Redline Communications Reports 2015 Fourth Quarter and Year End Results

New director appointed to the board and shareholder rights plan adopted

TORONTO, March 7, 2016 /CNW/ - Redline Communications (www.rdlcom.com) Group Inc. (TSX: RDL) ("Redline" or the "Company"), the creator of powerful wide-area wireless networks for mission-critical applications in challenging locations, today announced operating results¹ for the three months (fourth quarter) and the fiscal year ended December 31, 2015.

Financial highlights for the fiscal year ended December 31, 2015 include:

  • Cash of $14.5 million as of December 31, 2015, down $1.8 million over 2014
  • Order Bookings² were $31.8 million, down 22% over 2014
  • Revenues were $30.1 million, down 17% over 2014
  • $17.8 million Order Backlog² at December 31, 2015, up 2% over 2014
  • 56% overall gross margin, unchanged from 2014
  • Operating expenses were $18.5 million, up 1% over 2014
  • Adjusted EBITDA loss² of $0.5 million, a decrease of $3.5 million over 2014
  • EPS of ($0.10) compared to EPS of $0.15 in 2014

Financial Review

Order Bookings for the fourth quarter and year ended December 31, 2015 were $7.3 million and $31.8 million respectively, down 39% and 22% over the same periods in 2014. Total recognized revenue for the fourth quarter and year ended December 31, 2015 was $5.1 million and $30.1 million, down 56% and 17% over the same periods in 2014. The decreases in Order Bookings and total recognized revenue can be largely attributed to reduced spending from energy sector clients as a result of lower oil prices.

"Redline is continuing to develop business from non-energy sector clients. With the recent hiring of an experienced vice president of sales and marketing, the repositioning of our products to be more attractive to the telecom service provider market and the upcoming introduction of a new LTE-based product line, we are confident that our revenues should grow," stated Rob Williams, Redline CEO. "We are already seeing a shift in market mix with approximately 62% of 2015 order bookings coming from the non-energy sector compared with 50% in 2014."

Overall gross margin for the fourth quarter and year ended December 31, 2015 was 54% and 56% respectively, up one percentage point and unchanged over the same periods in 2014.

Overall operating expenses for the fourth quarter and year ended December 31, 2015, were $4.2 million and $18.5 million, an improvement of 15% and an increase of 1% respectively over the same periods in 2014.  

Adjusted EBITDA loss for the fourth quarter and year ended December 31, 2015 was $1.1 million and $0.5 million respectively, a decrease of $2.5 million and $3.5 million over the corresponding periods in 2014, directly tied to lower revenues.

Net Loss for the fourth quarter of 2015 was $1.4 million, or ($0.08) per share as compared to a Net Profit of $1.4 million, or $0.08 per share in the fourth quarter of 2014. For the full year 2015, Redline reported a Net Loss of $1.8 million, or ($0.10) per share, as compared to a Net Profit of $2.5 million, $0.15 per share in 2014.

At December 31st, 2015, Redline held cash of $14.5 million, down $1.8 million from the cash of approximately $16.4 million at December 31, 2014.

Changes in Directors

Redline announced today that Mr. Philippe deGaspé Beaubien III, a founder and current chairman of the Company, will not be seeking re-election at the upcoming annual general and special meeting of the Company, which is expected to be held in June 2016 (the "2016 AGM").

In light of Mr. deGaspé Beaubien's departure, Redline announced that Mr. David J. Roberts was appointed today to its board of directors. In addition, the Company reached an agreement with a group of shareholders holding approximately 46% of Redline's outstanding common shares, pursuant to which Mr. Roberts will also be nominated at the 2016 AGM, together with the current directors, other than Mr. deGaspé Beaubien.

Mr. Roberts is currently Chief Investment Officer of Pender Financial Group Corporation and has over 30 years of senior operational and investment experience in the venture capital, information technology, communications and life sciences sectors. He has held various directorships in public and private companies since 1983. He is currently Chairman of ActiveState Software Inc. and a director of RDM Corporation (TSX: RC). Previously, Mr. Roberts also served as Chairman, President and CEO of BasicGov Systems, Inc., President & CEO and director of Santa Rosa Resources Corp., a director of Pender Growth Fund (VCC) Inc., Chairman of Icron Technologies Corporation, Inc., and President & CEO of PenderFund Capital Management Ltd. Mr. Roberts is a graduate of University College London (B.Sc.).

