LEVIS, QC,
April 20 /PRNewswire-FirstCall/ - DEQ
Systems Corp. (TSX-V: DEQ) ("DEQ" or the "Company") announces today
the filing of its first quarter financial results for the period
ended February 28, 2011. The
Consolidated Financial Statements are available on SEDAR
(www.sedar.com) and DEQ's website. A conference call will be held
on Thursday, April 21, 2011
at 10am EST to present and discuss
these results. Those interested in participating should dial toll
free 1 (800) 735-5968 or (416) 981-9000. A PowerPoint presentation
will be available on DEQ's website in the Invest/Financial
Reports/PowerPoint section to support the call content.
2011 FIRST QUARTER RESULTS
HIGHLIGHTS:
Financial Metrics
- Revenue
-
- 141 new installations during the quarter as compared to 66 new
installations in the Q1-2010 for a net increase of 113% installs at
an average lease of $4,200 per
annum
- 62% increase direct leasing quarterly revenue from $296,000 in 2010 to $480,000 in 2011
- Loss of $106,000 of royalties
explained by Station Casinos' bankruptcy
- Termination of the Paltronics revenue recognition in 2010 that
affected our revenue by $57,000
- Settlement agreement on the Severn Project concluded on
March 3, 2011 that will affect our
recurring revenue by approximately $200,000 per quarter starting on March 1, 2011
- 81% gross margin in 2011 compared to 90% in 2010 explained by
the loss of revenue from Paltronics and Station Casinos
- Operating Costs
-
- Quarterly operating costs increased to $1,146,000 in 2011 compared to $953,000 2010. This is explained by the Asian
commercialisation in Macau and
Malaysia as well as the increased
number of products installed in North
America, mostly from G3 systems in California
- As announced in March 2011, the
Company has reduced annual operating expenses by more than
$500,000 following the loss of
revenue from Severn Enterprises
- EBITDA
-
- Negative EBITDA of $310,000 in Q1
2011 compared to a positive EBITDA of $70,000 in 2010. This is explained by the loss of
$163,000 of royalties from Station
Casinos and Paltronics as well as the higher operating costs with
our recent installations in Macau
and Malaysia as well as a patent
right sale of $130,000 in 2010
- Cash Flow
-
- During the first quarter of 2011, our cash position decreased
by $767,000 explained mostly by our
$500,000 investment in inventory and
lease equipments. DEQ's very strong sales funnel has compelled us
to build more systems in one quarter than we have in the past two
years combined to ensure that we have no back orders when compared
to projected installations
Operational Highlights
- Product Installations
-
- In the first quarter of 2011, DEQ directly installed 141 new
products in worldwide.
- As of February 28, 2011, DEQ had
625 directly installed products in North
America, 105 products installed in Asia and 390 products installed through
distributors worldwide for a total of 1,120 products in operation
worldwide
Earle G. Hall,
President and CEO of DEQ stated, "The financial results of Q1 are
no reflection of the momentum or, potential of DEQ. In Q1 we
reacted to the Severn loss by immediately restructuring our costs
and realigning our priorities with our revenues. As well, the ever
weak US dollar had a negative effect on our revenues. We have
invested over half of a million dollars in inventory. This is the
largest production run of our history and was done to ensure that
we could keep up with the ensuing orders. That translated into more
than 140 new installations in Q1 and a Q2 that will be our
strongest quarter in the history of the company in term of new
installations. DEQ is a solid growth company that strictly manages
cost while seeking any and all viable commercial ventures. Q1 saw
the arrival of LT Game as a strategic partner and the full breadth
of this relationship will be seen in late 2011 and in 2012. Q1 was
a quarter of construction, adjustment and fine tuning to ensure
that we are ready for the success before us and we are very excited
as to the opportunities and potential that lay before us.
