Redline Communications Reports Solid Q2 2012 Financial Results

Strong Bookings and Growing Backlog Highlight a Solid Quarter 
TORONTO, Aug. 14, 2012 /CNW/ - Redline Communications Group Inc. (TSX: RDL) 
("Redline" or the "Company"), a leading provider of ruggedized wireless 
infrastructure systems, today reported financial results for the three and six 
month periods ended June 30, 2012. 
Financial Summary for the three months ended June 30, 2012 


    --  $12.1M Bookings², slightly ahead of strong Q1 2012 Bookings
    --  $10.1M Shipments, up 16% over Q1 2012
    --  $7.8M Order Backlog, up 25% over Q1 2012
    --  $17.4M Revenue, up 37% over same period last year
    --  $6.3M Operating Expenses, a 5% improvement over the same period
        last year
    --  $3.9M Adjusted EBITDA¹, up 168% over the same period last year
    --  $7.8M Net Profit compared to $0.06M in the same period last
        year
    --  EPS of $0.08 on a fully diluted basis 

Financial Highlights for the three months ended June 30, 2012
    --  Strong demand for the core Broadband Wireless Infrastructure
        ("BWI") product line helped the Company secure record Bookings
        totaling $12.1 million in the quarter. These Bookings were
        driven primarily from sales to the energy sector, including
        several large oil and gas projects in North America and the
        Middle East.
    --  The Company's flagship BWI product line accounted for 78% of
        new product orders in the quarter as the Company continued to
        de-emphasize its WiMAX™ business.
    --  The Company finished the quarter with a Backlog of orders
        totalling $7.75 million, an increase of 25% over the Backlog at
        March 31, 2012.
    --  Gross margin in the first quarter improved to 57% from 52%
        reported in the first quarter of 2012.
    --  The Company continues to deliver on its plan to reduce
        operating expenses, reporting a reduction of 5.1% to $6.35
        million in the quarter as compared to the same period in 2011.
    --  Adjusted EBITDA, was $3.91 million, an increase of 168% from
        adjusted EBITDA of $1.46 million for the same period in 2011.

Operating Highlights for the three months ended June 30, 2012
    --  Redline received and shipped a $2-million order for its rugged
        industrial wireless system to a major oil and gas company,
        providing high-capacity, high-availability communications
        between the company's US-based drilling rigs and centralized
        control offices.
    --  Redline announced that their rugged industrial wireless
        products were chosen to create a wireless infrastructure for a
        major oil field operated by the Abu Dhabi Company for Onshore
        Oil Operations (ADCO) in the United Arab Emirates. Redline's
        systems integrator Alcatel-Lucent (ALU) will deliver the
        complete and integrated digital oil field system.
    --  Redline advanced in the Cisco Developer Network as a solution
        developer within the wireless and mobility technology
        categories and Redline's
        RDL-3000
        system has successfully completed interoperability testing with
        Cisco Access Points.
    --  The Company announced the availability of Enterprise, a new
        compact carrier-grade wireless networking solution with the
        fastest bi-directional wireless broadband capacity in the
        industry.
    --  Subsequent to the end of the quarter, Redline completed a 1:4
        share consolidation effective July 13, 2012.

Financial Details

Strong demand for Redline's core Broadband Wireless Infrastructure ("BWI") 
product line helped the Company secure Bookings totaling $12.1 million for a 
second quarter in a row. These Bookings were driven primarily from sales to 
the energy sector, including several large oil and gas projects in the both 
the Middle East and North America. The Company's flagship BWI product line 
accounted for 78% of new product Bookings in the quarter as the Company 
continued to de-emphasize its lower margin legacy RedMAX™ WiMAX business. 
The Company finished the quarter with a Backlog of orders totaling $7.8 
million, up 25% from $6.2 million recorded at the end of the first quarter 
2012.