"The demands of my other business interests require me to step aside at this point in time. As one of the founders and largest shareholder, I am confident in the remaining board members' ability to direct the company and capitalize on the significant opportunities that lie ahead for Redline", said Mr. Philippe deGaspé Beaubien III.

The nominees for directors at the 2016 AGM will consist of Messrs. Eric Demirian, Nizar Jaffer Somji, Robert Williams, John Wilson and David J. Roberts.

Adoption of Rights Plan

The Company also announced that its board of directors has approved the adoption of a shareholder rights plan (the "Rights Plan"), effective March 7, 2016. The Rights Plan is subject to TSX acceptance. Although effective as of today, the Rights Plan is subject to ratification by Redline's shareholders within six months. Such approval will be sought at the 2016 AGM. If the shareholders do not ratify the Rights Plan at the 2016 AGM, the Rights Plan and all of the rights outstanding at the time will terminate.

The primary objectives of the Rights Plan are to ensure that, in the context of a bid for control of the Company through an acquisition of shares of the Company, all shareholders have an equal opportunity to participate in the bid and are given adequate time to assess the bid. The Rights Plan is not intended to prevent take-over bids that treat shareholders fairly and offer fair value, and permits bids that meet certain requirements intended to protect the interests of all shareholders.

Redline is not aware of any specific take-over bid for the Company that has been made or is contemplated. The Rights Plan is similar to plans adopted by other Canadian companies, with such amendments to take into consideration National Instrument 62-104 Take-Over Bids and Issuer Bids, which is expected to come into force in Ontario in May of 2016.

Under the terms of the Rights Plan, one right (a "Right") will be issued by the Company in respect of each outstanding share. The Rights issued under the Rights Plan become exercisable only if a person acquires 20% or more of the shares of the Company without complying with the "permitted bid" provisions of the Rights Plan or without the approval of the Company's board. In this event, Rights holders (other than the offeror, its affiliates, associates and joint actors) can purchase shares of the Company at a substantial discount to the prevailing market price at the time that the Rights become exercisable.

"Permitted bids" under the Rights Plan must be made to all holders of the Company's shares and must be open for acceptance for a minimum of 105 days (which period may be reduced in certain circumstances). If at the end of 105 days at least 50% of the outstanding shares (other than those owned by the offeror, its affiliates, associates and joint actors) have been tendered and not withdrawn, the offeror may take up and pay for the shares but must extend the bid for a further 10 days to allow other shareholders to tender to the bid.

The description of the Rights Plan in this news release is qualified in its entirety by the full text of the Rights Plan, a copy of which is available under Redline's profile on SEDAR at www.sedar.com.

Conference Call and Webcast – March 8th, 2016 at 10:00 a.m. ET

A conference call and webcast to discuss the results has been scheduled for Tuesday March 8, 2016 at 10:00 a.m. Eastern Time. To participate, please dial 1-647-427-7450 approximately 10 minutes before the conference call, and provide passcode 50821851. A recording of the call will be available through April 30, 2016 on Redline's website.

About Redline Communications
Redline Communications (www.rdlcom.com) is the creator of powerful wide-area wireless networks for mission-critical applications in challenging locations. Redline networks are used by oil and gas companies to manage onshore and offshore assets, by militaries for secure battlefield communications, by municipalities to remotely monitor infrastructure, and by telecom service providers to deliver premium services. Hundreds of businesses worldwide rely on Redline to engineer, plan and deliver ruggedized, secure and reliable networks for their M2M, voice, data and video communications needs - in locations that include the deserts of the Middle East, the rainforests of South America, and the frozen Alaskan slopes. For more information visit www.rdlcom.com.

NOTES:

1

All amounts reported in this press release are in US dollars unless otherwise stated.

