Redline Communications Group Completes Restatement of Financial Statements,
reports Financial Results for 2009
TORONTO, Sept. 3 /CNW/ - Redline Communications Group Inc. (TSX: RDL) ("Redline" or the "Company"), a developer and manufacturer of specialized broadband wireless systems, today announced that it has completed the restatement of its consolidated financial statements for the years ended December 31, 2006, 2007 and 2008, and for the three-month periods ended March 31, June 30, and September 30, 2009. The Company also announced its financial results for the three-month period ended December 31, 2009 and the year ended December 31, 2009.
As previously reported, in March 2010 the Company formed a special committee of its directors, which was responsible for supervising a review of the Company's historical financial statements and determining the extent to which the findings could result in the Company being required to restate any financial statements. The special committee also considered the adequacy of the Company's internal controls. Additional details concerning the work of the special committee and the resulting restatements can be found in Redline's Management Discussion and Analysis for the year ended December 31, 2009 ("2009 MD&A").
A description of the restatements for the year ended December 31, 2008 can be found in note 2 of the consolidated financial statements of the Company for the years ended December 31, 2009 and December 31, 2008 ("2008/2009 Consolidated Financial Statements"). The impact of the restatements for the years and quarters for fiscal 2006, 2007, 2008 as well as for the three-month periods ended March 31, June 30, and September 30, 2009 is detailed in the "Results of Operations" section of the 2009 MD&A. Except as set forth in the 2008/2009 Consolidated Financial Statements, all restated information is unaudited. The 2008/2009 Consolidated Financial Statements and the 2009 MD&A are available on SEDAR at www.sedar.com.
"Fulfilling our outstanding filing obligations is an important step toward resumption of trading in our shares," said Eric Melka, acting CEO of Redline Communications. "We recognize that shareholders may have been inconvenienced by the temporary cease trade order, and we are implementing appropriate changes to personnel, internal reporting procedures and controls as well as corporate governance practices to reduce the likelihood of Redline facing a similar situation in the future."
Examples of such changes include the following: Personnel Changes: - A new, experienced senior management team was hired in April 2010. - Majed Sifri, former CEO of Redline, was asked by the Board to resign from the Board of Directors. Board Structure: - At its upcoming annual meeting, management will propose an increase in the number of independent Directors on the Board (from 2 to 5), and intends to put forward new independent nominees who have relevant accounting and corporate governance experience. - Role of Chair of the Audit and Compensation Committees to be rotated every two years. Management Oversight: - Standardized multi-executive review of large customer contracts, financial statements and financial metrics. - Enhanced inventory continuity and reconciliation measures. Internal Controls/Infrastructure: - Enhanced accounting system that limits reliance on manual processes. - Enhanced internal controls as outlined in our 2009 MD&A.
Upon the completion of all outstanding continuous disclosure requirements including the release and filing of its 2010 quarterly statements and related Management's Discussion and Analysis, Redline intends to apply to the relevant securities regulatory authorities for a revocation of the cease trade order previously in effect against the Company, and will work with these authorities to expedite the resumption of trading of its shares.
Selected Financial Information
The selected financial information included in this release is qualified in its entirety by, and should be read together with the 2008/2009 Consolidated Financial Statements and the 2009 MD&A. As a result of the restatements, the previously filed consolidated financial statements of the Company and associated discussions should no longer be relied upon.
Financial Results Summary: (US$000 other than per share data) ------------------------------------------------------------------------- Three month period ended December 31 Years ended ------------------------------------------------------------------------- 2009 2008(1) 2009 2008(1) 2007(1) ------------------------------------------------------------------------- Revenue 11,133 12,822 38,990 37,419 21,365 ------------------------------------------------------------------------- Gross Margin 5,422 4,872 19,294 16,430 7,688 ------------------------------------------------------------------------- Operating Expenses 7,460 9,445 28,425 41,625 37,237 ------------------------------------------------------------------------- Net Income/(Loss) (2,246) (5,148) (9,808) (26,040) (30,832) ------------------------------------------------------------------------- Income/(Loss) per share $(0.10) $(0.25) $(0.47) $(1.25) $(2.43) ------------------------------------------------------------------------- Cash 4,759 4,355 4,759 4,355 28,721 ------------------------------------------------------------------------- (1) Restated
2009 Financial Review:
In 2009, revenue was $39.0 million, an increase of $1.6 million, or 4%, compared with $37.4 million (re-stated) in 2008. The slight increase reflects the positive impact of the amortization of RedMAX revenues offset by general challenges faced by the Company in terms of overall market softness for its products as well as operational issues that were addressed late in 2009. The RedMAX revenues are being recognized ratably over the projected life of the product in accordance with revenue recognition guidelines.
Gross margin was 49.5% or $19.3 million, compared to 43.9% or $16.4 million in 2008 (re-stated). Improved margins are a result of the mix of products sold between BWI and RedMAX along with a reduced bill of materials (BOM) costs and better management of supply chain costs including freight and warehousing.
Operating expenses were $28.4 million, a decrease of 13.2 million, or 31.7% compared with $41.6 million (restated) in 2008. This decrease reflects the cost cutting measures put into place late in 2008.
