SRTI BLOCKCHAIN GENERATION INC 
By SAN JOSE, Calif., Nov. 4 /PRNewswire-FirstCall/ -- Sunrise Telecom Incorporated (Pink Sheets: SRTI), a leader in test and measurement solutions for telecom, wireless and cable networks, today announced its unaudited financial results for the three months ended September 30, 2009.
Net sales for the third quarter of 2009 were $9.6 million, compared with $13.2 million in the second quarter of 2009 and $19.0 million in the third quarter of 2008. Net sales for 2008 included sales from the company's Protocol Products Group (now named Accanto Systems) that was sold to LTE Innovations in December 2008. The company had not incurred significant continuing cash flows related to the disposed entity in 2009, and in October 2009 Accanto Systems terminated its distributorship agreement with the company. As a result of this subsequent event, the company will reclassify certain income statement and balance sheet items as discontinued operations in its third quarter and year-end financial results presentations for 2008 and 2009.
Third quarter operating loss was $6.1 million, compared with an operating loss of $2.2 million in the prior quarter and an operating loss of $21.9 million in the third quarter of 2008. The operating loss in the third quarter of 2009 was primarily due to one time charges and a decrease in revenue. Net loss per share was $(0.12) compared with net loss per share of $(0.04) in the second quarter of 2009 and net loss per share of $(0.41) in the third quarter of 2008.
Bahaa Moukadam, chief executive officer said, "We took decisive actions during the quarter, improving our cost structure to better align it with our sales activity, implementing additional financial controls, and strengthening our management team. This gives us a strong foundation for improving our business results and we expect these actions to better position the company to generate cash rather than use cash in operations in 2010."
Executive Team Changes
The company made significant leadership changes in the third quarter to improve execution. In August, Bahaa Moukadam was named CEO of the company and Lyron Bentovim was appointed Sunrise Telecom's chief operating officer and chief financial officer. Paul Marshall, the company's former CEO, was appointed chief technology officer. The company also welcomed My Chung and Ray Texeira as senior vice president of worldwide sales and vice president of customer experience, respectively.
"Our much strengthened executive team is intensely focused on the fundamentals of running a successful business, overseeing tight financial controls, improving the customer experience at each touch point and improving our go-to-market effectiveness," added Mr. Moukadam.
Cost Reduction Program
During the quarter, the company made additional progress in its cost cutting and productivity improvement program. Operating expenses for the quarter were $8.0 million compared with $13.8 million in the third quarter of 2008, excluding impairment and restructuring charges. The company expects to capture additional benefits of the actions taken in 2009 and reduce operating expenses further in the fourth quarter of 2009 and into 2010.
Manufacturing Transition
During the quarter, the company made significant progress in the transition of the majority of its manufacturing operations to its Taiwanese facility. The transition is expected to be mostly complete by the end of the year. The company expects to start seeing benefits in the fourth quarter of 2009 and to enjoy the full benefits, as well as inventory reduction, in fiscal 2010.
New Product Milestones
Sunrise Telecom continued to enhance its Ethernet product portfolio in the third quarter by introducing the GigE Module for its flagship Modular Test Toolkit Platform. The new and improved realWORX WEB was introduced giving Cable Operators a best-in-class 24/7 monitoring system as they prepare to transition to DOCSIS 3.0. The company also reached an important milestone by starting quantity shipments of the new CM2800 product.
"With a stronger product portfolio, we are able to better serve our worldwide telecom and cable TV customers as they focus on driving new revenues from residential and business services," said Mr. Moukadam.
Silicon Valley Bank Loan Agreement
On October 30, 2009, the company amended its loan and security agreement with Silicon Valley Bank to modify its minimum EBITDA covenant to no less than ($5,700,000) for the period ended September 30, 2009. There were no other changes to the agreement.
Change of Auditors
On November 3, 2009, the Audit Committee of the Board of Directors engaged Armanino McKenna LLP as the company's independent registered public accounting firm effective immediately and concurrently dismissed KPMG LLP as the company's independent auditors. The company's financial statements for the fiscal years ended December 31, 2008 and 2007 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except with respect to the company's ability to continue as a going concern as described therein. The company did not have any disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. In connection with the audits of the company's financial statements for the years ended December 31, 2008 and 2007, KPMG noted certain material weaknesses in the company's internal control over financial reporting, which the Company disclosed in its Annual Reports on Form 10-K for the periods ended December 31, 2008 and 2007. KPMG had served as the company's independent auditors since 1997.
Fourth Quarter Business Outlook
"While we expect the business environment to continue to be challenging with somewhat limited visibility, we expect revenue to improve sequentially in the fourth quarter and be in the range of $10.0 to $13.5 million. We believe that August was our low point for the year in terms of bookings. Since then, we have seen double-digit sequential monthly growth, and we believe that November will continue this positive trend," said Mr. Moukadam.
