DEQ and DEK International reach a settlement on the Severn Project

This settlement agreement sees DEQ assigning and transferring all amounts payable as royalties by Severn to DEK International for the remainder of the 10 year Agreement that started in 2005. This transfer of the defaulted royalties to DEK International will completely discharge and release DEQ from any and all obligations regarding the final payment of the balance of purchase price of US$883,000 due to DEK International on July 31, 2011.

While DEQ has continually disclosed the risks and poor performance of the Severn Project, the total cash flow received from this project since its inception and including this final transaction represents 81% of the total amount of US$5.75 M loaned to Severn by DEQ which means that DEQ has retrieved the vast majority of its investment from this project.

Since the early stages of this Guatemala project, the Severn casinos have not developed or performed as expected. DEK International, has even paid several of DEQ’s royalty payments on behalf of Severn, in a temporary move to avoid default and protect their own investment in the project with the hope that the financial situation would improve. This support ceased during the fourth quarter of 2010, as the economics and outlook of Severn remained dismal.

DEQ explored several options with external legal counsel including and not limited to legal action. Based on the legal and other external opinions received, DEQ’s management was convinced that the best option was to seek financial relief for the failed Severn Project and commenced negotiations with the parties involved. These negotiations came to a conclusion in March 2011.

The transfer of the slot machine royalty due by Severn to DEK does not affect in any way the royalty collected on a monthly basis from DEK International on the operation of approximately 380 tables with the G3 System that are currently in operations in more than 150 casinos located in South America and  Eastern Europe.

 “DEQ is now a debt free company with a solid balance sheet. Our product install growth is very significant and looking at Q1 2011, DEQ installed 141 leased products compared to Q1 2010 where it installed 66 for a growth rate of well over 100%. Our accelerated growth will offset this loss of royalties of approximately US$200,000 per quarter in the near term and as we look to the future, we are very excited with not only our geographical growth but our product penetration per casino and the new products we are launching in 2011,” stated Earle G. Hall, President and CEO of DEQ.