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DEQ Reports Q3 2011 Financial Results

(October 20, 2011)

LEVIS, QUEBEC -- (Marketwire) -- 10/20/11 -- DEQ Systems Corp. (TSX VENTURE:DEQ) ("DEQ" or the "Company") announces the filing of its third quarter financial results for the period ended August 31, 2011. The Consolidated Financial Statements are available on SEDAR (www.sedar.com) and DEQ's website. A conference call will be held on Friday, October 21, 2011 at 11am EST to present and discuss these results. Those interested in participating in the call should dial toll free 1 (800) 736-4594 or (416) 981-9000. A presentation will be available on DEQ's website in the Invest/Financial Reports/PowerPoint section to support the call content.

2011 THIRD QUARTER RESULTS HIGHLIGHTS:

Financial Metrics

Revenue


-- 164 new units installed during the Q3-2011 compared to 115 new installations in Q3-2010 for a net increase of 43% at an average annual lease of $3,900 per unit. -- 96% increase in new units installed for the nine-month period of 2011. 488 new units installed for the nine-month period in 2011, compared to 249 in 2010 for an increase of 96%. -- 104% increase in Q3-2011 direct leasing revenue to $708,000 in 2011 from $347,000 in 2010. -- 84% increase in direct leasing revenue for the nine-month period to $1,750,000 in 2011 from $952,000 in 2010. -- The termination of Severn Agreement at the end of the first quarter of 2011 has reduced our third quarter royalties by $245,000 compared with the same period last year.

Operating Costs

-- Reduction in quarterly operating and R&D expenses of $143,000 in Q3 when compared to Q2-2011. This is explained by the results yielded from the cost reduction plan that was announced in March 2011.

EBITDA

-- Positive EBITDA of $102,000 in Q3-2011 compared to a loss of $(193,000) in Q2-2011. This is explained by the increase in the number of units installed during the quarter and the operating cost reduction program that was completed in Q2 2011.

Cash Flow

-- During the third quarter of 2011, the cash position decreased by $321,000. This is mostly explained by the change in non-cash working capital of $246,000 as well as the investment in leased equipment for new units installed during the quarter for an amount of $190,000. As of August 31, 2011, DEQ had a cash position of $2,045,000.

Operational Highlights

-- In the third quarter of 2011, DEQ directly installed 164 new units worldwide. (488 units for the nine-month period ended August 31, 2011) -- DEQ has obtained more than 40 jurisdictional licenses worldwide in less than three years. -- As of August 31, 2011, DEQ has directly installed 868 units in North America, 108 products installed in Asia for a grand total of 976 units in less than three years. -- Distributors have installed 392 units; and -- DEQ has a grand total of 1,368 units in operation worldwide.

"While the loss of the Severn contract earlier this year was a hard blow to our revenue base, cost structure and key financial metrics, the DEQ team has brilliantly reduced expenses while accelerating product placement," stated Earle G. Hall, President & CEO. "DEQ's products are internationally recognized and growing in placements, penetration and geographical presence and we are excited to the prospects of 2012 to further increase our revenue, units in the field and shareholder value."

Statement of Earnings (unaudited) Third Quarter Nine-Month Period Aug. 31, Aug. 31, Aug. 31, Aug. 31, 2010 2011 2010 2011 (unaudited) (unaudited) (unaudited) (unaudited) ---------------------------------------------------- Direct leasing 347,000 708,000 952,000 1,750,000 Royalties (excluding Severn)(1) 298,000 376,000 1,137,000 1,017,000 Royalties (Severn Enterprises)(1) 245,000 - 689,000 218,000 ---------------------------------------------------- Total recurring revenue 890,000 1,084,000 2,778,000 2,985,000 Non recurring revenue 252,000 90,000 873,000 393,000 ---------------------------------------------------- Total Revenue 1,142,000 1,174,000 3,651,000 3,378,000 Gross Profit 1,048,000 1,041,000 3,177,000 2,764,000 % Gross margin 92% 89% 87% 82% Operating Costs 964,000 939,000 2,884,000 3,165,000 ---------------------------------------------------- EBITDA (2) 84,000 102,000 293,000 (401,000) Stock based compensation 54,000 26,000 197,000 319,000 Amortization expenses 585,000 629,000 1,724,000 1,844,000 Interest expenses 23,000 1,000 63,000 13,000 Foreign exchange (gain) loss (29,000) (30,000) (62,000) 57,000 Future income taxes (69,000) (21,000) (207,000) (65,000) Other items (210,000) - (210,000) (170,000) ---------------------------------------------------- Net Income (Loss) (270,000) (503,000) (1,212,000) (2,399,000) ---------------------------------------------------- Net Income (Loss) per share $(0.004) $(0.007) $(0.017) $(0.035)

Note 1: On March 3, 2011, the Company entered into a settlement agreement with DEK International on the Severn Project and the royalty from Severn Enterprises was terminated as of February 28, 2011.

Note 2: 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 August 31, 2010 Nov. 30, 2010 August 31, 2011 (unaudited) (audited) (unaudited) ------------------------------------------------ ------------------------------------------------ Cash and cash equivalents 4,080,000 3,933,000 2,046,000 Current assets (other than cash) 2,145,000 2,001,000 1,991,000 Long-term assets 13,618,000 12,700,000 11,786,000 ------------------------------------------------ Total Assets $19,843,000 $18,634,000 $15,823,000 ------------------------------------------------ ------------------------------------------------ Current liabilities 1,885,000 1,852,000 1,121,000 Long-term liabilities 254,000 - - Shareholders' equity 17,704,000 16,782,000 14,702,000 ------------------------------------------------ Total Liabilities and Equity $19,843,000 $18,634,000 $15,823,000 ------------------------------------------------ ------------------------------------------------ Number of shares outstanding 69,302,000 69,182,000 69,182,000 ------------------------------------------------ ------------------------------------------------

ABOUT DEQ

DEQ Systems Corp. (TSX VENTURE:DEQ) is a customer centric company that delivers best of breed table game technology related products to the global gaming industry that add value and increase client revenue. DEQ provides table game bonusing technology, table games, table game results tracking and jackpot connectivity solutions to more than 275 casinos in 30 countries. DEQ is an intellectual property focused company that has an extensive patent portfolio of more than 20 patents recognized in 50 countries.

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.

TSX Venture does not accept any responsibility regarding the accuracy of the information contained in this press release.

Contacts:
Earle G. Hall
President & CEO
DEQ Systems Corp.
(418) 839-3012
earle.hall@deq.com

Francois Proulx
Chief Financial Officer
DEQ Systems Corp.
(418) 839-3012
francois.proulx@deq.com


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