"I am very pleased with this solid quarter. We had strong Bookings once again, 
and our Backlog has grown to nearly $8 million." said Eric Melka, President 
and CEO of Redline Communications. "We've been winning larger deals with new 
and existing oil & gas customers. These typically have longer roll-out 
periods, so our Backlog has increased along with our Revenues. This increase 
in Backlog also provides better visibility into future Revenue."

Shipments for the second quarter were $10.1 million, up 16% over the $8.7 
million reported in the first quarter 2012. BWI product accounted for 87% of 
total product shipments compared with 77% for the first quarter 2012. The 
portion of BWI product shipped to customers within the Energy sector increased 
to approximately 50% from approximately 40% for the first quarter of 2012.

Total revenue for the second quarter 2012 was $17.4 million, an increase of 
37% from $12.7 million in the same period in 2011. Revenue from BWI product 
and services was $7.8 million, an increase of 25% from $6.3 million in the 
same period in 2011. Revenue from RedMAX product and services was $9.6 million 
of which $1.3 million was new RedMAX revenue and the balance was Amortized 
Deferred revenue¹. The second quarter of 2012 is the final amortization 
period for RedMAX deferred revenue. The amortized amounts will remain in prior 
reported revenues for comparative purposes however there will be no such 
ongoing amortization as the revenue has now been fully amortized. Further 
detail can be found in the Company's MD&A filed with SEDAR.

Overall Gross Margins on Revenue were 56.8% for the second quarter 2012, up 
4.9 points from the first quarter of 2012, and down 2.8 points from the same 
period last year as a result of expected fluctuations in revenue mix. Gross 
margins on core BWI product revenue remained very strong at 67% for the second 
quarter 2012.

Operating expenses for the second quarter of 2012 were $6.4 million, down 5% 
from $6.7 million reported in the second quarter of 2011. Reductions in 
legal and accounting expenses related to the now-settled class action lawsuit 
and the completion of the Company's conversion to IFRS accounted for the 
majority of the savings.

Higher revenues and lower operating costs have resulted in increases in 
adjusted EBITDA¹, for both the three and six months ended June 30, 2012. 
Adjusted EBITDA for second quarter 2012 was $3.9 million, a 168% increase over 
adjusted EBITDA of $1.5 million for the same period in 2011.

Redline reported a non-cash gain of $4.0 million for the second quarter, 
related to the June 30, 2012 fair market valuation of the debenture and 
warrants associated with the private placement completed in June 2011. This 
compares to a non-cash charge of $0.6 million in the second quarter 2011, also 
related to the fair market value calculation of the debenture. Redline 
realized a Net Profit of $7.8 million for the second quarter of 2012, compared 
to $0.06 million in the same period last year.

"We continue to focus on cost management, positive earnings and cash 
generation." said Melka. "Our costs continue to decrease, we reported an 
EBITDA of 22% of revenue, and we generated cash from earnings which has been 
used for working capital to accommodate our growing revenues. We are currently 
exploring with our financial partners how to best leverage this working 
capital."

At June 30, 2012, Redline held cash and short-term investments of 
approximately $2.3 million compared to $4.7 million at December 31, 2011.

Conference Call and Webcast -10:00 a.m. EDT

A conference call and webcast to discuss the results will be held August 15, 
2012, at 10:00 a.m. EDT. To participate in the conference call, please dial 
1-647-427-7450 or 1-888-231-8191 approximately 10 minutes before the 
conference call, and provide passcode 14614310.

A recording of the call will be available through August 22, 2012. Please dial 
1-416-849-0833 or 1-855-859-2056 and enter passcode 14614310 to listen to the 
rebroadcast. A webcast of the call will also be available on Redline's 
website at http://www.rdlcom.com/en/about/investors/webcasts.