Net Loss for 2009 was $9.8 million or $0.47 per share, an improvement of $16.2 million over the Net Loss of $26.0 million (restated) or $1.25 per share (restated) in 2008. The decrease in Net Loss is a result of higher gross margins and reduced operating expenses.
In Q4 2009, revenue was $11.1 million, compared to $12.8 million in Q4 2008 (re-stated). Gross margin was 48.7% or $5.4 million. Net loss was $2.2 million or $0.10 per share compared to a loss of $5.0 million or $0.25 per share in Q4 2008 (re-stated).
2009 Highlights: - Signed an agreement with the Ontario Ministry of Economic Development for $10 million in financing to support ongoing product development. The repayable loan is being provided through the Ontario Ministry of Economic Development's Advanced Manufacturing Investment Strategy (AMIS) program. - Added TESSCO Technologies Incorporated as a Value Added Distributor. Publicly traded TESSCO is a value-added provider of the product and supply chain solutions needed to design, build, run, maintain and use wireless systems. - Signed an agreement with Hydro One, the leading electricity transmitter and distributor in Ontario, to trial Redline's RedMAX 4C WiMAX solutions to enable communications to smart meters and other advanced electricity distribution technologies. - Selected by I-NetLink Wireless, a Manitoba-based wireless communications company, for its wireless network roll-out across 150 communities in rural Manitoba, which will be the largest WiMAX network in Manitoba. - Chosen by Rapid Link Incorporated, a leading provider of WiMAX and communication services, for its $7 million WiMAX network in California which will deliver high-speed wireless communications services throughout five counties in California. - Introduced RedMAX 4C SC- 100e Mobile WiMAX base station which incorporates IEEE 802.16e-2005 technology and offers customers a cost-effective and high capacity solution to establish a wireless network using the most advanced WiMAX technology available today.
About Redline Communications
Redline Communications (www.rdlcom.com) manufactures powerful and versatile wireless broadband products used to cost-effectively deploy distributed applications and services. Municipalities use Redline products to quickly and easily deploy or extend their video surveillance networks; oil and gas companies to monitor how their oil wells are operating; service providers and enterprises to bring business grade access to buildings. Redline's radio products are the most deployed commercial radio for the US military. For over 10 years, Redline has been delivering reliable wireless solutions with the strong combination of high capacity, speed, range and reliability. Redline products are marketed and supported locally through an exclusive network of value added resellers in the Americas; the Middle East, and Africa.
NOTE: All registered and unregistered trademarks mentioned in this release are the property of their respective owners.
Forward-Looking Statements --------------------------
Certain statements in this release, including the estimate of future revenues, sales, provided above, constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws. In some cases, forward-looking statements can be identified by terms such as "could", "expect", "may", "will", "anticipate", "believe", "intend", "estimate", "plan", "potential", "project" or other expressions concerning matters that are not historical facts. Readers are cautioned not to place undue reliance upon any such forward-looking statements.
Such forward-looking statements are not promises or guarantees of future performance and involve both known and unknown risks and uncertainties that may cause the actual results, performance, achievements or developments of Redline to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements. Forward-looking statements, by their nature, are based on certain assumptions regarding expected growth, management's current plans, estimates, projections, beliefs, opinions and business prospects and opportunities (collectively, the "Assumptions"). While the Company considers these Assumptions to be reasonable, based on the information currently available, they may prove to be incorrect.
Many risks, uncertainties and other factors could cause the actual results of Redline to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include but are not limited to the following: significant competition, competitive pricing practices, cautious capital spending by customers, industry consolidations, rapidly changing technologies, evolving industry standards, frequent new product introductions, short product life cycles and other trends and industry characteristics affecting the telecommunications industry; any material, adverse affects on Redline's performance if its expectations regarding market demand for particular products prove to be wrong; any negative developments associated with Redline's suppliers and contract manufacturing agreements including the Company's reliance on certain suppliers for key components; potential penalties, damages or cancelled customer contracts from failure to meet delivery and installation deadlines and any defects or errors in Redline's current or planned products; fluctuations in foreign currency exchange rates; potential higher operational and financial risks associated with Redline's efforts to expand internationally; a failure to protect Redline's intellectual property rights, or any adverse judgments or settlements arising out of disputes regarding intellectual property; changes in regulation of the wireless industry or other aspects of the industry; any failure to successfully operate or integrate strategic acquisitions, or failure to consummate or succeed with strategic alliances; and Redline's potential inability to attract or retain the personnel necessary to achieve its business objectives or to maintain an effective risk management strategy (collectively, the "Risks"). For additional information on these Risks, see Redline's most recently filed Annual Information Form ("AIF") and Annual MD&A, which are available on SEDAR at www.sedar.com and on the Company's website at www.redlinecommunications.com. Redline assumes no obligation to update or revise any forward-looking statements or forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by law. All forward looking statements contained in this release are expressly qualified in their entirety by this cautionary statement.
%SEDAR: 00025950E
For further information: Redline Communications, Lynda Partner, [email protected], +1 905-479-8344 x2224
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