DEQ Systems Corp.
TSX VENTURE : DEQ

DEQ Systems Corp.

December 06, 2006 19:37 ET

DEQ Concludes a Second 10 Year IP Licensing Agreement with Severn Enterprises

LEVIS, QUEBEC--(CCNMatthews - Dec. 6, 2006) - DEQ Systems Corp. (TSX VENTURE:DEQ) announces today that it has concluded a second 10 year intellectual property licensing agreement with Severn Enterprises. The agreement grants Severn the right to integrate DEQ's patent portfolio into the second phase of the Severn Project. This phase foresees the addition of 254 slot machines, for a total project including both phases of 550 slot machines.

The Severn Project is expected to generate a total fixed royalty revenue of US$8.4M over the next 10 years. An additional variable royalty revenue for all 550 slot machines will be applied according to specific revenue milestones and will be earned over and above the fixed royalties. Over the life of the agreement, DEQ expects to realize cash inflows of a total of US$15.35M, as follows: secured loan repayment (US$5.75M); interest income (US$1.2M); and fixed royalty revenue (US$8.4M). These cash inflows do not include variable royalty revenue.

The fixed royalty revenues of US$8.4M are calculated for all 550 slot machines at US$60.88 per machine per month for the first year, US$91.32 per machine per month for the second and third year, US$121.76 per machine per month for the fourth year, and US$152.20 per machine per month for the subsequent 6 years for the right to use DEQ's intellectual property.

As previously disclosed by the Company, DEQ will provide Severn with a secured loan of US$3M for the purchase of the additional slot machines and related equipment including management control systems from third party vendors. The loan will bear interest at an annual rate of 5% compounded monthly and payable simultaneously with the capital. The term of the loan is set for seven (7) years and will be reimbursed every six months in equal instalments starting on November 30, 2007.

Earle G. Hall, President & CEO stated: "DEQ's long term vision is to be a premier provider of revenue generating intellectual property for the casino industry. This licensing agreement with Severn is the stepping stone for DEQ to penetrate the slot machine segment of the market. Not only is the Severn agreement a significant milestone for DEQ, but it is a concrete step to becoming a global gaming IP licensing company, focused on the generation of high margin, recurring royalty revenue."

About DEQ Systems Corp.

DEQ is a worldwide provider of gaming technology products including multiple bet electronic side-betting systems. DEQ's internationally patented technology enhances performance of existing casino products through revenue generating intellectual property. DEQ's products and intellectual property are present in more than 200 casinos located in more than 30 countries around the world. DEQ has developed and holds an extensive international patent portfolio that is the basis of the current product line.

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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