Xentel DM Incorporated
TSX VENTURE : XDM

Xentel DM Incorporated

August 31, 2007 14:00 ET

Xentel Reports Second Quarter June 30, 2007 Results

CALGARY, ALBERTA--(Marketwire - Aug. 31, 2007) - Xentel DM Incorporated (TSX VENTURE:XDM) a North American specialty entertainment and relationship marketing company, today reported its financial results for the three and six months ended June 30, 2007.



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Period ended June 30 Three months Six months
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2007 2006 2007 2006
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($ 000's, except per share amounts)
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Revenue $ 24,853 $ 27,488 $ 52,999 $ 58,715
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Gross Margin 4,734 6,528 11,204 14,406
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Net (loss) earnings (590) (62) (473) 119
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EBITDA (142) 1,556 1,355 3,167
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EPS, fully diluted $ (0.02) $ (0.00) $ (0.02) $ 0.01
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EBITDA, per share, fully diluted $ (0.00) $ 0.06 $ 0.05 $ 0.12
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(i)EBITDA - Net Earnings before income taxes, interest, depreciation and
amortization. Since Gross Margin, EBITDA and diluted EBITDA per share have
no standardized GAAP meaning, the comparability of these amounts to other
enterprises may not be possible if the basis of calculation of differs.
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The results for the second quarter 2007 was a net loss of $590 thousand compared to a net loss of $62 thousand for the second quarter 2006. Revenues amounted to $24,853 thousand compared to $27,488 thousand for the second quarters 2007 and 2006 respectively. EBITDA for the three months ended June 30, 2007 was negative $142 thousand compared to $1,566 thousand for the same period in 2006.

Year to date for the six months ended June 30, revenues for 2007 and 2006 were $52,999 thousand and $58,715 thousand respectively. For the six months ended June 30, 2007 the Company incurred a net loss of $473 thousand compared to net earnings of $119 thousand for the same period in 2006.

Consumer attitudes continues to be the most significant issue facing the Company. Profitability has been adversely affected by the revenue decline because certain fixed costs are not readily scalable. Management has taken action in this area and anticipates the effects will be reflected in future quarters.

David Winograd, President US operations, observed, "We are taking advantage of changes in the marketplace associated with consumer attitudes by adapting our management approach and marketing techniques."

Added Michael Platz, Chairman, "Although this has been a tough year, our focus on cost and debt reduction over the past eighteen months has substantially improved our balance sheet and liquidity. The Company remains strong and continues to be a dominant player in our market niche."

Xentel DM Incorporated is one of North America's leading relationship-marketing concerns and producers of cause related entertainment events. The Company's success is attributable to proprietary sales tools including technologically advanced teleservices and sophisticated customer databases. Xentel DM Incorporated has over 450 clients and 3,000 employees in over 30 offices across North America.

Certain statements in this press release may constitute "forward looking statements" and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any performance or achievement expressed or implied by such "forward looking statements".



Xentel DM Incorporated
Consolidated Balance Sheets
($ '000s)

June 30, June 30, December 31,
2007 2006 2006
(unaudited) (unaudited) (audited)

Assets
Current assets
Cash and cash equivalents $ 365 $ 199 $ 795
Accounts receivable, net of
allowances 6,459 7,800 8,956
Inventory 474 507 628

Work in process 6,157 6,617 6,421
Prepaid expenses 981 1,152 1,106
Due from related party 1,384 - 1,514
Income taxes receivable 283 - -
Future income taxes 498 878 643
Other current assets - 3 -

----------- ------------ -------------

16,601 17,156 20,063

Deferred financing costs, net
of amortization - 275 210
Due from related party - 1,451 -
Equipment 3,110 3,723 3,622
Future income taxes 2,606 3,310 2,843
Other intangible assets 2,153 3,891 3,207
Goodwill 1,079 1,130 1,180

----------- ------------ -------------

$ 25,549 $ 30,936 $ 31,125
----------- ------------ -------------
----------- ------------ -------------

Liabilities
Current liabilities

Bank indebtedness $ 457 $ 1,694 $ 1,259
Accounts payable and accrued
liabilities 5,036 5,489 6,654
Income taxes payable 3 44 365
Current portion of long term
liabilities 2,211 1,906 2,058
Future income taxes 1,016 1,061 1,016

----------- ------------ -------------

8,723 10,194 11,352

Long term debt 61 2,421 1,542
Due to related parties 2,648 2,358 2,729
Future income taxes 1,488 2,838 1,628
Deferred tenant inducement 330 - 389

----------- ------------ -------------
13,250 17,811 17,640

Shareholders' equity

Share capital 9,280 9,291 9,280
Warrants 205 205 205
Contributed surplus 70 58 70
Accumulated other
comprehensive income (3,710) (3,315) (2,997)
Retained earnings 6,454 6,886 6,927

----------- ------------ -------------
12,299 13,125 13,485

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$ 25,549 $ 30,936 $ 31,125
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Xentel DM Incorporated
Consolidated Statements of Operations and Retained Earnings
('000s, except per share amount, unaudited)