About Redline Communications

Redline Communications (www.rdlcom.com) is the innovator of Virtual Fiber™, 
a rugged broadband wireless solution used to cost-effectively deploy and 
extend secure networks, enable machine-to-machine (M2M) applications, connect 
digital oil fields and smart grids, facilitate and enhance public safety 
networks, and bring Internet access wherever and whenever it's needed - 
regardless of terrain or remote location. For more than a decade Redline has 
delivered powerful, versatile and reliable wireless systems to governments, 
militaries, oil and gas companies and telecom service providers through its 
global network of certified partners.

NOTES:

1      The term Adjusted EBITDA refers to Profit before deducting
       share-based payment expense, finance expense, foreign exchange
       gain (loss), FMV gain (loss) on debenture, depreciation and
       income taxes. Adjusted EBITDA margin refers to the percentage
       that Adjusted EBITDA for any period represents as a portion of
       total revenue for that period.   We believe that Adjusted EBITDA
       and Adjusted EBITDA margin are useful supplemental information
       as they provide an indication of the results generated by the
       Company's main business activities prior to taking into
       consideration how those activities are financed and taxed and
       also prior to taking into consideration share-based payment
       expense and the other items listed above. Accordingly, we
       believe that these measures may also be useful to investors in
       enhancing their understanding of the Company's operating
       performance.  See ―Results of Operations - Adjusted
       EBITDA.
        

2      All amounts reported in this press release are in US dollars
       unless otherwise stated. To better assess the health and growth
       of the Redline's business, the Company reports on several key
       metrics, including "Orders or Bookings", "Shipped or Shipments",
       "Backlog", "EBITDA" and "Amortized Deferred Revenue".  Further
       information including definitions of these categories can be
       found in the Company's Management Discussion and Analysis for
       the three and six months ended June 30, 2012 ("Q2 and First Half
       2012 MD&A"), copies of which are available on SEDAR at
       www.sedar.com. Further
       details on the three and six month results ended June 30, 2012
       can be found in the condensed consolidated interim statement of
       financial position, condensed consolidated interim statement of
       comprehensive income, condensed consolidated interim statement
       of changes in equity and condensed consolidated interim
       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 Interim Financial
       Statements of the Company for the three and six months ended
       June 30, 2012 and the  Q2 and First Half 2012 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 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.

REDLINE COMMUNICATIONS GROUP INC.                                      

Condensed Consolidated Interim                                         
Statements of Financial Position

(Unaudited, expressed in U.S.                                          
dollars)
                                                                       
                                                                       
                                                                       
                                              June 30,     December 31,
                                                                   2011
                                                  2012

ASSETS                                                                 
                                                                       

Current assets:                                                        

  Cash                                 $     2,279,577  $     4,651,284

  Short-term investment                              -           92,144

  Restricted short-term investments             33,003           33,003

  Trade receivables                         11,288,757        9,913,208

  Other receivables                            165,234          340,499

  Inventories                                7,176,821        7,851,884

  Deferred WiMAX cost of revenue                     -        7,484,581

  Deferred cost of revenue                   1,766,120          333,287

  Prepaid expenses and other                   838,521        2,214,309
  deposits
                                            23,548,033       32,914,199

Non-current assets:                                                    

  Property, plant and equipment                940,513        1,026,480

  Intangible assets                            151,680          158,239

  Other assets                                  97,240           97,365
                                             1,189,433        1,282,084

Total Assets                           $    24,737,466  $    34,196,283
                                                                       

LIABILITIES AND SHAREHOLDERS'                                          
DEFICIENCY

Current liabilities                                                    

  Trade and other payables             $     6,892,563  $     9,081,197

  Income tax payable                           292,927          292,927

  Deferred WiMAX revenue                             -       14,213,501

  Deferred revenue                           4,889,357        2,285,406

  Current portion of borrowings              6,292,241        6,182,398
                                            18,367,088       32,055,429

Non-current liabilities                                                

  Convertible debenture (principal           1,335,811        1,344,095
  and interest)

  Fair market value adjustment on            5,306,982        2,918,446
  convertible debenture

