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Message: DEQ Releases its 2008 Financial Statements

DEQ Releases its 2008 Financial Statements

posted on Feb 25, 2009 01:15PM
February 25, 2009
DEQ Releases its 2008 Financial Statements
LEVIS, QUEBEC--(Marketwire - Feb. 25, 2009) - DEQ Systems Corp. (TSX VENTURE:DEQ) announced today the filing of its annual financial results for the year-ended November 30, 2008. A conference call will be held on Thursday, February 26th at 11am EST to present and discuss these results. Those interested in participating should dial (416) 915-5762 or toll free 1 (800) 814-4861. A visual presentation (Powerpoint) will be available on DEQ's website (www.deq.com) in the Invest/Financial Reports/PowerPoint section to support the call content. The Consolidated Financial Statements are available on SEDAR (www.sedar.com) and DEQ's website.



- 95% growth in recurring revenue in United States in 2008

- 16% increase in total recurring revenue from $2.25 M to $2.62 M in 2008

- 16% increase in gross profit from $2.75 M to $3.21 M in 2008

- 79% gross margin compared to 77% in 2007 due to increase in recurring revenue

- 27% average annual growth in recurring revenue over the last three years

- Positive adjusted cash flows from operations of $362,000 comparable to previous year

- Stable operating costs at $3.45 M

- Solid cash position of $6M


- Acquisition of DEK International exclusive distribution license

- EZ Baccarat(TM) and EZ Trak(TM) products had successfully been introduced in more than 10 casinos during the year with more than 45 units of each products in the field

- Nevada Gaming Control Board Approval for the G3(TM) and the successful deployment of the G3 in Nevada in reputed casinos such as the Wynn, the Bellagio, the Venetian, Harrah's and MGM

- DEQ added key international industry and financial board members in the course of the year

- DEQ ranks among TOP 10 Best Technology Companies for 2008 on TSX Venture

"2008 was a year of license applications and approvals, trial tests and initial product rollout in the USA", stated Earle G. Hall, President & CEO of DEQ. "We have successfully broadened our product base with the new EZ Baccarat/EZ Trak product line that is now operational in its first 10 casinos that include the Wynn in Las Vegas. The G3 is installed in the Wynn, the Venetian and Palazzo, the Bellagio as well as many other world class casinos. 2008 was the year where we applied to more than 18 jurisdictions for operating licenses and product licenses to begin our expansion in Las Vegas as well as in the rest of the United States. 2008 was a year of uncertainty, economic crisis and many obstacles. DEQ has thrived during this year of constant turbulence and obstacles and we have laid the framework for widespread commercialization in 2009. At the same time, we have undertaken a very cautious approach to spending and have revised our entire cost base to ensure that we are creating the maximum amount of value for our shareholders. Our focus is on our core business; leasing systems in target rich markets and controlling cost to ensure we create the maximum value possible for our shareholders in these times of economic uncertainty."

Statement of Earnings
                               November 30,    November 30,    November 30,
                                      2006            2007            2008
                                  (Audited)       (Audited)       (Audited)
 Royalties (1)                   1,230,971       1,961,816       2,245,604
 Sale of equipment               1,375,194       1,223,886         677,310
 Equipment rental (1)              539,695         288,288         369,540
 Patents rights                    503,602         107,160         794,300
                                 3,649,462       3,581,150       4,086,754

Gross Margin                     2,018,153       2,754,610       3,208,901
 % Gross Margin                         55%             77%             79%
 % Annual Growth                        17%             36%             16%

Operational Costs               (2,755,630)     (3,204,744)     (3,450,253)

EBITDA (2)                        (737,477)       (450,134)       (241,352)

Interest income,
 net of expenses                   149,203         370,754         369,019
Deferred revenue variation         285,550         381,812         234,253
Adjusted cash flow
 from operations (2)              (302,724)        302,432         361,920

Additional information

Recurring Revenue                1,770,666       2,250,104       2,615,144
Lease Table Equivalent (LTE)
 (Recurring Rev. / $3,000)             590             750             871
% Annual Growth                         15%             27%             16%
Net Income                      (2,343,281)     (1,706,441)     (1,509,617)
Net income per share               $(0.060)        $(0.030)        $(0.022)


Note 1: Recurring revenue is comprised of Royalties and Equipment rental.
Note 2: We use EBITDA (Earnings before interest, taxes, depreciation and
        amortization) and Adjusted Cash Flow from Operations as performance
        measurements in our financial disclosure. These measurements are
        not recognized under generally accepted accounting principles. The
        reconciliations above demonstrate how we calculate such
        measurements from our financial statements.

