3/27/02 - Telenetics Reports Fourth Quarter and Fiscal 2001 Results

LAKE FOREST, California – March 27, 2001 – Telenetics Corporation (OTC-BB: TLNT), a provider of wired and wireless data communications products for customers worldwide, today reported financial results for the quarter and year ended December 31, 2001.

Comparison of Results for Quarters Ended December 31, 2001 and 2000

Net sales for the quarter ended December 31, 2001 were approximately $4.4 million, an increase of 155% over $1.7 million in net sales for the quarter ended December 31, 2000. Earnings before interest, taxes, depreciation and amortization ("EBITDA") was a record $573,000, or $0.02 per share, for the quarter ended December 31, 2001, as compared to a negative EBITDA of ($3.5 million), or ($0.22) per share, for the quarter ended December 31, 2000.

Net loss for the quarter ended December 31, 2001 improved to ($2.9 million), or ($0.11) per share, as compared to a net loss of ($4.6 million), or ($0.28) per share, for the quarter ended December 31, 2000. Net loss and EBITDA for the quarter ended December 31, 2001 include an extraordinary gain of $89,000 relating to negotiated discounts on certain litigation obligations and accounts payable.

Comparison of Results for Years Ended December 31, 2001 and 2000

Net sales for the year ended December 31, 2001 were approximately $20.1 million, an increase of 142% over $8.3 million in net sales for the year ended December 31, 2000. Negative EBITDA improved to approximately ($1.3 million), or ($0.06) per share, for the year ended December 31, 2001, as compared to negative EBITDA of approximately ($9.5 million), or ($0.64) per share, for the year ended December 31, 2000.

Net loss for the year ended December 31, 2001 improved to ($7.1 million), or ($0.44) per share, as compared to a net loss of ($11.9 million), or ($0.82) per share, for the year ended December 31, 2000. Net loss and EBITDA for the year ended December 31, 2001 include an extraordinary gain of $415,000, or $0.02 per share, relating to negotiated discounts on certain litigation obligations and accounts payable.

Selection and Use of EBITDA as Measure of Financial Performance

The Company’s management has selected and standardized its selection of EBITDA as a measure of Company financial performance for several reasons. The Company believes that a discussion of EBITDA is relevant because it can provide the reader and Company management with a more accurate and understandable picture of period-to-period changes in the Company’s operating performance by eliminating the effects of the Company's unusually heavy amortization and non-cash expense burdens, some of which are described below. The Company’s management believes these burdens generally have little contemporaneous relevance to financial reporting periods. The Company’s management also selected EBITDA as a measure of Company financial performance because EBITDA is a common and widely recognized measure used by financial institutions to evaluate a company's financial performance under various circumstances. Each of the elements the Company used in determining EBITDA have been taken from financial statement information prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). The tables below outline these elements.

Amortization for the quarter and year ended December 31, 2001 includes the write-off of the Company’s eflex technology asset of approximately $2.6 million. In light of the patent infringement litigation settlement agreement the Company entered into in September 2001 with Aeris Communications, Inc. and in light of changing business conditions, subsequent to September 30, 2001, the Company began to reevaluate the value of the intangible technology asset the Company acquired through its acquisition of eflex Wireless, Inc. in January 2000. Through that reevaluation, the Company determined that there no longer exists sufficient evidence to support any carrying value for this asset. Therefore, the Company expensed the entire capitalized value of this asset as of December 31, 2001. This non-cash expense accounted for approximately $2.6 million of the Company’s $2.9 million loss for the quarter ended December 31, 2001.

During the second quarter of 2001, holders of a substantial portion of the shares of Series A Convertible Preferred Stock that the Company issued during 2000 converted their shares of preferred stock into shares of common stock. The conversions triggered the repricing of other derivative securities that were outstanding at the time of the conversions. As required by current accounting practices, the Company revalued those other derivative securities using a Black-Scholes pricing model, resulting in a non-cash preferred dividend of approximately $2 million. In addition, when shares of Series A Preferred Stock initially were issued in October 2000, the Company valued the beneficial conversion feature of those securities, which was also recognized during 2001 as a non-cash dividend of approximately $800,000. The aggregate $2.8 million of these valuations has been reported as a nonrecurring, non-cash preferred dividend attributable to preferred shareholders, which has increased the net loss applicable to common shareholders in the calculation of basic and diluted loss per share.

