
and

PAGE 15 OF 21
16

o companies, including Cisco, that market products for installation on
the premises of network service providers' customers and which offer
some services that compete with the services delivered using our IP
service delivery platform.

We believe that there is likely to be consolidation in this industry. We
expect to face increased competition from larger companies with significantly
greater resources than we have.

Some of these larger competitors have pre-existing relationships
involving a range of product lines with the network service providers who are
the principal potential customers for our IP service delivery platform. These
competitors may offer vendor financing, which we do not offer, undercut our
prices or use their pre-existing relationships with our customers to induce them
not to use our IP service delivery platform.

IF ANY OF OUR SIGNIFICANT SUPPLIERS WERE TO TERMINATE THEIR RELATIONSHIPS WITH
US OR COMPETE AGAINST US, OUR REVENUE AND MARKET SHARE WILL LIKELY BE REDUCED.

Many of our suppliers also have significant development and marketing
relationships with our competitors and have significantly greater financial and
marketing resources than we do. If they develop and market products in the
future in competition with us, or form or strengthen arrangements with our
competitors, our revenue and market share will likely be reduced.

IF WE BECOME SUBJECT TO UNFAIR HIRING CLAIMS, WE COULD BE PREVENTED FROM HIRING
NEEDED PERSONNEL, OR FROM PURSUING OR IMPLEMENTING OUR RESEARCH, AND COULD INCUR
SUBSTANTIAL LIABILITIES OR COSTS.

Companies in our industry whose employees accept positions with
competitors frequently claim that these competitors have engaged in unfair
hiring practices or that the employment of these persons would involve the
disclosure or use of trade secrets. We have been threatened with claims like
these in the past and may receive claims of this kind in the future. These
claims could prevent us from hiring personnel or from using the intellectual
property alleged to be trade secrets brought to us by the personnel that we
hired. We could also incur substantial costs and damages in defending ourselves
or our employees against these claims, regardless of their merits. Defending
ourselves from these claims could divert the attention of our management away
from our operations.

IF OUR PRODUCTS DO NOT WORK THE WAY OUR CUSTOMERS EXPECT, ORDERS FOR OUR
PRODUCTS MAY BE CANCELLED AND THE MARKET PERCEPTION OF OUR PRODUCTS COULD BE
HARMED.

If our products do not work with our customers' or their end users'
networks, the market perception of our products could be harmed and orders for
our products could be cancelled. In particular, if an actual or perceived breach
of network security occurs in a customer's or its end-user's network that uses
our products, we may be subject to lawsuits for losses suffered by customers or
their end-users.

If we have to redesign or modify our products to make them compatible
with a customer's or end user's network, our sales cycle could be extended, our
research and development expenses may increase, and profit margins on our
products may be reduced.

BECAUSE THE MARKETS IN WHICH WE COMPETE ARE PRONE TO RAPID TECHNOLOGICAL CHANGE
AND THE ADOPTION OF STANDARDS DIFFERENT FROM THOSE THAT WE USE, OUR PRODUCTS
COULD BECOME OBSOLETE, AND WE COULD BE REQUIRED TO INCUR SUBSTANTIAL EXPENSES TO
MODIFY OUR PRODUCTS TO REMAIN COMPETITIVE.

The market for our IP service delivery platform is prone to rapid
technological change, the adoption of new standards, frequent new product
introductions and changes in customer and end user requirements. We may be
unable to respond quickly or effectively to these developments. We may
experience difficulties that could prevent our development of new products and
features. The introduction of new products or technologies by competitors, or
the emergence of new industry standards could render our products obsolete or
could require us to incur expenses to redesign our products.

WE RELY ON OUR INTELLECTUAL PROPERTY RIGHTS TO BE COMPETITIVE, AND IF WE ARE
UNABLE TO PROTECT THESE RIGHTS, WE MAY NEVER BECOME PROFITABLE.

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17

We rely on a combination of copyright, trademark and trade secret laws
and restrictions on disclosure to protect our intellectual property rights.
Monitoring unauthorized use of our products is difficult, and we cannot be
certain that the steps we have taken will prevent unauthorized use of our
technology. If we are unable to protect our intellectual property rights, our
ability to supply our products as they have been designed could suffer, and our
ability to become profitable could be harmed.

IF WE BECOME INVOLVED IN AN INTELLECTUAL PROPERTY DISPUTE, WE COULD BE SUBJECT
TO SIGNIFICANT LIABILITY, THE TIME AND ATTENTION OF OUR MANAGEMENT COULD BE
DIVERTED AND WE COULD BE PREVENTED FROM SELLING OUR PRODUCTS.

