DEQ Systems Corp.
TSX VENTURE : DEQ

DEQ Systems Corp.

October 22, 2009 16:01 ET

DEQ Releases its 2009 Third Quarter Results

LEVIS, QUEBEC--(Marketwire - Oct. 22, 2009) - DEQ Systems Corp. (TSX VENTURE:DEQ) announced today the filing of its 2009 third quarter financial results for the period that ended on August 31, 2009. The Consolidated Financial Statements are available on SEDAR (www.sedar.com) and DEQ's website.

A conference call will be held on Friday, October 23, 2009 at 11am EST to present and discuss these results. Those interested in participating should dial toll free 1 (800) 908-8402 or (416) 981-9000. 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.

2009 THIRD QUARTER HIGHLIGHTS:



Financial Metrics

- Revenue

- 30% growth in recurring revenue in third quarter compared to previous
year
- 35% increase in gross profit for the nine-month period from $2.20M in
2008 to $2.96 M in 2009
- 91% gross margin compared to 82% in 2008 due to increase in recurring
revenue
- 31% average annual growth in recurring revenue over the last three
years

- EBITDA

- Positive EBITDA of $163,000 in third quarter of 2009 compared to a loss
of $140,000 in 2008
- For the nine-month period, the Company had a positive EBITDA of
$678,000 compared to a loss of $365,000 in 2008

- Operating Costs

- 24% decrease in quarterly operating costs from $895,000 in 2008 to
$679,000 in 2009

Operational Highlights

- LTE

- LTE for Q3 was 1,175 in 2009 compared to 905 in Q3 2008 and 1,249 in Q2
2009. The LTE have been affected by the USA/Canadian Currency exchange
appreciation that has a direct negative effect on the calculation of
the LTE. As well, the closure of all Russian casinos negatively
affected our LTE by 76 in the third quarter.

- Product Installations

- During the third quarter, DEQ had 71 new installations which is
comparable with Q1 and Q2 of this year with a total of 65 and 67
installations respectively.
- As of August 31, 2009, the Company had a total of 203 new
installations, excluding the major installations completed in September
at Chukchansi Casino (20 G3 tables) and Treasure Island (11 G3 tables).

- Recent News Releases and Information of Interest

- Commerce Casino takes 10 EZ Baccarat and 10 EZ Trak
- Monte Carlo in Las Vegas goes G3 on its poker games with the
installation of 5 tables
- Chukchansi Casino installs 20 G3 Systems
- Treasure Island installs 11 G3 on its poker games
- Pala Casino installs 10 EZ units


- Negative Impact of Weak US Dollar

The weak US Dollar has had a direct negative effect on the revenue of DEQ during the quarter as our revenue is reported in Canadian Dollars. Our recurring revenue in the third quarter was negatively affected by the 14% drop of the U.S. currency (1.27 to 1.095 between February 2009 to August 31, 2009)

- Sustained Increase in Recurring Revenue

Quarter after Quarter, DEQ is increasing its product penetration in the USA and has installed more than 200 new systems in this fiscal year. DEQ has obtained key new jurisdictional licenses that will positively affect our system installation base in the coming months.

- Russian Casino Closures

During the third quarter, the Russian Government's political decision to close all casinos negatively affected our revenue from DEK International by $57,000. Please read the detailed note in the MD&A on the Russian Casino Closures and the effects on the balance of payment for the repurchase of the DEK Exclusivity. We do not expect this to be a permanent decision but does affect us in the short term.

"DEQ has had a great operational quarter," stated Earle G. Hall, President & CEO of DEQ. "Our USA installation base has grown exponentially over the past year when compared to last year. Our challenge is to continue to grow this installation base as fast as possible to offset the currency losses due to the weak US Dollar. As well, the unfortunate decision by the Russian parliament to close all casinos did have a negative impact on us as we lost the equivalent of 76 LTE in this decision. However, this will have a direct positive impact on the DEK International balance of the purchase price. Our strong USA growth has always been the heart of our business plan and we are now seeing the light at the end of the tunnel as we deploy faster and in more states. Finally, as you have seen in our September and October Press Releases, we are opening up more and more jurisdictions such as New Jersey and Connecticut and we are shipping greater quantities to each client. These two key elements will have a direct positive impact on our installation progression going forward."



Financial Results
Third Quarter Nine Month Period
Aug.31, Aug. 31, Aug. 31, Aug .31,
2008 2009 2008 2009
(unaudited) (unaudited) (unaudited) (unaudited)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
$ $ $ $

Revenue
Royalties 593,116 688,403 1,684,628 2,256,279
Sale of equipment 158,194 39,519 608,902 308,209
Equipment rental 86,004 193,065 245,197 527,356
Patent rights 86,955 - 221,998 210,000
--------------------------------------------------------------------------
924,268 920,987 2,760,725 3,301,844

Gross Profit 755,682 842,132 2,199,135 2,960,189
% Gross margin 82% 91% 80% 90%

Operating Costs(1) 895,313 678,855 2,563,864 2,282,385
--------------------------------------------------------------------------

EBITDA(2) (139,631) 163,277 (364,729) 677,804

Interest income, net
of expenses 137,414 21,149 476,106 98,375
Deferred revenue variation (120,516) (159,007) 818,952 (131,587)
--------------------------------------------------------------------------
Adjusted Operating
Cash Flow(2) $(122,732) $25,418 $930,329 $644,592
--------------------------------------------------------------------------
--------------------------------------------------------------------------



Additional Information:
--------------------------------------------------------------------------
Recurring Revenue(3) $679,120 $881,468 $1,929,825 $2,786,635
Lease Table Equivalent (LTE)
(Recurring Rev. / $3,000) 905 LTE 1175 LTE N/A N/A

Net earnings (loss) ($) $360,326 (520,748) (91,848) (917,590)
Net earnings (loss)
per share ($) 0.005 (0.007) (0.001) (0.013)
--------------------------------------------------------------------------

Note 1: Operating costs excluded stock option based compensation.

Note 2: We use EBITDA (Earnings before Stock option based compensation,
Interest, Taxes, Depreciation and Amortization) and Adjusted
Operating Cash Flow 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.

Note 3: Recurring revenue is comprised of Royalties and Equipment rental.

LTE: LTE is Leased Table Equivalent: DEQ receives an average of $3,000
per table per year of patent royalties. This metric is used to
standardize the amount of leased table royalties. Actual tables may
vary as royalties may be derived from the usage of the patents
without the physical machine in use.



Balance Sheets Aug. 31, November 30, Aug.31,
2008 2008 2009
(Unaudited) (Audited) (Unaudited)
------------------------------------------------------------------------
------------------------------------------------------------------------

Cash and cash equivalents 6,784,210 6,593,357 6,070,759
Current assets
(other than cash) 1,910,201 1,920,175 1,670,315
Long-term assets 17,739,692 17,079,837 15,269,528
------------------------------------------------------------------------
Total Assets $26,434,103 $25,593,369 $23,010,603
------------------------------------------------------------------------
------------------------------------------------------------------------

Current liabilities 2,890,244 2,734,291 2,160,610
Long-term liabilities 2,256,931 2,725,668 1,624,600
Shareholders' equity 21,286,928 20,133,410 19,225,393
------------------------------------------------------------------------
Total Liabilities
and Equity $26,434,103 $25,593,369 $23,010,603
------------------------------------------------------------------------
------------------------------------------------------------------------

Number of shares
outstanding 70,416,315 70,416,315 69,589,815
------------------------------------------------------------------------
------------------------------------------------------------------------


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. 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.

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