2

To better assess the health and growth of the Redline's business, the Company reports on several non-IFRS metrics, including "Orders or Bookings", "Shipped or Shipments", "Backlog", "EBITDA", "Adjusted EDITDA","EPS excluding the non-cash expense relating to the fair market adjustment on the Debenture", and "Amortized Deferred Revenue". Further information including definitions of these measures and a reconciliation to their closest IFRS measures, if applicable, can be found in the Company's Management Discussion and Analysis for the three and twelve months ended December 31, 2015 ("Q4 and 2015 Year MD&A"), copies of which are available on SEDAR at www.sedar.com. Further details on the three and twelve month results ended December 31, 2015 can be found in the condensed consolidated annual audited statement of financial position, condensed consolidated annual audited statement of comprehensive income, condensed consolidated annual audited statement of changes in equity and condensed consolidated annual audited statement of cash flows reproduced at the end of this press release. The selected financial information included in this release is qualified in its entirety by, and should be read together with the Condensed Consolidated Audited Financial Statements of the Company for the three and twelve months ended December 31, 2015 and the Q4 and 2015 Year MD&A.

Forward Looking Statements
Certain statements in this release may 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 effects 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.

 

REDLINE COMMUNICATIONS GROUP INC.









Consolidated Statements of Financial Position









(Expressed in U.S. dollars)























December 31,
2015


December 31,
2014




ASSETS









Current assets:










Cash 



$        14,548,954


$        16,364,077





Trade receivables



8,187,806


12,163,006





Other receivables



466,668


780,313





Inventories 



7,100,207


5,479,981





Prepaid expenses and other deposits



266,578


595,174








30,570,213


35,382,551




Non-current assets:










Property, plant and equipment



1,389,727


1,590,011





Intangible assets



1,974,672


1,943,678





Other assets 



64,755


77,250








3,429,154


3,610,939




Total Assets



$        33,999,367


$        38,993,490














LIABILITIES AND SHAREHOLDERS' EQUITY 









Current liabilities










Trade and other payables



$          4,475,662


$          6,307,092





Income tax payable



94,063


155,063





Deferred revenue



1,534,731


1,467,123





Convertible debenture (principal and interest)



224,595


-





Fair market value adjustment on convertible debenture



11,817


-





Borrowings



2,833,752


4,311,077








9,174,620


12,240,355




Non-current liabilities










Other payables



322,116


478,311





Other financial liability



-


159





Convertible debenture (principal and interest)



-


265,614





Fair market value adjustment on convertible debenture



-


91,040








322,116


835,124




Total Liabilities



9,496,736


13,075,479














SHAREHOLDERS' EQUITY









Share capital 



172,662,177


172,617,023




Warrant 



310,000


310,000




Contributed surplus



8,457,415


8,167,450




Deficit



(156,926,961)


(155,176,462)








24,502,631


25,918,011




Total liabilities and equity



$        33,999,367


$        38,993,490

























REDLINE COMMUNICATIONS GROUP INC.







Consolidated Statements of Comprehensive Income (Loss)







(Expressed in U.S. dollars)



























Three months ended December 31,


Year ended December 31,




2015


2014


2015


2014

Revenue




$     5,135,419


$  11,542,106


$   30,129,653


$  36,438,811

Cost of revenue




2,352,593


5,444,019


13,268,491


15,984,952

Gross profit




2,782,826


6,098,087


16,861,162


20,453,859













Expenses:












Research and development




969,027


792,432


3,298,337


3,031,637


Administration and finance




1,106,671


1,685,415


5,491,258


6,029,204


Sales and marketing




1,833,648


2,134,537


8,488,656


8,130,326


Operations and customer support




293,495


307,912


1,268,530


1,210,641






4,202,841


4,920,296


18,546,781


18,401,808

Profit (loss) before undernoted items




(1,420,015)


1,177,791


(1,685,619)


2,052,051













Other expenses (gains)












Finance expense




53,979


26,596


137,562


127,450


Restructuring costs




-


-


235,155


-


Gain on fair market value  of financial instruments




(28,207)


(105,098)


(65,739)


(556,228)


Foreign exchange gain




(65,479)


(159,971)


(337,511)


(45,072)






(39,707)


(238,473)


(30,533)


(473,850)

Profit (loss) before income taxes




(1,380,308)


1,416,264


(1,655,086)


2,525,901

Income tax expense




48,051


3,293


95,413


46,361

Net profit (loss) and total comprehensive income (loss)



$    (1,428,359)


$    1,412,971


$   (1,750,499)


$    2,479,540

























Earnings (loss) per share












Basic




$             (0.08)


$             0.08


$            (0.10)


$             0.15


Diluted




$             (0.08)


$             0.08


$            (0.10)


$             0.15





































REDLINE COMMUNICATIONS GROUP INC.