Before the effect of non-cash dividends imputed to preferred shareholders, the Company reported a net loss of approximately ($7.1 million), or ($0.32) per share, for the year ended December 31, 2001. The effect of non-cash dividends imputed to preferred shareholders amounted to $0.1 million, or $0.00 per share, for the quarter ended December 31, 2001. The effect of non-cash dividends imputed to preferred shareholders amounted to approximately $2.8 million, or $0.12 per share, for the year ended December 31, 2001.

Outlook for 2002

Commenting on the Company’s 2001 financial results and the Company’s outlook for 2002, Shala Shashani Lutz, Chief Executive Officer and President of Telenetics stated, "Fiscal 2001 was an eventful year for Telenetics. Our acquisition of the license from Motorola Inc. to manufacture and sell a series of Motorola’s legacy data transmission products, which we renamed the ‘Sunrise Series,’ not only greatly expanded our range of product offerings and customer base, but increased our presence in the international arena. This rapid expansion was not without its challenges. We took significant steps in the second half of 2001 to improve margins, manage production and streamline our operations. I believe the improved year-end results speak to our successful management of our substantial growth under adverse economic conditions. With what we believe to be a solid foundation of brand-name products, loyal customers and an international reseller network, we have entered 2002 with the goal of expanding our business and markets. We are focusing on the development and marketing of our wireless products and believe that our revenues from this portion of our business will increase."

ABOUT TELENETICS

Based in Lake Forest, California, Telenetics designs, manufactures and distributes wired and wireless data communications products for customers worldwide. Telenetics offers a wide range of industrial grade modems and wireless products, systems and services for connecting its customers to end-point devices such as meters, remote terminal units, traffic and industrial controllers and remote sensors. Telenetics also provides high-speed communications products for complex data networks used by financial institutions, air traffic control systems and public and private wireless network operators. Additional information is available at www.telenetics.com.

FINANCIAL HIGHLIGHTS

		Year Ended (Unaudited)
		December 31, 2001	December 31, 2000
Net Sales		$ 20,081,000	$ 8,299,000
Gross Profit (loss)		5,893,000	1,418,000
Loss from Operations		(5,630,000)	(11,369,000)
Net Loss Before Extraordinary Gains		(7,503,000)	(11,901,000)
Extraordinary Gains		415,000	—
Net Loss		(7,088,000)	(11,905,000)
Loss Per Common Share
	Before Dividend Effect and Extraordinary Gains	$ (0.34)	$ (0.82)
	Extraordinary Gains	0.02	—
	Dividend effect	(0.12)	—
	Basic and Diluted	$ (0.44) ==========	$ (0.82) ==========
Weighted Average Shares Outstanding
	Basic and Diluted	22,403,778 ==========	14,774,265 ==========

CALCULATION OF EBITDA

		Quarter Ended (Unaudited)
		December 31, 2001	December 31, 2000
Net Loss		$ (2,930,000)	$ (4,610,000)
Interest		566,000	190,000
Depreciation		82,000	108,000
Amortization		252,000	283,000
Accelerated amortization of investments in technology and goodwill		2,603,000	496,000
EBITDA		$ 573,000 ==========	$ (3,533,000) ==========
EBITDA per common share
	Basic and Diluted	$ 0.02 ==========	$ (0.22) ==========
Weighted Average Shares Outstanding
	Basic and Diluted	27,373,419 ==========	16,399,980 ==========

		Year Ended (Unaudited)
		December 31, 2001	December 31, 2000
Net Loss		$ (7,088,000)	$ (11,905,000)
Interest		1,873,000	541,000
Taxes		1,000	1,000
Depreciation		338,000	251,000
Amortization		958,000	1,153,000
Accelerated amortization of investments in technology and goodwill		2,603,000	496,000
EBITDA		$ (1,315,000) ==========	$ (9,463,000) ==========
EBITDA per common share
	Basic and Diluted	$ (0.06) ==========	$ (0.64) ==========
Weighted Average Shares Outstanding
	Basic and Diluted	22,403,778 ==========	14,774,265 ==========