DEQ Systems Corp.
TSX VENTURE : DEQ

DEQ Systems Corp.

October 25, 2007 19:00 ET

DEQ Announces its Financial Results for the Third Quarter and Will Hold a Conference Call

LEVIS, QUEBEC--(Marketwire - Oct. 25, 2007) - DEQ Systems Corp. (TSX VENTURE:DEQ) announced today the filing of its interim financial results for the third quarter ending August 31st, 2007. A conference call will be held on Friday, October 26th at 11am EST to present and discuss these results. Third quarter highlights include the strategic alliance with Shuffle Master, G3TM System approval in Macao, installation of our Baccarat tracking system at Barona Casino in California as well as a cash inflows of more than $6M from operations and warrants exercised during the quarter.

"The third quarter marks the start of a new chapter in the history of DEQ", stated Earle G. Hall, President & CEO of DEQ. "Our business model is based on providing tailored solutions to the four table game segments (specialty poker, blackjack, Baccarat and poker rooms). During the third quarter, we have completed the initial phase of our business plan, that of converting competitors to partners and clients to create solid distribution channels. We are now very fortunate and proud to have such partners as Shuffle Master and clients as Harrah's, Station Casinos and Barona. We have migrated our business model from a manufacturing sales company to an intellectual property recurring revenue company. In 2007, we have put in place our revenue growth model with a stabilized cost base. During the third quarter, DEQ has started integrate its first product line for specialty poker in the United States through its partners which is significant step for the Company. Our focus is now on segment tailored solutions for specialty poker, blackjack and Baccarat in specific target markets such as the USA and Macau with our partners. As well, it is important to note that we are quite proud to have been recognized amongst the Top 10 Technology listed companies on the TSX Venture Exchange."

"DEQ's financial strength has improved dramatically over the last couple months with the cash inflow of more than 6 million dollars with the exercising of warrants as well as the growth in our operating cash flows. Also, in the last quarter, we have implemented a cross currency interest rate swap that will stabilise a portion of our foreign exchange loss (gain) in our results due to material variation of the exchange rate with the US dollar," stated Francois Proulx, CFO of DEQ. "Our business plan is focusing on revenue growth with stabilized costs which we have achieved in the last nine months and we keep our focus on recurring revenue growth."

Earle G. Hall, President and Chief Executive Officer, and Francois Proulx, Chief Financial Officer of DEQ, will be hosting a conference call on Friday, October 26, 2007, at 11AM Eastern Time to present the Company's 2007 Third Quarter Results.

Those interested in participating in the call should dial (416) 644-3417 or toll free 1 (800) 732-0232, approximately 5 minutes before the call start time. A visual presentation (web enabled Powerpoint) will be available on DEQ's website (www.deq.com) to support the call content. The presentation will be accessible on the home page of the website in the Events section under "Third Quarter 2007 Results Presentation." The Consolidated Financial Statements are available on SEDAR (www.sedar.com) and DEQ's website.

Third Quarter Highlights:

- Shuffle Master (NASDAQ: SHFL) became the provider of the G3 system for its suite of more than 4500 table game and electronic game products.

- G3TM System approved in Macau by Gaming Laboratories International

- TSX VENTURE 50 recognized DEQ as one of the 10 Best Venture Companies in the Technology Sector in 2007.

- Finally, since May 31, 2007, a total of 10,318,000 warrants have been exercised at $0.60 for a gross proceeds of $6,190,800.

The Company reports:

Third Quarter ended August 31st, 2007

- Increase in cash and cash equivalents from $1,877,000 to $2,202,000 during the third quarter.

- 46% increase in gross profit to $598,000, representing $187,000 increase compared to $411,000 for the same period in 2006.

- 52% increase in quarterly recurring revenue to $467,000 in the 2nd quarter of 2007 representing an increase of $159,000 compared to $308,000 for the same period in 2006.

- Foreign exchange loss of $107,000 due to recent Canadian dollar appreciation compared to US dollar.

