Redline Reports Second Quarter 2008 Financial Results

    - Company expands in key markets; accelerates delivery of new family of
    WiMAX products -


    All figures in US Dollars unless specified

    TORONTO, July 31 /CNW/ - Redline Communications Group Inc. ("Redline" or
"the Company"), (TSX/AIM: RDL), a leading provider of WiMAX and wireless
broadband solutions, today announced its financial results for the three- and
six-month periods ended June 30, 2008.

    Financial Results:

    -   Revenue was $9.5 million, compared to $14.1 million in Q2 2007 and
        $13.8 million sequentially
    -   WiMAX Forum Certified(TM) RedMAX revenue of $4.4 million or 46% of
        total product revenue
    -   Broadband wireless infrastructure (BWI) revenue was $5.1 million or
        54% of total product revenue
    -   Gross margin was 37%, compared to 33% for Q2 2007
    -   Net loss of $5.3 million, or $0.25 per share, based on 21,048,635
        fully diluted shares, compared to net loss of $2.8 million, or
        $0.26 per share, for the same period in 2007
    -   Net cash at quarter end was $15.5 million versus $20.8 million at the
        end of Q1 2008

    Operational Highlights:

    -   166 paid trials and deployments of WiMAX Forum Certified(TM) RedMAX
        systems, compared to 160 at the end of Q1
    -   63 commercial WiMAX networks compared with 58 at the end of Q1
    -   Shipped latest version of RedMAX 4C base station to major carrier in
        the Middle East
    -   RedMAX 4C granted Best of WiMAX World EMEA "Industry Choice" and
        Frost and Sullivan Innovation Awards

    The second quarter financial results were affected both by market and
operational issues, including a softening in the demand for 802.16d WiMAX
products as a result of recent industry announcements, customers delaying
network expansions due to complications in integrating the Redline Management
Suite (RMS), and changes in the Company's senior sales management.
    "Redline has worked quickly to address the operational issues we
experienced late in the second quarter," said Majed Sifri, President and CEO,
Redline Communications Inc. "We have appointed new managing directors for
Europe and Africa, and are adding seasoned sales representatives to strengthen
our sales teams in other territories. In addition, we expect to replace our
Vice President of Worldwide Sales this quarter. The technical issues with the
integration of the RMS have been resolved and we are working closely with our
customers to continue with network expansion plans."
    "We are confident that we will execute on our plan to expand WiMAX
deployments among our key WiMAX customers and to accelerate the development
and delivery of our RedMAX 4C Mobile WiMAX products this year," added Sifri.
"We have also been successful in increasing our customer base in the
Asia-Pacific region, including the addition of Sify Technologies Limited, an
emerging telecommunications company in India that is rolling out our RedMAX
products in five major cities. Our international growth has also been
bolstered by continued uptake and the recent FCC certification of our complete
family of 3.65 GHz products in the United States. To ensure continued growth
in WiMAX, we are also looking at strategic options to leverage the value of
our Broadband Wireless Infrastructure business unit."

    Financial Review

    In the second quarter of 2008, Redline's revenue was $9.5 million,
compared to $14.1 million in the second quarter of 2007 and $13.8 million in
the first quarter of 2008. The Company's WiMAX Forum Certified(TM) products
accounted for $4.4 million, or 46% of product revenue, and BWI generated
revenues of $5.1 million. In 2008, the Company expects that its WiMAX and BWI
businesses will make equal contributions to revenues for the year, with some
quarter-by-quarter variations.
    Gross margin for the three months ended June 30, 2008 was 37%, or
$3.5 million, compared to 33%, or $4.7 million, for the same period last year.
Operating expenses were $8.6 million in Q2 2008 compared to $6.8 million in Q2
2007 and $9.4 million in Q1 2008. Net loss for the second quarter of 2008 was
$5.3 million, or $0.25 per share, compared to $2.8 million, or $0.26 per
share, for the second quarter of 2007 and $4.2 million, or $0.20 per share, in
Q1 2008. As at June 30, 2008, the Company had $15.5 million of cash, cash
equivalents and restricted cash, compared with $20.8 million as at March 31,
2008. The decrease in cash during the quarter reflects an operating loss of
$5.1 million.