| |
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|
|
|
|
| Statement of Earnings
|
|
|
|
|
|
| (unaudited) |
|
|
|
|
|
| |
|
|
|
Feb. 28, 2010 |
Feb. 28, 2011 |
| |
|
|
|
(3
months) |
(3
months) |
| |
|
|
|
|
|
| Direct leasing |
|
|
|
296,000 |
480,000 |
| Royalties (excluding Severn
Enterprises)(1) |
|
|
|
445,000 |
312,000 |
| Royalties (Severn
Enterprises)(2) |
|
|
|
212,000 |
218,000 |
| Total recurring revenue |
|
|
|
953,000 |
1,010,000 |
| Non recurring revenue |
|
|
|
189,000 |
24,000 |
| Total Revenue |
|
|
|
1,142,000 |
1,034,000 |
|
|
|
|
|
|
|
| Gross Profit |
|
|
|
1,023,000 |
836,000 |
| % Gross margin |
|
|
|
90 % |
81 % |
|
|
|
|
|
|
|
| Operating Costs |
|
|
|
953,000 |
1,146,000 |
| |
|
|
|
|
|
| EBITDA (3) |
|
|
|
70,000 |
(310,000) |
| |
|
|
|
|
|
| Stock based compensation |
|
|
|
78,000 |
26,000 |
| Amortization expenses |
|
|
|
567,000 |
598,000 |
| Interest (revenue) expenses |
|
|
|
18,000 |
13,000 |
| Foreign exchange (gain) loss |
|
|
|
(2,000) |
84,000 |
| Future income taxes |
|
|
|
(69,000) |
(21,000) |
| Other items |
|
|
|
- |
(170,000) |
| Net Income (Loss) |
|
|
|
(522,000) |
(840,000) |
| Net Income (Loss ) per share |
|
|
|
$(0.008) |
$(0.012) |
| Note 1: |
Our royalties (excluding Severn Enterprises) have decreased by
$133,000 in 2011 explained by Station Casinos bankruptcy in 2010
($106,000) and by the termination of Paltronics five-year agreement
in the second quarter of 2010 ($56,000). |
| Note 2: |
On March 3, 2011, the Company entered into a settlement
agreement with DEK International on the Severn Project and the
royalty from Severn is terminated as of February 28, 2011. This
settlement agreement sees DEQ assigning and transferring all
amounts payable as royalties by Severn Enterprises S.A. to DEK
International for the remainder of the 10 year agreements concluded
in October 2005 and December 2006. This transfer of the defaulted
royalties to DEK International will completely discharge and
release the Company from any and all obligations regarding the
final payment of the balance of purchase price of $831,595 as of
February 28, 2011. |
| Note 3: |
We use EBITDA (Earnings before Stock option based compensation,
Interest, Taxes, Depreciation, Amortization and Foreign exchange)
as performance measurements in our financial disclosure. This
measure is not recognized under generally accepted accounting
principles. The reconciliations above demonstrate how we calculate
such measurements from our financial statements. |
| |
| Balance
Sheet |
| |
|
|
Feb. 28, 2009 |
|
Nov. 30, 2010 |
|
Feb. 28, 2011 |
|
|
|
|
(unaudited) |
|
(Audited) |
|
(unaudited) |
|
|
| Cash and cash equivalents |
|
|
5,203,000 |
|
3,933,000 |
|
3,166,000 |
| Current assets (other than cash) |
|
|
1,990,000 |
|
2,001,000 |
|
1,608,000 |
| Long-term assets |
|
|
14,364,000 |
|
12,700,000 |
|
12,502,000 |
| Total Assets |
|
|
$21,557,000 |
|
$18,634,000 |
|
$17,276,000 |
|
|
| Current liabilities |
|
|
1,930,000 |
|
1,852,000 |
|
1,308,000 |
| Long-term liabilities |
|
|
1,276,000 |
|
0 |
|
0 |
| Shareholders' equity |
|
|
18,351,000 |
|
16,782,000 |
|
15,968,000 |
| Total Liabilities and
Equity |
|
|
$21,557,000 |
|
$18,634,000 |
|
$17,276,000 |
| |
|
|
|
|
|
|
|
| Number of shares outstanding |
|
|
69,529,000 |
|
69,302,000 |
|
69,302,000
|
ABOUT DEQ
DEQ Systems Corp. (TSXV: DEQ) is a global
provider of gaming technology in over 30 countries. Protected by
more than 20 patents in 50 countries, DEQ specializes in
progressive and random bonusing systems for table games. DEQ's
innovation and ingenuity has been to replace the single dollar coin
slot and sensor with its internationally award winning G3™
technology. The G3 incorporates multiple credit betting, dealer
hand betting and mystery bonusing. DEQ also commercializes
technology and patents including the award winning baccarat
revolution, EZ Baccarat™ and related auxiliary products such as EZ
Trak™. DEQ is and will continue to lead innovation in the table
game bonusing segment of the global gaming market. For further
information, please visit www.deq.com.
TSX Venture does not accept any responsibility
regarding the accuracy of the information contained in this press
release.
Forward-looking statements contained in this
Press Release involve known and unknown risks, uncertainties and
other factors that may
cause actual results, performance and achievements of the
Company to be materially different from any future results,
performance or achievements expressed or implied by the said
forward-looking statements.
SOURCE DEQ SYSTEMS CORP.