- As at August 31, 2007, the company had a shareholders' equity of $11.92 million and working capital of $3.27 million.

Nine-Month Period ended August 31st, 2007

- 25% increase in gross profit for a total of $2,290,000, representing an increase of $460,000 compared to $1,830,000 for the same period in 2006.

- 67% increase in recurring revenue to $1,548,000, representing an increase of $624,000 compared to $924,000 for the same nine-month period in 2006.

- Significant increase in adjusted operating cash flows for the nine-month period to $847,000, representing an increase of $925,000 compared to ($78,000) for the same period in 2006.



Statement of Earnings

Third Quarter Nine Months
ended August 31 ended August 31
2007 2006 2007 2006
(unaudited) (unaudited) (unaudited) (unaudited)
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REVENUES
Royalties $467,231 307,989 1,547,932 924,001
Sale of equipment 63,047 274,971 743,367 1,267,465
Equipment rental 62,712 123,009 228,327 449,022
Patent rights 107 160 - 107,160 503,990
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700,150 705,969 2,626,786 3,144,478
GROSS PROFIT 598,164 410,857 2,288,469 1,830,327
NET LOSS $(321,834) $(426,589) $(838,120) $(797,924)
Net loss per share (0.01) (0.01) (0.02) (0.02)

Additional information:

NET LOSS $(321,834) $(426,589) $(838,120) $(797,824)

+ Depreciation and
amortization 168,453 160,892 447,156 467,306
+ Stock-based
compensation 136,631 119,422 395,821 192,642
+ Interest capitalized
on advances (58,063) (43,224) (176,816) (84,582)
+ Future income taxes - (47,278) - (67,627)
+ Foreign exchange
loss (gain) 107,398 33,762 351,142 211,932
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32,585 (203,015) 188,337 (78,153)

+ Deferred revenue
variation (70,163) 276 325 522,137 -
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Adjusted operating
cash flow (i) $(37,578) $73,310 $846,545 $(78,153)
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(i) Adjusted cash flow from operations is a non-GAAP measure that
represents cash flow from operations before changes in assets and
liabilities after deferred revenue



Balance Sheet

October 25, August 31, May 31, November 30,
2007 2007 2007 2006
(Pro Forma(i)) (unaudited) (audited) (audited)
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Cash and cash
equivalents 8,204,429 2,201,519 1,877,221 3,591,367
Current assets
(other than cash) 2,177,226 2,177,226 2,277,573 2,783,913
Long-term assets 9,347,317 9,347,317 9,664,062 7,329,713
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Total Assets $19,728,972 $13,726,062 $13,818,856 $13,704,993
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Current liabilities 1,109,018 1,109,018 1,261,482 1,581,378
Long-term liabilities 701,879 701,879 710,526 655,896
Shareholders' equity 17,918,075 11,915,165 11,846,847 11,467,719
-----------------------------------------------------------------------
Total Liabilities and
Equity $19,728,972 $13,726,062 $13,818,856 $13,704,993
-----------------------------------------------------------------------
Number of shares
outstanding 64 601 274 54 656 049 54 340 149 53 241 149
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(i) Between September 1, 2007 and October 25, 2007, a total of 10,002,100
warrants have been exercised at $0.60 per warrant for gross proceeds of
$6,001,260 as well as 4,125 subscription units at $0.40 per unit for
gross proceeds of $1,650. As at October 25, 2007, the company had
64,601,274 common shares outstanding.


About DEQ

Founded in 1998, DEQ Systems Corp. (TSX VENTURE:DEQ) is a leader in the table game bonusing technology field. DEQ's patents, products and features include side bet bonusing games with progressive and random jackpot prizes, slot machine style mystery bonusing, multiple credit and denomination betting flexibility, dealer hand betting, electronic credit bank, electronic rake, baccarat hand tracking, 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. was recognized as a TSX Venture 50™ company in 2007.
TSX Venture 50 is a trademark of TSX, Inc. and is used under license.

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.

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