    Chief Executive Officer Review

    In the second quarter of 2008, Redline continued to deliver on its key
strategic initiatives:

    Accelerating Mobile WiMAX Delivery
    Redline continues to accelerate development and delivery of its RedMAX 4C
Mobile WiMAX products and expects to be included in the next phase of WiMAX
Forum Certification. The Company's Mobile WiMAX offerings now includes a
variety of base stations and customer premise equipment that offer the
flexibility to deploy networks in a range of markets, providing ubiquitous
enterprise and personal broadband access.

    Expanding RedMAX trials and commercial deployments:
    Redline has increased the number of trials and deployments to 166,
compared to 150 at the end of 2007, including several trials of its RedMAX 4C
products. There are now 63 carriers that have converted to commercial
revenue-generating RedMAX deployments, compared with 49 at the end of 2007.

    Expanding Redline's global reach:
    Redline has over 170 global reseller and deployment partners for its
RedMAX and BWI products, including global systems integrators and other
companies with expertise in planning and installing wireless networks for
markets including oil and gas, transportation, public safety and the military.
The Company has also developed alliances with partners that will assist with
the sales and deployment of its RedMAX 4C Mobile WiMAX products.

    Broadening customer base:
    Redline is focused on delivering solutions for key high-growth
international markets. While the Company continues to derive a significant
portion of its revenue from the Americas and Middle East, it has seen recent
rapid growth in the Asia Pacific market, with that region now generating 11%
of total revenues. The Company is also broadening to new types of operators,
including mobile carriers that are trialing or deploying its WiMAX products.

    Maintaining technology leadership:
    Redline has maintained its technology leadership in both its WiMAX and
BWI business units. The RedMAX product family continues to offer the highest
capacity in the market, highest scalability and open architecture, which
translates into an easy to deploy network with a rapid return on investment
for its customers. Under the Redline Ecosystem Verification (REV) program,
Redline has completed interoperability testing with Tranzeo Wireless
Technologies' (TSX:TZT) Canadian WiMAX vendor. In addition, Redline continues
to accelerate development and delivery of its RedMAX 4C Mobile WiMAX products
and expects to be included in the next phase of WiMAX Forum Certification.


    Redline has revised its revenue guidance for the second half of 2008 to
approximately $20 million to $25 million.

    Investor Conference Call

    Redline's Q2 2008 conference call is on Thursday, July 31, 2008 at
8:30 am ET (1:30 pm BST). Conference call dial in numbers are 416-644-3429 or
1-800-732-9303 (Canada) or 00-800-2288-3501 (UK). The live webcast of the
conference call and a copy of this news release and financial statements are
available on the 'Investors' section of Redline's website or at

    Interim Consolidated Balance Sheets
    (Expressed in U.S. dollars)

                                                      June 30,   December 31,
                                                         2008           2007

    Current assets:
      Cash                                      $  15,494,035  $  28,713,405
      Restricted cash                                   8,033          8,033
      Accounts receivable                          15,726,384     17,423,119
      Other receivables                               364,363        360,855
      Inventories                                  13,258,906      9,028,620
      Prepaid expenses                                834,781        576,741
                                                   45,686,502     56,110,773

    Property, plant and equipment                   1,736,926      1,339,721

    Other assets                                       93,974         94,054

                                                $  47,517,402  $  57,544,548

    Liabilities and Shareholders' Equity

    Current liabilities:
      Accounts payable and accrued liabilities  $   9,402,165  $   9,657,119
      Deferred revenue                              1,884,030      2,706,656
      Current portion of capital lease
       obligations                                    177,335        229,322
      Current portion of loans payable              1,998,010      1,776,633
                                                   13,461,540     14,369,730

    Loans payable                                     895,897      1,375,424

    Capital lease obligations                          47,633         60,462

    Shareholders' equity:
      Share capital                               128,444,175    128,538,474
      Share purchase loan                            (365,780)      (365,780)
      Warrants                                        310,000        310,000
      Contributed surplus                           5,384,196      4,651,508
      Deficit                                    (100,971,727)   (91,706,738)
      Accumulated other comprehensive income          311,468        311,468
                                                   33,112,332     41,738,932

                                                $  47,517,402  $  57,544,548

    Interim Consolidated Statements of Operations and Deficit
    (Expressed in U.S. dollars)

                            Three months ended            Six months ended
                                 June 30,                      June 30,
                           2008           2007           2008           2007
                               (Unaudited)                   (Unaudited)
      Product     $   8,796,461  $  13,224,445  $  21,437,583  $  24,028,778
      Maintenance       728,723        909,762      1,885,678      1,737,174
                      9,525,184     14,134,207     23,323,261     25,765,952