Three Months Ended Six Months Ended
June 30 June 30
2007 2006 2007 2006

Revenue $ 24,853 $ 27,488 $ 52,999 $ 58,715

Cost of revenue 20,119 20,960 41,795 44,309

--------- --------- --------- ----------

Gross margin 4,734 6,528 11,204 14,406

--------- --------- --------- ----------
Corporate expenses

Branch overhead and corporate
administration 4,876 4,972 9,849 11,239
Interest expense 214 320 454 575
Amortization of equipment 216 453 616 1,004
Amortization of intangible
assets 405 419 836 846

--------- --------- --------- ----------

5,711 6,164 11,755 13,664

--------- --------- --------- ----------

Earnings (loss) before
undernoted items (977) 364 (551) 742

Loss on disposal of other
investments - 191 - 191
Expenses related to 2003
privatization lawsuit 43 225 137 228

--------- --------- --------- ----------
Earnings (loss) before income
taxes (1,020) (52) (688) 323

--------- --------- --------- ----------
Income tax expense (recovery)
Current income tax expense
(recovery) (312) 78 (313) 1
Future income tax expense
(recovery) (118) (68) 98 203

--------- --------- --------- ----------

(430) 10 (215) 204

--------- --------- --------- ----------

Net earnings (loss) (590) (62) (473) 119

Retained earnings, beginning
of period 7,044 6,948 6,927 6,767

--------- --------- --------- ----------

Retained earnings, end of
period $ 6,454 $ 6,886 $ 6,454 $ 6,886
--------- --------- --------- ----------
--------- --------- --------- ----------

Basic and diluted net earnings
(loss) per share $ (0.02) $ (0.00) $ ( 0.02) $ 0.01
--------- --------- --------- ----------
--------- --------- --------- ----------

Basic and diluted weighted
average number of shares
outstanding 26,195 26,205 26,195 26,205
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Xentel DM Incorporated
Consolidated Statements of Contributed Surplus
('000s, unaudited)

Three Months Ended Six Months Ended
June 30 June 30
2007 2006 2007 2006

Balance, beginning of period $ 70 $ 58 $ 70 $ 58

--------- --------- --------- ---------
Balance, end of period $ 70 $ 58 $ 70 $ 58
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See accompanying notes to the financial statements


Xentel DM Incorporated
Consolidated Statements of Comprehensive Income
('000s, unaudited)

Three Months Ended Six Months Ended
June 30 June 30
2007 2006 2007 2006

Net earnings (loss) for the
period $ (590) $ (62) $ (473) $ 119

Foreign currency translation
adjustment from self
sustaining foreign operations (631) (331) (713) (321)

--------- --------- --------- ---------
Comprehensive (loss) $ (1,221) $ (393) $ (1,186) $ (202)
--------- --------- --------- ---------
--------- --------- --------- ---------
See accompanying notes to the financial statements


Xentel DM Incorporated
Consolidated Statements of Accumulated Other Comprehensive Income
('000s, unaudited)

Three Months Ended Six Months Ended
June 30 June 30
2007 2006 2007 2006

Transition adjustment -
January 1, 2006 - $ (2,995) - $ (2,995)

Foreign currency translation
adjustment from self
sustaining foreign operations (631) (331) (713) (320)

Balance at beginning of period (3,079) 11 (2,997) -

--------- --------- --------- ---------
Balance at end of period $ (3,710) $ (3,315) $ (3,710) $ (3,315)
--------- --------- --------- ---------
--------- --------- --------- ---------

See accompanying notes to the financial statements


Xentel DM Incorporated
Consolidated Statements of Cash Flows
('000s, unaudited)

Three Months Ended Six Months Ended
June 30 June 30
2007 2006 2007 2006

Cash flows from (used in)
operating activities

Net earnings (loss) for the
period $ (590) $ (62) $ (473) $ 119

Non cash transactions
reflected in net earnings

Amortization 620 872 1452 1,850
Future income tax expense
(recovery) (117) (68) 98 202
Adjustment for non cash
interest 96 102 198 130

--------- --------- --------- ---------
9 844 1,275 2,301

--------- --------- --------- ---------

Net change in non cash working
capital items

Accounts Receivable 1540 1,123 2,174 1,324
Inventory and work in process 59 126 99 (557)
Prepaid expenses 98 (527) 73 (672)
Other current assets - 194 (2) 178
Income taxes payable (416) (548) (645) (679)
Accounts payable and accrued
liabilities (467) (691) (1,417) (1,257)

--------- --------- --------- ---------

Net change in non cash working
capital items 814 (323) 282 (1,663)

--------- --------- --------- ---------

823 521 1,557 638

Cash flows from (used in)
financing activities

Bank indebtedness (37) (7) (761) 454
Long term debt (506) (547) (1,020) (804)

--------- --------- --------- ---------
(543) (554) (1,781) (350)

--------- --------- --------- ---------
Cash flow (used in) investing
activities

Investment in capital assets,
net (99) (110) (227) (562)

--------- --------- --------- ---------

Effect of exchange rate
fluctuations on cash balances 23 17 21 21

--------- --------- --------- ---------

Net increase (decrease) in
cash and cash equivalents 204 (126) (430) (253)

Cash and cash equivalents,
beginning of period 161 325 795 452

--------- --------- --------- ---------

Cash and cash equivalents,
end of period $ 365 $ 199 $ 365 $ 199
--------- --------- --------- ---------
--------- --------- --------- ---------

See accompanying notes to the financial statements.


The TSX Venture Exchange has neither approved nor disapproved the contents of this announcement.

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