We may become a party to litigation in the future to protect our
intellectual property or because others may allege infringement of their
intellectual property. These claims and any resulting lawsuit could subject us
to significant liability for damages and invalidate our proprietary rights.
These lawsuits, regardless of their merits, likely would be time-consuming and
expensive to resolve and would divert management time and attention. Any
potential intellectual property litigation alleging our infringement of a
third-party's intellectual property also could force us to:

o stop selling our products or services that use the challenged
intellectual property;

o obtain from the owner of the infringed intellectual property right a
license to sell the relevant technology, which license may not be
available on reasonable terms, or at all; and

o redesign those products or services that use the infringed
technology.

WE HAVE LIMITED EXPERIENCE MARKETING AND SELLING OUR PRODUCTS INTERNATIONALLY.
WE INTEND TO EXPAND OUR OPERATIONS INTERNATIONALLY, AND OUR OPERATING RESULTS
WILL SUFFER IF WE DO NOT GENERATE REVENUE FROM INTERNATIONAL OPERATIONS THAT
EXCEEDS THE COST OF ESTABLISHING AND MAINTAINING THE OPERATIONS.

We intend to enter new markets in Europe, Asia and Latin America. We
have limited experience in marketing and distributing our products
internationally and may be unable to develop international market demand for our
products. If we are unable to generate revenue from international operations
that exceed the cost of establishing and maintaining these operations, our
operating results will suffer.

The success of our international operations may be affected by:

o our ability to establish relationships with international
distributors who can effectively market and support our products;
and

o difficulties inherent in developing versions of our products that
comply with local standards or regulatory requirements.

ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE SENSITIVITY

We do not currently use derivative financial instruments for speculative
trading or hedging purposes. In addition, we maintain our cash equivalents in
government and agency securities, debt instruments of financial institutions and
corporations and money market funds. Our exposure to market risks from changes
in interest rates relates primarily to corporate debt securities. We place our
investments with high credit quality issuers and, by policy, limit the amount of
the credit exposure to any one issuer.

Our general policy is to limit the risk of principal loss and ensure the
safety of invested funds by limiting market and credit risk. All highly liquid
investments with a maturity of less than three months at the date of purchase
are considered to be cash equivalents, and all investments with maturities of
three months or greater are classified as available-for-sale and considered to
be short-term investments.

EXCHANGE RATE SENSITIVITY

Currently, all of our sales and most of our expenses are denominated in
United States dollars. Therefore, we have not engaged in any foreign exchange
hedging activities to date. However, we expect to conduct transactions in
foreign currencies in increasing volumes in the future, and as a result we may
engage in foreign exchange hedging activities.

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18

PART II. OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

(a) During the three months ended March 31, 2001, we sold 1,891 shares
of common stock to employees upon the exercise of outstanding stock
options which were not subject to a registration statement under the
Securities Act of 1933. In exchange for the shares, we received an
aggregate of $2,000 in cash. These securities were issued in
transactions exempt from registration under the Securities Act of
1933 in reliance upon Section 4 (2) of the Securities Act of 1933
and Rule 701 under the Securities Act of 1933.

(b) On September 25, 2000, in connection with our initial public
offering, a Registration Statement on Form S-1 (File No. 333-35938)
was declared effective by the Securities and Exchange Commission,
pursuant to which 11,500,000 shares of our common stock were offered
and sold for our account at a price of $23 per share, generating
gross offering proceeds of $264.5 million. The managing underwriters
were Goldman, Sachs & Co., Chase Securities Inc., Robertson
Stephens, Inc. and JP Morgan Securities Inc. Our initial public
offering closed on September 29, 2000. The net proceeds of the
initial public offering were approximately $242.5 million after
deducting approximately $18.5 million in underwriting discounts and
approximately $3.5 million in other offering expenses.

We did not pay directly or indirectly any of the underwriting
discounts or other related expenses of the initial public offering
to any of our directors or officers, any person owning 10% or more
of any class of our equity securities, or any of our affiliates.

We have not yet used all the funds from the initial public offering.
We expect to use the net proceeds from the initial public offering
for general corporate purposes, including working capital, expansion
of our sales and marketing organization and capital expenditures. We
may also use a portion of the net proceeds from this offering to
acquire or invest in businesses, technologies or products that are
complementary to our business. We currently have no commitments or
agreements with respect to any acquisitions or investments. We have
not determined the amounts we plan to spend on any of the uses
described above or the timing of these expenditures. Pending our use
of the net proceeds, we intend to invest them in short-term,
interest-bearing, investment-grade securities.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits.
See exhibit index on page 20.
(b) Reports on Form 8-K.
None.

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19

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

COSINE COMMUNICATIONS, INC.