    Cost of
     revenue(1)       5,977,014      9,419,247     14,324,473     16,504,245

    Gross margin      3,548,170      4,714,960      8,998,788      9,261,707

      Research and
       development(1) 3,116,277      1,915,156      6,531,842      4,524,174
      Finance and
       istration(1)   1,471,501      1,278,542      3,044,129      2,380,616
      Sales and
       marketing(1)   4,046,056      3,582,204      8,491,027      7,267,679
                      8,633,834      6,775,902     18,066,998     14,172,469
    Loss before the
     undernoted      (5,085,664)    (2,060,942)    (9,068,210)    (4,910,762)

    Other expenses
      Interest and
       other            167,656         49,891        132,279        115,400
      Foreign exchange
       loss (gain)     (260,207)       388,873       (110,121)       172,244
      Gain on disposal
       of assets              -              -        (70,296)             -
      Amortization of
       property, plant
       and equipment    248,479        270,815        435,682        490,499
                        155,928        709,579        387,544        778,143
    Loss before
     income taxes    (5,241,592)    (2,770,521)    (9,455,754)    (5,688,905)

    Income taxes          8,919         50,883         39,761         50,883

    Loss and
     loss for the
     period          (5,250,511)    (2,821,404)    (9,495,515)    (5,739,788)

     of period:
      As previously
       reported     (95,721,216)   (78,876,610)   (91,706,738)   (75,958,226)
      Change in
       policy                 -              -        230,526              -
      As revised    (95,721,216)   (78,876,610)   (91,476,212)   (75,958,226)
    Deficit, end
     of period    $(100,971,727) $ (81,698,014) $(100,971,727) $ (81,698,014)
      Loss per
    Basic and
     diluted      $       (0.25) $       (0.26) $       (0.45) $       (0.53)
     average number
     of common
     shares used in
     basic and
     diluted loss
     per share       21,048,635     10,793,362     21,048,267     10,776,422
    (1) Includes
     expense as

    Cost of
     revenue      $      28,262  $      29,677  $      59,122  $      63,126
      Research and
       development      140,007         72,574        285,190        216,663
      Finance and
       administration    72,222         83,355        155,038        178,557
      Sales and
       marketing        178,775        136,731        381,714        296,259

    Interim Consolidated Statements of Cash Flows
    (Expressed in U.S. dollars)

                            Three months ended            Six months ended
                                 June 30,                      June 30,
                           2008           2007           2008           2007
                               (Unaudited)                   (Unaudited)
    Cash provided by
     (used in):

      Loss for the
       period     $  (5,250,511) $  (2,821,404) $  (9,495,515) $  (5,739,788)
      Items not
         of property,
         plant and
         equipment      248,479        270,815        435,682        490,499
        Gain on
         of assets            -              -        (70,296)             -
         expense        419,266        322,337        881,064        754,605
         of debt         26,324              -         52,648              -
         loss (gain)    (53,846)       (12,447)       232,871        (12,447)
      Change in non-
       cash operating
       working capital   (8,756)    (1,371,971)    (3,642,073)    (7,182,947)
                     (4,619,044)    (3,612,670)   (11,605,619)   (11,690,078)

      Issuance of
       share capital,
       net of
       costs            (52,522)       (49,336)       (94,299)     2,546,098
      Repayment of
       loans           (445,432)      (432,667)      (855,024)      (432,667)
       payment of
       capital lease
       obligations      (36,145)       (69,701)       (97,059)      (165,538)
                       (534,099)      (551,704)    (1,046,382)     1,947,893

      Purchase of
       plant and
       equipment       (159,020)      (295,457)      (334,498)      (551,615)
    Foreign exchange
     gain (loss) on
     cash held in
     currency            53,846         12,447       (232,871)        12,447

    Decrease in cash (5,258,317)    (4,447,384)   (13,219,370)   (10,281,353)

    Cash, beginning
     of period       20,752,352     12,151,422     28,713,405     17,985,391

    Cash, end of
     period       $  15,494,035  $   7,704,038  $  15,494,035  $   7,704,038

     cash flow
       paid       $     103,566  $     102,702  $     206,640  $     245,771

     relating to
     financing and
      Purchase of
       plant and
       under capital
       leases            32,243         34,143         32,243        145,793
      Purchase of
       plant and
       under loans      544,226              -        544,226              -
      Change in
       policy                 -              -        230,526              -