Consolidated Statements of Changes in Equity





(Expressed in U.S. dollars)

















Share
capital

Share

purchase

loan

Warrant

Contributed

surplus

Deficit

Total

Balance at
January 1, 2014

$    168,903,267

$        (365,780)

$           310,000

$        8,911,025

$  (157,656,002)

$      20,102,510


Net profit

-

-

-

-

2,479,540

2,479,540


Exercise of options

1,790,172

-

-

(835,117)

-

955,055


Conversion of warrants

2,253,156

-

-

-

-

2,253,156


Share purchase loan settlement

(329,572)

365,780

-

-

-

36,208


Repurchase and cancellation of options

-

-

-

(201,793)

-

(201,793)


Share-based payments

-

-

-

293,335

-

293,335

Balance at
December 31, 2014

$    172,617,023

$                    -

$           310,000

$        8,167,450

$  (155,176,462)

$      25,918,011


Net loss

-

-

-

-

(1,750,499)

(1,750,499)


Exercise of options

45,154

-

-

(24,791)

-

20,363


Share-based payments

-

-

-

314,756

-

314,756

Balance at
December 31, 2015

$    172,662,177

$                    -

$           310,000

$        8,457,415

$  (156,926,961)

$      24,502,631

















REDLINE COMMUNICATIONS GROUP INC.








Consolidated Statements of Cash Flows








(Expressed in U.S. dollars)




















Three months ended December 31,


Year ended December 31,



2015

2014


2015

2014


Cash flows from operating activities:









Net profit (loss)


$   (1,428,359)

$     1,412,971


$   (1,750,499)

$     2,479,540



Adjustments to reconcile net profit (loss) to net cash from operating activities










Finance expense


53,979

26,596


137,562

127,450




Depreciation and amortization of non-current assets


218,879

178,104


859,029

556,359




Gain on disposal of assets


-

(23,757)


(9,950)

(8,105)




Recognition of share based payments


40,348

54,689


314,756

329,543




Foreign exchange loss on cash held in foreign currency


68,938

198,866


579,532

580,622




Foreign exchange gain on borrowings


(114,146)

(174,237)


(727,420)

(486,443)




Gain on fair market value of financial instruments


(28,207)

(105,098)


(65,739)

(556,228)
















(1,188,568)

1,568,134


(662,729)

3,022,738



Change in non-cash operating assets and liabilities 










Decrease in deferred cost of revenue


-

-


-

40,059




Increase in deferred revenue


211,398

(48,409)


67,608

361,790




Change in other non-cash operating assets and liabilities 


3,886,301

(1,083,460)


961,085

(190,261)


Cash from operating activities


2,909,131

436,265


365,964

3,234,326


Cash flows used in investing activities:









Acquisition of property, plant and equipment


(28,495)

(7,264)


(197,384)

(403,762)



Proceeds on sale of property, plant and equipment


-

201,705


9,950

216,129



Acquisition of intangible assets


(263,000)

(191,988)


(492,355)

(2,066,022)


Cash used in investing activities


(291,495)

2,453


(679,789)

(2,253,655)


Cash flows from financing activities:









Finance income


(25,427)

16,198


2,383

58,680



Proceeds from exercise of options


-

18,015


20,363

955,055



Proceeds from conversion of debenture and warrants


-

-


-

1,919,290



Repayment of borrowings


(841,200)

(442,243)


(944,512)

(442,243)


Cash from (used in) financing activities


(866,627)

(408,030)


(921,766)

2,490,782


Foreign exchange loss on cash held in foreign currency


(68,938)

(198,866)


(579,532)

(580,622)


Increase (decrease) in cash


1,682,071

(168,178)


(1,815,123)

2,890,831


Cash, beginning of the period


12,866,883

16,532,255


16,364,077

13,473,246


Cash, end of the period


$   14,548,954

$   16,364,077


$   14,548,954

$   16,364,077
































SOURCE Redline Communications Group Inc.

For further information: Redline Contact(s): George Kypreos, Chief Financial Officer, +1-905-479-8344, gkypreos@rdlcom.com; Cory Pala, Investor Relations, +1-416-657-2400, cory.pala@evestor.com

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