EX-99.1 2 v028007_ex99-1.htm

EXHIBIT 99.1

COSINE COMMUNICATIONS ANNOUNCES
FINANCIAL RESULTS FOR THE QUARTER ENDED SEPTEMBER 30, 2005

SAN JOSE, CALIF., October 31, 2005 -- CoSine Communications, Inc. (COSN.PK), a provider of customer support services for managed, network-based IP and broadband service providers, today announced revenues of $785,000 and a net loss of $31,000, or $0.00 per share for the three months ended September 30, 2005, as compared to revenues of $1,088,000 and a net loss of $14.6 million or $1.47 loss per share for the three months ended September 30, 2004. For the nine months ended September 30, 2005, CoSine reported revenues of $2.4 million and a net loss of $1.5 million or $0.15 loss per share as compared to revenues of $8.l million and a net loss of $31.7 million or $3.17 loss per share in the nine months ended September 30, 2004.

During the quarter, CoSine announced that the board of directors, after an extensive review of strategic alternatives, had approved a plan to redeploy CoSine’s existing resources 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. CoSine’s redeployment strategy will involve the acquisition of one or more operating businesses with existing or prospective taxable earnings. This strategy may allow CoSine to realize future cash flow benefits from its net operating loss carry-forwards (“NOLs”). As of this date, no candidates have been identified, and no assurance can be given that the Company will find suitable candidates, and if it does, that it will be able to utilize its existing NOLs.
 
Also during the quarter, CoSine announced the adoption of a share purchase rights plan, whose primary purpose is to preserve CoSine’s existing and projected net operating losses (NOLs). Cosine’s redeployment strategy is based in part on its ability to realize future cash flow benefits from its NOLs. The share purchase rights plan is designed to reduce the likelihood that an ownership change will impair the availability of CoSine’s NOLs. CoSine had over $300 million in NOLs at December 31, 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 effectuate desirable strategic alternatives, the time and costs required to explore and investigate possible transactions and other corporate actions, management and board interest in and distraction due to exploring and investigating strategic alternatives, the reactions, either positive or negative, of investors, competitors, customers, employees and others to CoSine exploring possible strategic alternatives and opportunities and to any specific strategic alternative or opportunity selected by CoSine and the continued downturn in the telecommunications industry and slow development of the market for network-based IP services, all as may be discussed in more detail in the section entitled "Risk Factors" on pages 31 through 36 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2004 and in the Quarterly Reports on Form 10-Q that we file during fiscal year 2005. 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
 

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

   
Three months ended
  
Nine months ended
  
   
September 30,
 
September 30,
 
           
   
2005
  
2004
  
2005
  
2004
  
                   
Revenue:
                  
Product
  
$
—
  
$
452
  
$
216
  
$
5,989
  
Service
    
785
    
636
    
2,165
    
2,122
  
Total revenue
    
785
    
1,088
    
2,381
    
8,111
  
Cost of revenue
   
702
    
4,441
    
1,545
    
7,373
  
                           
Gross profit (loss)
    
83
    
(3,353
)
  
836
    
738
  
                           
Operating expenses:
                          
Research and development
    
—
    
3,709
    
103
    
13,316
  
Sales and marketing
    
—
    
3,056
    
105
    
9,594
  
General and administrative
   
422
    
1,721
    
2,825
    
4,626
  
Restructuring and impairment charges
    
—
    
2,871
    
(91
)
  
5,214
  
Total operating expenses
    
422
    
11,357
    
2,942
    
32,750
  
                           
Loss from operations
    
(339
)
  
(14,710
)
  
(2,106
)
  
(32,012
)
                           
Interest income and expense and other, net
    
191
    
82
    
470
    
304
  
                           
Loss before income tax provision (benefit)
    
(148
)
  
(14,628
)
  
(1,636
)
  
(31,708
)
                           
Income tax provision (benefit)
    
(117
)
  
(9
)
  
(94
)
  
2
  
                           
Net loss
  
$
(31
)
$
(14,619
)
$
(1,542
)
$
(31,710
)
                           
Basic and diluted net loss per share
  
$
(0.00
)
$
(1.47
)
$
(0.15
)
$
(3.17
)
                           
Shares used in computing basic and diluted net loss per share
    
10,091
    
9,945
    
10,095
    
9,998
  
 

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

   
September 30,
2005
(Unaudited)
  
December 31,
2004 (1)
  
           
ASSETS
          
Current assets:
          
Cash and cash equivalents
  
$
12,113
  
$
9,203
  
Short-term investments
    
10,864
    
15,710
  
Accounts receivable, trade
    
171
    
1,328
  
Other receivables
    
162
    
483
  
Prepaid expenses and other current assets
    
416
    
949
  
Total current assets
    
23,726
    
27,673
  
Long-term deposits
    
310
    
150
  
   
$
24,036
  
$
27,823
  
               
LIABILITIES AND STOCKHOLDERS' EQUITY
              
Current liabilities:
              
Accounts payable
  
$
243
  
$
252
  
Accrued warranty liability
    
43
    
157
  
Other accrued liabilities
    
1,011
    
3,129
  
Accrued compensation
    
—
    
412
  
Deferred revenue
    
469
    
509
  
Total current liabilities
    
1,766
    
4,459
  
Total liabilities
    
1,766
    
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
   
623
    
614
  
Accumulated deficit
    
(517,301
)
  
(515,759
)
Total stockholders' equity
    
22,270
    
23,364
  
   
$
24,036
  
$
27,823
  

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