By: /s/ Craig B. Collins
------------------------------------
Craig B. Collins
Chief Financial Officer and Executive Vice President
(Principal Financial and Accounting Officer)
Dated: May 11, 2001

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20

EXHIBIT INDEX

Exhibit Number Description
-------------- -----------

3.1* Second Amended and Restated Certificate of Incorporation, as
amended (incorporated by reference to Exhibit 3.2 to Form 8A
(file no. 000-30715) filed May 26, 2000).

3.2* Amended and Restated Bylaws, as amended (incorporated by
reference to Exhibit 3.3 to Form 8A (file no. 000-30715) filed
May 26, 2000).

10.1* Form of Indemnification Agreement entered into by the
Registrant with each of its directors and officers
(incorporated by reference to Exhibit 10.1 of Amendment No. 1
to Registration Statement on Form S-1 filed June 6, 2000).

10.2* 2000 Stock Plan and forms of agreements thereunder
(incorporated by reference to Exhibit 10.2 of Amendment No. 1
to Registration Statement on Form S-1 filed June 6, 2000).

10.3* 2000 Employee Stock Purchase Plan and forms of agreements
thereunder (incorporated by reference to Exhibit 10.3 of
Amendment No. 1 to Registration Statement on Form S-1 filed
June 6, 2000).

10.4* 2000 Director Option Plan and forms of agreements thereunder
(incorporated by reference to Exhibit 10.4 of Amendment No. 1
to Registration Statement on Form S-1 filed June 6, 2000).

10.5* 1997 Stock Plan (as amended and restated) and forms of
agreements thereunder (incorporated by reference to Exhibit
10.5 of Registration Statement on Form S-1 filed April 28,
2000).

10.6* Third Amended and Restated Investors' Rights Agreement
(incorporated by reference to Exhibit 10.6 of Amendment No. 1
to Registration Statement on Form S-1 filed June 6, 2000).

10.7* Master Equipment Lease Agreement between the Registrant and
Relational Funding Corporation dated as of February 1, 2000
(incorporated by reference to Exhibit 10.7 of Amendment No. 1
to Registration Statement on Form S-1 filed June 6, 2000).

10.8* Loan and Security Agreement between Registrant and Venture
Lending and Leasing II, Inc. dated as of September 21, 1998
(incorporated by reference to Exhibit 10.8 of Amendment No. 1
to Registration Statement on Form S-1 filed June 6, 2000).

10.9* Amended and Restated Supplement between Registrant and Venture
Lending and Leasing II, Inc. dated as of October 21, 1998
(incorporated by reference to Exhibit 10.9 of Amendment No. 1
to Registration Statement on Form S-1 filed June 6, 2000).

10.10* Master Loan and Security Agreement between Registrant and
Finova Capital Corporation date as of May 19, 1999
(incorporated by reference to Exhibit 10.10 of Amendment No. 1
to Registration Statement on Form S-1 filed June 6, 2000).

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Exhibit Number Description
-------------- -----------

Loan and Security Agreement between Registrant and Silicon
10.11* Valley Bank dated as of May 29, 1998 (incorporated by reference
to Exhibit 10.11 of Amendment No. 1 to Registration Statement
on Form S-1 filed June 6, 2000).

10.12* Loan Modification Agreement between Registrant
and Silicon Valley Bank dated as of June 22,
1998 (incorporated by reference to Exhibit 10.12
of Registration Statement on Form S-1 filed
April 28, 2000).

10.13* Loan and Security Agreement between Registrant
and Silicon Valley Bank dated as of September
30, 1999 (incorporated by reference to Exhibit
10.13 of Amendment No. 1 to Registration
Statement on Form S-1 filed June 6, 2000).

10.14* Building Lease Agreement between Registrant and Westport Joint
Venture dated as of May 26, 1998 (incorporated by reference to
Exhibit 10.14 of Amendment No. 1 to Registration Statement on
Form S-1 filed June 6, 2000).

10.15* Amendment No. 1 to Lease between Registrant and Westport Joint
Venture dated as of September 9, 1999 (incorporated by
reference to Exhibit 10.15 of Registration Statement on Form
S-1 filed April 28, 2000).

10.16* Building Lease Agreement between Registrant and
Westport Joint Venture dated as of September 20,
1999 (incorporated by reference to Exhibit 10.16
of Amendment No. 1 to Registration Statement on
Form S-1 filed June 6, 2000).

10.17* Sublease between Registrant and Liberate
Technologies dated as of June 28, 2000
(incorporated by reference to Exhibit 10.17 of
Amendment No. 4 to Registration Statement on
Form S-1 filed September 5, 2000).

* Previously filed.

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