Balance Sheets
                               November 30,    November 30,    November 30,
                                      2006            2007            2008
                                  (Audited)       (Audited)       (Audited)
Cash and cash equivalents        3,591,367      11,364,112       6,593,357
Current assets
 (other than cash)               2,783,913       2,180,534       1,860,176
Long-term assets                 7,329,713       9,187,762      17,139,836
Total Assets                   $13,704,993     $22,732,408     $25,593,369

Current liabilities              1,581,378       1,716,162       2,734,291
Long-term liabilities              655,896         577,073       2,725,668
Shareholders' equity            11,467,719      20,439,173      20,133,410
Total Liabilities and Equity   $13,704,993     $22,732,408     $25,593,369

Number of shares outstanding    53,241,149      69,350,794      70,416,315

Statement of Cash Flows
                               November 30,    November 30,    November 30,
                                      2006            2007            2008
                                  (Audited)       (Audited)       (Audited)
Operating Activities
 Operating cash flows             (602,344)       (244,199)        452,970
 Change in receivable
  of l-t sales                    (142,213)        458,154      (1,072,264)
 Change in working capital        (510,741)        500,614        (167,916)

                                (1,255,298)        714,569        (787,210)

Investing Activities              (107,112)     (2,647,420)     (4,370,381)

Financing Activities             4,822,309       9,705,596         386,836

Increase (decrease) in cash      3,459,899       7,772,745      (4,770,755)

Cash at beginning                  131,468       3,591,367      11,364,112

Cash at end                      3,591,367      11,364,112       6,593,357
Additional Information

- Royalties and Patent rights: Please note that an amount of royalties recognized in second quarter for $222,000 and in third quarter for $87,000 was reclassified as patent rights in our audited financial statements. This reclassification has no impact on the amount of total revenue disclosed in our second and third quarter of 2008. This revenue is related to US$1M cash inflow received from Station Casinos in May 2008. Therefore, the number of LTE disclosed in second quarter was readjusted to 737 (instead of 1,025) and at 905 in the third quarter (instead in 1,021). The number of LTE disclosed in the fourth quarter was 1,029, an increase of 14% compare to the third quarter of 2008.

- Sale of equipment: Low margin (under 10%) as this is not core business related. As mentioned in previous years, sales of equipment are being reduced as much as possible.

- Operating Costs: Travel and commercialization costs were higher than previous years as R&D as initial product approvals and rollout was commenced. These costs were reduced at the end of the year now that product momentum has started.

- Cash Flow: The change in the cash position in DEQ was positive in 2008 for the operations at $361,920. Major fluctuations in our cash position are attributable to acquisition of licensing rights from DEK International ($4.0M) and an investment project ($1.1M) that will yield a 25% IRR (Internal rate of return). Outside of these two events totalling more than $5.1M, our cash position has been stable.

- Share Buyback Program: As of February 24th , 2009, DEQ has purchased a total of 656,000 shares at an average weighted price of $0.297 as part of the approved normal course issuers bid.


Founded in 1998, DEQ Systems Corp. (TSX VENTURE:DEQ) is a leader in the table game bonusing technology field. DEQ's patents and products include side bet bonusing with progressive and random jackpot prizes and slot machine style mystery bonusing, multiple credit betting on the player's and dealer's hand, denomination betting flexibility, electronic credit bank, electronic rake, as well as baccarat and blackjack hand tracking. All DEQ solutions are enhanced by multimedia animation and sound effects. DEQ has an extensive patent portfolio that is recognized in more than 50 countries such as the USA, Macau, Australia and Canada. DEQ's bonusing solutions and products are present in more than 200 casinos in over 30 countries.

DEQ Systems Corp. has been selected in the TSX Venture 50 in 2008. "2008 Venture 50" is a trademark of TSX inc. and is used under license. TSX Venture does not accept any responsibility regarding the accuracy of the information contained in this press release.
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