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Redline Communications Reports Third Quarter 2009 Results and Announces Management Changes

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^{Published in Science and Technology on Monday, November 16th 2009 at 14:03 GMT by Market Wire}  

 Q3 2009 Financial Highlights: - Revenue of $9.1 million, compared to $10.4 million in Q2 2009 and $9.6 million in Q3 2008 - Gross margin was 42.6% (53% excluding inventory provisions), compared to 37.7% (41.3% excluding inventory provision) in Q2 2009 and 37.7% in Q3 2008 (51.1% excluding inventory provision) - Net loss of $2.4 million, or $0.11 per share, compared to $2.6 million, or $0.12 per share in Q2, 2009 and $6.2 million, or $0.29 per share, in Q3 2008 - Cash and short-term investments at quarter end was $5.1 million, compared to $4.2 million on June 30, 2009 and $4.4 million as at December 31, 2008 Q3 2009 Operational Highlights: - Launched RedMAX 4C SC-100e Mobile WiMAX base station designed to meet specific technical requirements for vertical market applications such as Smart Grid networks - Continued customer outreach and support programs to assist customers that have been short-listed for American Recovery and Reinvestment Act (ARRA) stimulus funding - Selected as WiMAX vendor for several projects in Latin America that will be funded by government stimulus programs - Added new leadership to Product Management team to focus on delivery of new products for key industry verticals and applications 

 2009 Nine Month Financial Summary: - Revenue of $29.0 million, compared with $32.9 million for the same period of 2008 - WiMAX product revenue was $12.6 million (46.3% of product revenue), compared to $11.8 million (38.9% of product revenue) for the same period of 2008 - BWI product revenue was $14.6 million (53.7% of product revenue), compared to $18.6 million (61.1% of product revenue) for the same period of 2008 - Gross margin was 41.3%, compared with 38.3% for the same period of 2008 - Net loss of $7.0 million, or $0.33 per share, compared to $15.7 million, or $0.74 per share, for the same period of 2008 

 (1) Earnings Before Interest, Taxes, Depreciation and Amortization. About Redline Communications 