  Convertible debenture at fair              6,642,793        4,262,541
  market value

Total Liabilities                           25,009,881       36,317,970
                                                                       

SHAREHOLDERS' DEFICIENCY                                               

Share capital                              134,485,251      134,336,023

Share purchase loan                          (365,780)        (365,780)

Warrant                                        310,000          310,000

Contributed surplus                          8,078,738        7,635,506

Deficit                                  (142,780,624)    (144,037,436)
                                             (272,415)      (2,121,687)

Total liabilities and equity           $    24,737,466  $    34,196,283



REDLINE COMMUNICATIONS GROUP                                              
INC.

Condensed Consolidated Interim Statements of                              
Comprehensive Income

(Unaudited,       
expressed in                                                              
U.S. dollars)
                                                                          
                                                              
                  
                  
                  
                   Three months ended June 30,   Six months ended June 30,
                  
                  
                  
                            2012          2011          2012          2011
                                                                          

Revenue             $ 17,381,474  $ 12,710,559  $ 29,887,934  $ 26,171,076

Cost of revenue        7,506,207     5,130,994    13,524,633    10,276,472

Gross profit           9,875,267     7,579,565    16,363,301    15,894,604
                                                                          

Expenses:                                                                 

  Research and         1,609,159     1,109,947     3,151,013     2,592,642
  development

  Finance and          1,929,272     2,710,307     3,556,328     5,130,433
  administration

  Sales and            2,331,816     2,254,133     4,805,751     4,419,087
  marketing

  Operations and
  customer               476,426       613,468       934,689     1,341,545
  support

  Gain on
  disposal of                  -             -             -       (1,519)
  assets
                       6,346,673     6,687,855    12,447,781    13,482,188

Income before     
non-operating          3,528,594       891,710     3,915,520     2,412,416
items
                                                                          

Other expenses                                                            

  Finance                 77,247       109,836       173,491       215,236
  expense

  (Gain) loss on
  fair market        (3,962,940)       582,791     2,648,217       582,791
  value of
  Debenture

  Foreign
  exchange             (399,123)       135,657     (163,000)       423,076
  (gain) loss
                     (4,284,816)       828,284     2,658,708     1,221,103

Profit before          7,813,410        63,426     1,256,812     1,191,313
income taxes

Income tax                     -             -             -             -
expense

Net profit and    
total               $  7,813,410  $     63,426  $  1,256,812  $  1,191,313
comprehensive
income 
                                                                          
                                                                          

Earnings per                                                              
share ((1))

  Basic             $       0.21  $          -  $       0.03  $       0.05

  Diluted           $       0.08  $          -  $       0.08  $       0.05



REDLINE COMMUNICATIONS GROUP INC.                                                                 

Condensed Consolidated Interim Statements of Changes in Equity                                    

(Unaudited, expressed in U.S. dollars)                                                            
                                                                                                  
                                                                                                  
                    Share        Share               Contributed
                   capital      purchase    Warrant    surplus          Deficit           Total
                                  loan

Balance at
December 31,
2010           $ 128,532,124  $ (365,780)  $ 310,000  $ 6,387,487  $ (148,099,590)  $ (13,235,759)

  Net profit               -            -          -            -        1,191,313       1,191,313

  Share-based              -            -          -      735,688                -         735,688
  payments

  Exercise of         67,354            -          -     (31,602)                -          35,752
  options

Balance at
June 30, 2011  $ 128,599,478  $ (365,780)  $ 310,000  $ 7,091,573  $ (146,908,277)  $ (11,273,006)
                                                                                                  

Balance at
December 31,
2011           $ 134,336,023  $ (365,780)  $ 310,000  $ 7,635,506  $ (144,037,436)  $  (2,121,687)

  Net profit               -            -          -            -        1,256,812       1,256,812

