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DEQ Reports its 2012 Second Quarter Results

(July 19, 2012)

LEVIS, QUEBEC -- (Marketwire) -- 07/19/12 -- DEQ Systems Corp. (TSX VENTURE:DEQ) ("DEQ" or the "Company") announces today the filing of its second quarter financial results for the period ended May 31, 2012. The Consolidated Financial Statements are available on SEDAR (www.sedar.com) and DEQ's website. A conference call will be held on Friday, July 20, 2012 at 11am EST to present and discuss these results. Those interested in participating should dial toll free 1 (800) 732 8470 or (416) 981-9000. A visual presentation (PowerPoint) will be available on DEQ's website in the Investors/Financial Reports/Presentation section to support the call content.

2012 SECOND QUARTER HIGHLIGHTS:

-- Revenue -- 82% increase in direct leasing revenue from $562,000 in the second quarter of 2011 to $1,024,000 in the second quarter of 2012. -- 31% increase in gross profit from $887,000 in the second quarter of 2011 to $1,164,000 in the second quarter of 2012. -- 114 net installations during the second quarter of 2012 at an average lease price of $4,250 per annum, representing an increase of approximately $500,000 of new recurring revenue per year. -- Operating Costs -- 24% increase in operating costs from $1,080,000 in the Q2-2011 to $1,342,000 in Q2-2012. These costs are explained by the significant increase in installations in Asia and the readjustment of operations to support growth. Economies of scale will be reached in the third quarter. -- EBITDA -- EBITDA of $(178,000) in Q2-2012 compared to $(193,000) in Q2-2011. We anticipate a positive EBITDA during our third quarter 2012. -- Cash Flow -- During the second quarter of 2012, our cash position decreased by $189,000 explained mostly by our negative EBITDA as well as the investments in leased equipment and licences for an amount of $140,000. -- Product Installations -- As of May 31, 2012, a total of 1,193 products installed directly worldwide are currently running and another 337 installed by distributors, for a grand total of 1,530 units installed worldwide with an average net recurring revenues of $3,560 per year. -- Company News -- DEQ releases the HAWK - Intelligent Baccarat Shoe -- DEQ debuts Internet Social Media Gaming Strategy with EZ Baccarat on Facebook -- Cannery Group Connects is Las Vegas Properties with EZ Pai Gow Progressive and Real Link -- Las Vegas Sands Macau increases G3 footprint to 53 linked over 4 casinos with Real Link -- EZ Baccarat internationally honoured as best table game

"With a total of 1,530 units installed worldwide generating over $5.5 M annual recurring revenue as well as multiple quarters in a row of double digit growth, DEQ is a strong growth emerging company in our industry", stated Earle G. Hall, President & CEO of DEQ. "Our current cost base is entering into a new economy of scale which will provide the margins necessary for us to achieve positive EBITDA and Positive Net Cash Flows. The current backlog and emerging projects give us great confidence in our future growth and upcoming quarters."


Statement of Earnings (unaudited) Second Quarter Six-month Period May 31, 2011 May 31, 2012 May 31, 2011 May 31, 2012 (unaudited) (unaudited) (unaudited) (unaudited) ---------------------------------------------------- ---------------------------------------------------- Direct leasing 562,000 1,024,000 1,042,000 1,939,000 Royalties (1) 328,000 282,000 640,000 595,000 ---------------------------------------------------- Total recurring revenue 890,000 1,306,000 1,682,000 2,534,000 Non recurring revenue (1) 280,000 29,000 522,000 43,000 ---------------------------------------------------- Total Revenue 1,170,000 1,335,000 2,204,000 2,577,000 Gross Profit 887,000 1,164,000 1,723,000 2,224,000 % Gross margin 76% 87% 78% 86% Operating Costs 1,080,000 1,342,000 2,253,000 2,601,000 ---------------------------------------------------- EBITDA (2) (193,000) (178,000) (531,000) (377,000) Stock based compensation 267,000 22,000 293,000 46,000 Amortization expenses 617,000 702,000 1,214,000 1,392,000 Interest expenses (1,000) 2,000 12,000 3,000 Foreign exchange (gain) loss 2,000 (39,000) 86,000 (12,000) Future income taxes (21,000) - (43,000) - Other items - - (170,000) - ---------------------------------------------------- Net Income (Loss) (1,056,000) (866,000) (1,924,000) (1,806,000) ---------------------------------------------------- ---------------------------------------------------- Net Income (Loss) per share $(0.015) $(0.013) $(0.028) $(0.026) ---------------------------------------------------------------------------- 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 is terminated as of February 28, 2011. Therefore, the royalties for the six-month period ending May 31, 2012 is excluding royalties from Severn Enterprises and is presented in the non recurring revenue. Note 2: We use EBITDA (Earnings before stock based compensation, Interest, Taxes, Depreciation and Amortization and foreign exchange impact), a non-IFRS measure, to evaluate the Company's operating performance. Securities regulators require that issuers caution readers that measures adjusted to a basis other than IFRS do not have standardized meaning under IFRS and are unlikely to be comparable to similar measures used by other companies. Balance Sheet Nov 30, 2011 Feb. 29, 2012 May 31, 2012 (unaudited) (unaudited) (unaudited) ------------------------------------------------ ------------------------------------------------ Cash and cash equivalents 1,843,000 1,445,000 1,256,000 Current assets (other than cash) 2,001,000 2,077,000 1,988,000 Long-term assets 10,962,000 10,490,000 9,926,000 ------------------------------------------------ Total Assets $14,806,000 $14,012,000 $13,170,000 ------------------------------------------------ ------------------------------------------------ Current liabilities 1,243,000 1,365,000 1,367,000 Shareholders' equity 13,562,000 12,647,000 11,803,000 ------------------------------------------------ Total Liabilities and Equity $14,805,000 $14,012,000 $13,170,000 ------------------------------------------------ ------------------------------------------------ Number of shares outstanding 69,182,000 69,182,000 69,182,000 ------------------------------------------------ ------------------------------------------------

ABOUT DEQ

DEQ Systems Corp. (TSX VENTURE: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(TM) 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(TM) and related auxiliary products such as EZ Trak(TM). 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

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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