DEQ reports its 2011 first quarter results

According to the released information, 2011 first quarter results highlights are the following:

-  141 new installations during the quarter as compared to 66 new installations in the Q1-2010 for a net increase of 113% installs at an average lease of US$4,200 per annum

-  62% increase direct leasing quarterly revenue from USUS$ 296,000 in 2010 to USUS$ 480,000 in 2011

-  Loss of USUS$ 106,000 of royalties explained by Station Casinos’ bankruptcy

-  Termination of the Paltronics revenue recognition in 2010 that affected our revenue by USUS$ 57,000

-  Settlement agreement on the Severn Project concluded on March 3, 2011 that will affect our recurring revenue by approximately US$200,000 per quarter starting on March 1, 2011

-  81% gross margin in 2011 compared to 90% in 2010 explained by the loss of revenue from Paltronics and Station Casinos

Operating Costs

- Quarterly operating costs increased to USUS$ 1,146,000 in 2011 compared to USUS$ 953,000 2010. This is explained by the Asian commercialisation in Macau and Malaysia as well as the increased number of products installed in North America, mostly from G3 systems in California

-  As announced in March 2011, the Company has reduced annual operating expenses by more than USUS$ 500,000 following the loss of revenue from Severn Enterprises

- Negative EBITDA of USUS$ 310,000 in Q1 2011 compared to a positive EBITDA of USUS$ 70,000 in 2010. This is explained by the loss of USUS$163,000 of royalties from Station Casinos and Paltronics as well as the higher operating costs with our recent installations in Macau and Malaysia as well as a patent right sale of USUS$ 130,000 in 2010

Cash Flow

- During the first quarter of 2011, our cash position decreased by US$767,000 explained mostly by our US$500,000 investment in inventory and lease equipments. DEQ’s very strong sales funnel has compelled us to build more systems in one quarter than we have in the past two years combined to ensure that we have no back orders when compared to projected installations

- In the first quarter of 2011, DEQ directly installed 141 new products in worldwide.

-  As of February 28, 2011, DEQ had 625 directly installed products in North America, 105 products installed in Asia and 390 products installed through distributors worldwide for a total of 1,120 products in operation worldwide

Earle G. Hall, President and CEO of DEQ stated: “The financial results of Q1 are no reflection of the momentum or, potential of DEQ. In Q1 we reacted to the Severn loss by immediately restructuring our costs and realigning our priorities with our revenues. As well, the ever weak US dollar had a negative effect on our revenues. We have invested over half of a million dollars in inventory.”

“This is the largest production run of our history and was done to ensure that we could keep up with the ensuing orders. That translated into more than 140 new installations in Q1 and a Q2 that will be our strongest quarter in the history of the company in term of new installations. DEQ is a solid growth company that strictly manages cost while seeking any and all viable commercial ventures.”

“Q1 saw the arrival of LT Game as a strategic partner and the full breadth of this relationship will be seen in late 2011 and in 2012. Q1 was a quarter of construction, adjustment and fine tuning to ensure that we are ready for the success before us and we are very excited as to the opportunities and potential that lay before us.”