 REDLINE COMMUNICATIONS GROUP INC. Consolidated Balance Sheets (expressed in U.S. dollars) ------------------------------------------------------------------------- September 30, December 31, 2009 2008 ------------------------------------------------------------------------- (unaudited) (audited) Assets Current assets: Cash and cash equivalents $ 5,047,118 $ 4,355,254 Restricted short-term investments 93,373 - Accounts receivable 9,440,973 11,627,388 Other receivables 206,617 230,563 Inventories 7,658,846 12,896,286 Prepaid expenses 428,650 457,437 ----------------------------------------------------------------------- 22,875,577 29,566,928 Capital assets: Property, plant and equipment 1,043,065 1,291,597 Intangible assets subject to amortization 322,415 496,092 Other assets 69,020 194,002 ------------------------------------------------------------------------- $ 24,310,077 $ 31,548,619 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 7,177,764 $ 9,905,615 Deferred revenue 1,196,533 1,267,498 Current portion of capital lease obligations 23,276 50,898 Current portion of loans payable 3,828,554 1,675,741 ------------------------------------------------------------------------- 12,226,127 12,899,752 Loans payable 126,371 250,313 Capital lease obligations 18,124 27,600 Shareholders' equity: Share capital 128,503,724 128,444,175 Share purchase loan (365,780) (365,780) Warrant 310,000 310,000 Contributed surplus 6,467,166 5,917,460 Deficit (123,287,123) (116,246,369) Accumulated other comprehensive income 311,468 311,468 ------------------------------------------------------------------------- 11,939,455 18,370,954 ------------------------------------------------------------------------- $ 24,310,077 $ 31,548,619 ------------------------------------------------------------------------- ------------------------------------------------------------------------- REDLINE COMMUNICATIONS GROUP INC. Consolidated Statement of Operations and Deficit (expressed in U.S. dollars) ---------------------------------------------------------- Three months ended Nine months ended September 30 September 30 2009 2008 2009 2008 ------------------------------------------------------------------------- (unaudited) (unaudited) Revenue: Product $ 8,365,951 $ 8,939,115 $ 27,238,218 $ 30,376,698 Maintenance 726,391 668,653 1,804,637 2,554,331 ----------------------------------------------------------------------- 9,092,342 9,607,768 29,042,855 32,931,029 Cost of revenue(1) 5,214,998 5,985,250 17,051,473 20,309,723 ------------------------------------------------------------------------- Gross Margin 3,877,344 3,622,518 11,991,382 12,621,306 Expenses: Sales and marke- ting(1) 2,710,111 3,947,131 7,995,196 12,438,158 Research and develo- pment(1) 2,273,655 4,014,980 7,010,326 10,546,822 Finance and admini- stration(1) 921,653 1,092,467 2,821,396 4,136,596 Amortization of property, plant & equipment 261,786 461,861 736,894 897,543 ----------------------------------------------------------------------- 6,167,205 9,516,439 18,563,812 28,019,119 ------------------------------------------------------------------------- Loss before the under- noted (2,289,861) (5,893,921) (6,572,430) (15,397,813) Other expenses /(income): Interest and other 70,084 68,943 260,981 201,222 Gain on disposal of assets - - - (70,296) Foreign exchange 88,256 200,996 199,241 90,875 ------------------------------------------------------------------------- 158,340 269,939 460,222 221,801 ------------------------------------------------------------------------- Loss before income taxes (2,448,201) (6,163,860) (7,032,652) (15,619,614) Income taxes (1,498) 8,088 8,102 47,849 ------------------------------------------------------------------------- Loss and comprehensive loss (2,446,703) (6,171,948) (7,040,754) (15,667,463) Deficit, beginning of the period (120,840,420) (100,971,727) (116,246,369) (91,706,738) Effect of change in accounting policy - - - 230,526 ------------------------------------------------------------------------- Deficit, end of period $(123,287,123) $(107,143,675) $(123,287,123) $(107,143,675) ------------------------------------------------------------------------- Loss per share - basic and diluted $ (0.11) $ (0.29) $ (0.33) $ (0.74) ------------------------------------------------------------------------- Weighted average number of common shares used in basic and diluted loss per share 21,272,764 21,048,635 21,142,121 21,048,385 ------------------------------------------------------------------------- (1)Includes stock-based compensation expense as follows: Cost of revenue $ 5,432 $ 24,572 $ 30,407 $ 83,694 Expenses: Sales and marketing 66,041 7,139 237,318 388,853 Research and development 32,078 175,905 172,580 461,095 Finance and adminis- tration 13,277 73,936 109,401 228,974 ------------------------------------------------------------------------- Total $ 116,828 $ 281,552 $ 549,706 $ 1,162,616 ------------------------------------------------------------------------- ------------------------------------------------------------------------- REDLINE COMMUNICATIONS GROUP INC. Consolidated Statements of Cash Flows (expressed in U.S. dollars) ------------------------------------------------------------------------- Three months ended Nine months ended September 30 September 30 2009 2008 2009 2008 ------------------------------------------------------------------------- (unaudited) (unaudited) Cash provided by (used in): Loss for the period $ (2,446,703) $ (6,171,948) $ (7,040,754) $ (15,667,463) Items not affecting cash: Amortization of property, plant and equipment 261,786 461,861 736,894 897,543 Stock-based compensation expense 116,828 281,552 549,706 1,162,616 Accretion of debt 26,324 26,324 78,972 78,972 Gain on disposal of assets - - - (70,296) Foreign exchange (219,763) 125,248 (226,003) 358,119 Change in non-cash working capital 2,045,045 11,233 4,802,754 (3,630,840) ------------------------------------------------------------------------- (216,483) (5,265,730) (1,098,431) (16,871,349) Financing activities: Issuance of share capital, net of issuance costs 14,592 - 59,549 (94,299) Government of Ontario loan 1,761,851 - 3,618,307 - Repayment of loans (678,981) (456,457) (1,668,408) (1,311,481) Principal payment of capital lease obligations (8,227) (88,409) (37,098) (185,468) ------------------------------------------------------------------------- 1,089,235 (544,866) 1,972,350 (1,591,248) Investing activities: Purchase of capital assets (116,375) (727,079) (314,685) (1,061,577) Increase in restricted short-term investments (366) - (93,373) - ------------------------------------------------------------------------- (116,741) (727,079) (408,058) (1,061,577) Foreign exchange gain (loss) on cash held in foreign currency 219,763 (125,248) 226,003 (358,119) Increase (decrease) in cash & cash equivalents 975,774 (6,662,923) 691,864 (19,882,293) Cash and cash equivalents, beginning of period 4,071,344 15,494,035 4,355,254 28,713,405 ------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 5,047,118 $ 8,831,112 $ 5,047,118 $ 8,831,112 ------------------------------------------------------------------------- Supplemental cash flow information: Interest paid $ 40,734 $ 77,688 $ 192,762 $ 284,328 Income taxes paid (1,498) 8,088 8,102 47,849 Supplemental disclosures relating to non-cash financing and investing activities: Purchase of property, plant & equipment under capital leases - - - 32,243 Purchase of property, plant & equipment under loan - - - 544,226 ------------------------------------------------------------------------- -------------------------------------------------------------------------