8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report (date of earliest event reported):  March 23, 2007

COSINE COMMUNICATIONS, INC.

(Exact name of Registrant as specified in its charter)

Delaware	000-30715	94-3280301
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification Number)
560 S. Winchester Blvd., Suite 500 San Jose, California 95128
(Address of principal executive offices) (Zip Code)
(408) 236-7518
(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

On March 23, 2007, CoSine Communications, Inc. issued a press release announcing its financial results for the quarter ended December 31, 2006. The full text of the press release is attached hereto as Exhibit 99.1 to this Current Report.

Item 9.01 Financial Statements and Exhibits.

     (c) Exhibits.

99.1 Press Release, dated March 23, 2007, of CoSine Communications, Inc.

SIGNATURES

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

March 23, 2007	By:	/s/ Terry Gibson
		Terry Gibson,
		Chief Executive Officer, Chief Financial Officer and Secretary (Principal Executive, Financial and Accounting Officer and Duly Authorized Officer)

INDEX TO EXHIBITS

Exhibit
No.	Description
99.1	Press Release, dated Match 23, 2007, of Cosine Communications, Inc.

EX-99.1

COSINE COMMUNICATIONS ANNOUNCES FINANCIAL RESULTS

FOR THE QUARTER ENDED DECEMBER 31, 2006

SAN JOSE, CALIF., March 23, 2007 -- CoSine Communications, Inc. (COSN.PK) today announced revenues of $1,361,000 and a net income of $449,000 or $0.04 per share for the year ended December 31, 2006 as compared to revenues of $3,315,000 and net loss of $1,218,000 or $0.12 loss per share for the year ended December 31, 2005. Revenues for the quarter ended December 31, 2006 were $128,000 and net income was $595,000, or $0.06 per share, as compared to revenues of $934,000 and a net income of $325,000 or $0.03 per share for the three months ended December 31, 2005.

Net income for the quarter and year ended December 31, 2006 included a $640,000 gain on liquidation of foreign subsidiaries. The gain is due to the cumulative effect of gains and losses of converting foreign subsidiaries financial statements into United States dollars. This gain, which had been deferred prior to the year ended December 31, 2006, was recognized in 2006 with the liquidation of the subsidiaries.

CoSine’s strategic plan is to redeploy its existing resources to identify and acquire new business operations. As a part of its strategic plan, CoSine completed the sale of its intellectual property and closed its customer service operations effective December 31, 2006.

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. CoSine has ceased its customer service operations effective December 31, 2006. CoSine’s strategic plan is to redeploy its existing resources to identify and acquire new business operations. 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 CoSine will find suitable candidates, and if it does, that it will be able to utilize its existing NOLs.

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. CoSine 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 acquisitions, 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 and executing possible strategic acquisitions. A detailed discussion of these factors and other risks that affect CoSine's business is contained in its SEC filings, including its most recent reports on Form 10-K and Form 10-Q, particularly under the heading "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. CoSine undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements.

For additional information contact:

CoSine Communications, Inc.

Terry Gibson                         

(408) 236-7518

E-mail: Terry.Gibson@Cosinecom.com

CoSine Communications, Inc.

CONSOLIDATED STATEMENT OF OPERATIONS

(in thousands, except per share data)

	Twelve months ended						Twelve months ended
	Dec 31,						Dec 31,
	2006			2005			2006			2005
Revenue:
Product	$ -			$ -			$ -			$ 216
Service		128			934			1,361			3,099
Total revenue		128			934			1,361			3,315
Cost of revenue		194			504			1,663			2,049
Gross profit (loss)		(66	)		430			(302	)		1,266
Operating expenses:
Research and development		-			-			-			103
Sales and marketing		-			-			-			105
General and administrative		410			402			1,316			3,227
Restructuring and impairment charges (credits)		-			-			-			(91	)
Total operating expenses		410			402			1,316			3,344
Income (Loss) from operations		(476	)		28			(1,618	)		(2,078	)
Interest income and expense and other, net		1,019			162			2,015			632
Income (Loss) before income tax benefit		543			190			397			(1,446	)
Income tax benefit		(52	)		(135	)		(52	)		(228	)
Net Income (Loss)	$	595		$	325		$	449		$	(1,218	)
Basic net income (loss) per share	$	0.06		$	0.03		$	0.04		$	(0.12	)
Diluted net income (loss) per share	$	0.06		$	0.03		$	0.04		$	(0.12	)
Shares used in computing basic net loss per share
Basic		10,091			10,091			10,091			10,094
Diluted		10,096			10,091			10,096			10,094

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

	December 31, 2006 (1)			December 31, 2005 (1)
ASSETS
Current assets:
Cash and cash equivalents	$	5,207		$	12,417
Short-term investments		17,650			10,749
Accounts receivable, trade		55			96
Other receivables		68			209
Prepaid expenses and other current assets		56			119
Total current assets		23,036			23,590
Long-term deposits		-			250
	$	23,036		$	23,840
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	320		$	237
Other accrued liabilities		239			874
Deferred revenue		-			126
Total current liabilities		559			1,237
Total liabilities		559			1,237
Stockholders’ equity:
Common stock		1			1
Additional paid-in capital		538,987			538,947
Accumulated other comprehensive income		17			632
Accumulated deficit		(516,528	)		(516,977	)
Total stockholders’ equity		22,477			22,603
	$	23,036		$	23,840

¹ Amounts are derived from the December 31, 2006 and 2005 audited financial statements.