  Shares
  issued on


  conversion
  of
  debenture          115,726            -          -            -                -         115,726 
Exercise of         33,502            -          -     (14,546)                -          18,956
  options 
Share-based              -            -          -      457,778                -         457,778
  payments  
Balance at
June 30, 2012  $ 134,485,251  $ (365,780)  $ 310,000  $ 8,078,738  $ (142,780,624)  $    (272,415) 
REDLINE
COMMUNICATIONS                                                
GROUP INC. 
Condensed Consolidated Interim                                
Statements of Cash Flows 
(Unaudited,
expressed in                                                  
U.S. dollars) 


                                                              
                                                              
                     Three months ended June     Six months ended June 30, 
                                         30,
                           2012         2011            2012           2011
                                                                       

Cash flows from
operating                                                     
activities:

  Net profit        $ 7,813,410  $    63,426  $    1,256,812  $   1,191,313

  Adjustments to
  reconcile
  profit before
  taxes to net                                                
  cash from
  operating
  activities
    Finance              77,247      109,836         173,491        215,236
    expense
    Depreciation
    and
    amortization        101,032       89,224         206,888        210,868
    of
    non-current
    assets
    Recognition
    of share            282,742      478,113         457,778        735,688
    based
    payments
    Foreign
    exchange
    loss (gain)               -            -           1,501        (1,167)
    on cash held
    in foreign
    currency
    Foreign
    exchange
    (gain) loss       (406,615)      120,016       (207,461)        278,878
    on
    borrowings
    Loss on fair
    market value    (3,962,940)      582,791       2,648,217        582,791
    of Debenture
                      3,904,876    1,443,406       4,537,226      3,213,607

  Change in
  non-cash
  operating                                                   
  assets and
  liabilities 
    Decrease in
    deferred          3,797,561    1,725,207       6,051,748      4,085,428
    cost of
    revenue
    Decrease in
    deferred        (7,370,148)  (2,757,789)    (11,609,550)    (8,548,386)
    revenue
    Change in
    other non-cash
    operating       (1,444,032)  (4,344,261)     (1,337,942)    (5,938,740)
    assets and
    liabilities

Cash used in
operating           (1,111,743)  (3,933,437)     (2,358,518)    (7,188,091)
activities

Cash flows from
investing                                                     
activities:

  Acquisition of
  property,            (19,361)      (7,509)        (64,286)       (65,408)
  plant and
  equipment

  Acquisition of
  intangible           (18,963)    (140,095)        (50,076)      (228,226)
  assets

  Redemption
  (purchase) of               -  (5,184,033)          92,144    (5,284,033)
  investments

Cash (used in)
investing              (38,324)  (5,331,637)        (22,218)    (5,577,667)
activities

Cash flows from
financing                                                     
activities:

  Finance costs           (770)        (371)         (8,426)       (45,102)
  paid

  Proceeds from
  exercise of            18,956       35,752          18,956         35,752
  options

  Proceeds of                 -    8,516,687               -      8,516,687
  borrowings

  Repayment of                -     (19,577)               -       (78,400)
  borrowings

Cash from
financing                18,186    8,532,491          10,530      8,428,937
activities

Foreign exchange
(loss) gain on                -            -         (1,501)          1,167
cash held in
foreign currency

Decrease in         (1,131,881)    (732,583)     (2,371,707)    (4,335,654)
cash 

Cash, beginning       3,411,458    2,419,999       4,651,284      6,023,070
of the period

Cash, end of the    $ 2,279,577  $ 1,687,416  $    2,279,577  $   1,687,416
period





Company Contacts:

George Kypreos Chief Financial Officer +1.905.479.8344 gkypreos@rdlcom.com

Lynda Partner Corporate Communications +1-613-618-3200 lpartner@rdlcom.com

Cory Pala Investor Relations +1-416-657-2400 Cory.Pala@evestor.com

SOURCE: Redline Communications Group Inc.

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-0- Aug/14/2012 23:29 GMT