About Sunrise Telecom Incorporated
Sunrise Telecom develops and delivers high-quality communications test and measurement solutions for telecom, cable and wireless networks. The Company's robust portfolio of feature-rich, easy-to-use products enables service providers to deliver premium voice, video, data and next-generation digital multimedia services quickly, reliably, and cost-effectively. Based in San Jose, California, Sunrise Telecom distributes its products through a direct sales force and a global network of sales representatives and distributors. For more information, visit http://www.sunrisetelecom.com or email info@sunrisetelecom.com.
SUNRISE TELECOM, the "S" logo, and other trademarks are trademarks of Sunrise Telecom Incorporated and may not be used without permission.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933, including, but not limited to, material contained in quotations, sales expectations for the fourth quarter of 2009, expectations related to the effects of cost reductions previously taken and expectations for the generation of cash from operations in 2010. These forward-looking statements are subject to many risks and uncertainties that could cause actual results to differ materially from those projected. Specific factors that may cause results to differ include the following: a lack of acceptance or slower than anticipated acceptance for Sunrise Telecom's new or enhanced products and modules; slower than anticipated product development or introduction into the marketplace; unanticipated delays in product delivery schedules; lower than anticipated end-user demand for telecommunications services and a corresponding cutback in spending by customers; increased competitive pressures, including from former employees; rapid technological change within the telecommunications industry; Sunrise Telecom's dependence on a limited number of major customers; Sunrise Telecom's dependence on limited source suppliers; deferred or lost sales resulting from order cancellations or order changes; deferred or lost sales resulting from Sunrise Telecom's lengthy sales cycle; unanticipated difficulties associated with international operations; Sunrise Telecom's ability to manage growth and slowdowns; the loss of key employees; ineffective internal controls requiring remediation; the long-term impact of cost controls; the Company's general lack of liquidity; the unknown effects of management changes; and protracted litigation, which could disrupt Sunrise Telecom's normal business operations. Some of these risks and uncertainties are described in more detail in Sunrise Telecom's reports including, but not limited to, its Annual Report on Form 10-K for the period ended December 31, 2008 and its Quarterly Report on Form 10-Q for the period ended March 31, 2009 filed with the SEC, and its quarterly report for the period ended June 30, 2009 filed with Pink Sheets. Sunrise Telecom assumes no obligation to update the forward-looking statements included in this press release.
SUNRISE TELECOM INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data, unaudited)
September 30, December 31,
2009 2008
---- ----
ASSETS
Current assets:
Cash and cash equivalents $7,434 $9,196
Accounts receivable, net of allowance of
$624 and $1,004, respectively 8,760 19,732
Inventories 10,110 11,481
Prepaid expenses and other assets 3,151 2,200
----- -----
Total current assets 29,455 42,609
Property and equipment, net 17,799 20,132
Restricted cash 293 296
Other assets 530 2,123
--- -----
Total assets $48,077 $65,160
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current
portion of notes payable $2,000 $2,000
Accounts payable 1,680 3,403
Other accrued liabilities 7,884 12,833
Income taxes payable 656 617
Deferred revenue 867 1,244
--- -----
Total current liabilities 13,087 20,097
Notes payable, less current portion - 2
Income taxes payable, less current portion 1,417 1,368
Deferred revenue, less current portion 45 71
-- --
Total liabilities 14,549 21,538
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Stockholders' equity:
Preferred stock, $0.001 par value per
share; 10,000,000 shares authorized;
none issued and outstanding - -
Common stock, $0.001 par value per share;
175,000,000 shares authorized;
51,349,058 shares outstanding as of
September 31, 2009 and December 31, 2008 51 51
Additional paid-in capital 78,167 77,964
Accumulated deficit (44,989) (34,856)
Accumulated other comprehensive income 299 463
--- ---
Total stockholders' equity 33,528 43,622
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Total liabilities and
stockholders' equity $48,077 $65,160
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SUNRISE TELECOM INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data, unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
Net sales $9,606 $18,966 $36,863 $59,105
Cost of sales 6,874 8,201 18,674 27,131
----- ----- ------ ------
Gross profit 2,732 10,765 18,189 31,974
----- ------ ------ ------
Operating expenses:
Research and development 3,032 4,404 8,671 14,674
Selling and marketing 2,935 5,713 10,613 18,439
General and administrative 2,017 3,639 6,777 13,068
Restructuring charges 766 157 1,031 1,396
Impairment charges - 18,796 - 18,796
- ------ - ------
Total operating expenses 8,750 32,709 27,092 66,373
----- ------ ------ ------
Loss from operations (6,018) (21,944) (8,903) (34,399)
Other income (expense), net (163) (1,041) (722) 1,137
---- ------ ---- -----
Loss before income taxes (6,181) (22,985) (9,625) (33,262)
Income tax expense (benefit) (61) (2,029) 508 (1,756)
--- ------ --- ------
Net loss $(6,120) $(20,956) $(10,133) $(31,506)
======= ======== ======== ========
Loss per share:
Basic and diluted $(0.12) $(0.41) $(0.20) $(0.61)
====== ====== ====== ======
Shares used in per share computation:
Basic and diluted 51,349 51,349 51,349 51,349
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SOURCE Sunrise Telecom
