CoSine Communications Announces Financial Results for the Quarter and Year Ended December 31, 2005


SAN JOSE, Calif., March 24, 2006 (PRIMEZONE) -- CoSine Communications, Inc. (Pink Sheets:COSN), a provider of customer support services for managed, network-based IP and broadband service providers, today announced revenues of $934,000 and a net income of $325,000, or $0.03 per share for the three months ended December 31, 2005, as compared to revenues of $1,564,000 and a net loss of $5.6 million or $0.53 loss per share for the three months ended December 31, 2004. For the year ended December 31, 2005, CoSine reported revenues of $3.3 million and a net loss of $1.2 million or $0.12 loss per share as compared to revenues of $9.7 million and a net loss of $37.3 million or $3.70 loss per share for the year ended 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. CoSine's strategic plan is to redeploy its existing resources to identify and acquire new business operations, while continuing to provide support to CoSine's existing customers. 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.

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 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.


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




                              Twelve months ended  Twelve months ended
                                    Dec 31,              Dec 31,
                                 2005      2004       2005      2004
                              ------------------   ------------------
 Revenue:
  Product                     $     --  $    935   $    216  $  6,924
  Service                          934       629      3,099     2,751
                              --------  --------   --------  --------
   Total revenue                   934     1,564      3,315     9,675
 Cost of revenue                   504      (287)     2,049     7,086
                              ------------------   ------------------
 Gross profit                      430     1,851      1,266     2,589

 Operating expenses:
  Research and development          --     1,762        103    15,078
  Sales and marketing               --       458        105    10,052
  General and administrative       402     1,438      3,227     6,064
  Restructuring and impairment
   charges (credits)                --     3,695        (91)    8,909
                              ---------------------------------------
 Total operating expenses          402     7,353      3,344    40,103
                              ---------------------------------------
 Income (Loss) from
  operations                        28    (5,502)    (2,078)  (37,514)

 Interest income and expense and
  other, net                       162       (94)       632       210
                              -------------------  ------------------
 Income (Loss) before income tax
  (benefit) provision              190    (5,596)    (1,446)  (37,304)

 Income tax (benefit)
  provision                       (135)       31       (228)       33
                              ------------------   ------------------
 Net Income (Loss)            $    325  $ (5,627)  $ (1,218) $(37,337)
                              ==================   ==================
 Basic net income (loss) per 
  share                       $   0.03  $  (0.53)  $  (0.12) $  (3.70)

 Shares used in computing basic 
  net loss per share            10,091    10,600     10,094    10,082

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


                                             December 31, December 31, 
                                                2005(a)      2004(a)
                                             ----------------------
 ASSETS
 Current assets:

  Cash and cash equivalents                  $  12,417    $   9,203
  Short-term investments                        10,749       15,710
  Accounts receivable, trade                        96        1,328
  Other receivables                                209          483
  Prepaid expenses and other current assets        119          949
                                             ----------------------
 Total current assets                           23,590       27,673
 Long-term deposits                                250          150
                                             ----------------------
                                             $  23,840    $  27,823
                                             ======================

 LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities:
  Accounts payable                           $     237    $     252
  Accrued warranty liability                        --          157
  Other accrued liabilities                        874        3,129
  Accrued compensation                              --          412
  Deferred revenue                                 126          509
                                             ----------------------
 Total current liabilities                       1,237        4,459
                                             ----------------------
 Total liabilities                               1,237        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           632          614
  Accumulated deficit                         (516,977)    (515,759)
                                             ----------------------
 Total stockholders' equity                     22,603       23,364
                                             ======================
                                             $  23,840    $  27,823
                                             ======================

 (a) Amounts are derived from the December 31, 2005 and 2004 audited
     financial statements.


            

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