    Forward-Looking Statements

    Certain statements in this press release may contain words such as
"could", "expects", "may", "anticipates", "believes", "intends", "estimates",
"targets", "envisions", "seeks" and other similar language and are considered
forward-looking statements or information under applicable securities
legislation. These statements are based on Redline's current expectations,
estimates, forecasts and projections about the operating environment,
economies and markets in which Redline operates. These statements are subject
to important assumptions, risks and uncertainties, which are difficult to
predict and the actual outcome may be materially different. Redline has made
various assumptions in the preparation of its financial outlook in this press
release, including the following company specific assumptions: An ability to
ramp sales in new WiMAX product lines and in a private label product line in
its RedCONNEX business; the continued network and deployment expansion by its
largest customers, especially in the Middle East and the Americas; the
continued ability to have more WiMAX customers convert to commercial networks,
and the ability to add new WiMAX customers, using both its 802.16-2004 and
802.16-2005 solutions; improvement in Redline's product costs due to favorable
supplier pricing, offset by higher costs associated with initial customer
deployments in emerging markets; increased employee costs relative to expected
cost of living adjustments and employee bonuses; and the effective execution
of Redline's strategy, including the execution of Redline's supply chain
strategy. Redline has also made certain macroeconomic and general industry
assumptions in the preparation of its financial guidance including: a modest
decrease in the growth rate of the gross domestic product of global economies
which is lower than the growth rate in 2007; global service provider capital
expenditures in 2008 reflecting mid to high single digit growth as compared to
high single digit growth in 2007; global growth rate to remain stable with
investments in next generation products and services to offset declines in
purchases of legacy equipment; and a moderate impact as a result of expected
industry consolidation among service providers in various geographic regions,
particularly in emerging markets; and the impact of the rise in the Canadian
dollar in 2007 and 2008 compared to the US dollar and other world currencies.
The above assumptions, although considered reasonable by Redline at the date
of this press release, may prove to be inaccurate and consequently Redline's
actual results could differ materially from its expectations set out in this
press release.
    Further, actual results or events could differ materially from those
contemplated in forward-looking statements as a result of the following (i)
risks and uncertainties relating to Redline's business including: significant
competition, competitive pricing practice, cautious capital spending by
customers, industry consolidation, rapidly changing technologies, evolving
industry standards, frequent new product introductions and 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 our
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; Redline's potential inability to attract or retain the personnel
necessary to achieve its business objectives or to maintain an effective risk
management strategy; (ii) risks and uncertainties relating to Redline's
liquidity, financing arrangements and capital including: any inability of
Redline to manage cash flow fluctuations to fund working capital requirements
or achieve its business objectives in a timely manner or obtain additional
sources of funding; or any negative impact on Redline's ability to make future
acquisitions, raise capital, issue debt and retain employees arising from
stock price volatility and any declines in the market price of Redline's
publicly traded securities. For additional information with respect to certain
of these and other factors, see Redline's final prospectus (at page 83 under
the heading "Risk Factor") which is available on Redline's website at or through Unless otherwise
required by applicable securities laws, Redline disclaims any intention or
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.

    About Redline Communications

    Redline Communications ( is the leading
provider of fixed and mobile standards-based wireless broadband solutions.
Redline's RedMAX(TM) WiMAX Forum Certified(TM) system, RedMAX 4C Mobile
WiMAX(TM) products, and its award-winning broadband wireless infrastructure
family of products - RedCONNEX(TM) and RedACCESS(TM) - enable service
providers and other network operators to cost-effectively deliver
high-bandwidth services, including voice, video and data communications.
Redline is committed to maintaining its wireless industry leadership with the
continued development of WiMAX and other advanced wireless broadband products.
With more than 100,000 systems in 85 countries, and a global network of over
170 partners, Redline's experience and expertise helps service providers,
enterprises and government organizations roll out wireless broadband networks
to support advanced communications.

    NOTE: All registered and unregistered trademarks mentioned in this
    release are the property of their respective owners.

For further information:

For further information: Redline Communications, Tom Hearne, Carolyn
Anderson,,, Tel: (905) 479-8344; Equicom Group, Craig
Armitage, Vanessa Beresford,,, Tel: (416) 815-0700; Canaccord Adams, Neil
Johnson, Andrew Chubb, Tel: +44 (0)20 7050 6500

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