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ESI Entertainment announces Fiscal 2012 First Quarter Financial Results(Canada Newswire Via Acquire Media NewsEdge) BURNABY, BC, Sept. 2, 2011 /CNW/ - ESI Entertainment Systems Inc. ("ESI" or the "Company") (CNSX : ESY) reported today its financial results (unaudited) for fiscal Q1 2012 ended May 31, 2011. (All dollar amounts reported in Canadian funds). Consolidated financial highlights for the quarter include (Q1 2012 compared to Q1 2011): Revenues increased by 27% to $943,000 from $743,000 Cost of Sales increased by 62% to $809,000 from $497,000 Operating Expenses decreased by 51% to $352,000 from $715,000 Net comprehensive loss before income taxes decreased by 8% to $391,000 from $425,000. "First Quarter Fiscal 2012 was a good Quarter for us. Not only did we restructure our internal accounting process, we also converted to a new accounting system and have adopted the new IFRS. These changes have allowed us to more effectively monitor our financial position. Throughout the significant change over, we continued to integrate new customers, build volume and increase revenue. All our subsidiary companies continued to operate efficiently within a lower cost base and increased profitability. ESI Integrity maintained its operations at a profitable level and Citadel Commerce has increased its revenues while holding down its costs. Although our struggle to grow both Integrity and Citadel back to and beyond their former revenues and profitability are not over, we are pleased to report that the Company continues to grow back and recover market share". - Tony Greening, CEO Selected Financial Information Period ended May 31, 2011 May 31, 2010 ($ 000) except for EPS Revenue 943 743 Gross Profit 134 246 Total operating expenses 352 715 Net Loss (391) (425) (Loss) earnings per share Basic and Diluted (0.03) (0.03) Total Assets 5,505 5,238 Total long-term liabilities 486 515 Cash generated from operations 12 (24) Results of Operations The Company's May 31, 2011 reporting is the first period using IFRS. Figures for the three months ended May 31, 2010 have been restated from those previously reported under GAAP to IFRS. Details regarding the transition to IFRS can be found in the condensed consolidated interim financial statements (note 20) which can be found on www.sedar.com. Consolidated Revenues The following table provides a breakdown of the Company's revenues from its subsidiaries for the three months ended May 31, 2011 and 2010: Three months ended ($ 000) May 31/11 May 31/10 % change Integrity 417 434 -4% Citadel 526 309 70% Total revenue 943 743 27% Total revenue increased by 27% to $943,000 for the three months ended May 31, 2011 from $743,000 for the three months ended May 31, 2010. Integrity Revenues ESI Integrity provides software solutions for real-time auditing of transaction processing systems to businesses requiring high levels of security, integrity, and trust, including government regulated lotteries and pari-mutuel (horse tracks) organizations. Integrity Revenues are generated from long term customer license and support contracts where it charges a fixed license fee for the use of its audit and risk management software, as well as an annual support fee. Revenue is typically earned over a two to five year period, depending on a contract's respective term. Citadel Revenues Citadel revenues are generated from its on-line payment processing which include electronic cheques and paper cheques but its main focus is its Instant Bank Transfer service. All of Citadel's services are charged on a fee per transaction charged to its merchants. Consolidated Gross Profit The following table provides a summary of the Company's gross profit as prepared in accordance with IFRS for the three months ended: ($ 000) May 31/11 May 31/10 Revenues 943 743 Direct Costs 809 497 Gross profit 134 246 Gross profit margin (%) 14% 33% The reduction of Gross Profit in the First Quarter to May 31, 2011, compared to May 31, 2010, is primarily attributable to reallocation during fiscal 2012 of direct and indirect operating costs among subsidiaries which has not affected overall group cash flow. All indirect costs in the Citadel subsidiaries are now allocated to Citadel Malta as Direct Costs Product Development All Product Development expenses for ESI Integrity are being capitalized. Sales, Marketing and Customer Service Sales, marketing and customer service expenses were $32,000 during the three months ended May 31, 2011, an increase of 3% compared to $31,000 for the three months ended May 31, 2010. The increase is primarily related to the additional sales and marketing activities. General and Administrative General and administrative expenses were $352,000 during the three months ended May 31, 2011, a decrease of 51% compared to $715,000 for the three months ended May 31, 2010. This reduction is due partly to the Company's ongoing efforts to minimize its operating expenses and partly to reallocation of direct and indirect costs. Amortization Amortization expenses were $22,000 during the three months ended May 31, 2011, an increase of 57% compared to $14,000 for the three months ended May 31, 2010. The amortization being reduced on older equipment is offset by amortization being recorded on newly incurred capitalized product development costs in Integrity. Net (loss) Earnings Net comprehensive loss for the quarter ended May 31, 2011 was $391,000 ($0.03 loss per share) compared to a loss of $425,000 ($0.03 loss per share) for the quarter ended May 31, 2010, a decrease of 8%. Liquidity and Capital Resources ESI has historically financed its operations through the sale of equity and through cash generated by its operations. During the quarter ended May 31, 2011, cash flow generated from operating activities was $12,300 compared to $24,000 used during the quarter ended May 31, 2010. Cash from financing activities totaled $382,000 during the quarter ended May 31, 2011 compared to $148,000 during the quarter ended May 31, 2010. Overall, the increase in cash totaled $389,000 for the quarter ended May 31, 2011 compared to $87,000 for the quarter ended May 31, 2010. For the three month period ending May 31, 2011 the Company incurred a comprehensive loss from operations of $391,000 and an increase in operating cash flow of $389,000. In addition, the Company has incurred significant operating losses and net utilization of cash in operations in prior periods. Accordingly, the Company will require continued financial support from its shareholders and creditors and/or new debt or equity financing until it is able to generate sufficient cash flow from operations on a sustained basis. Consolidated Financial Statements (Unaudited) NOTE TO READER: The following financial statements (unaudited) are extracted from the complete financial statements of the Company which have been filed with the Management's Discussion and Analysis. The Company's documents can be found on www.sedar.com to which the reader is referred. ESI ENTERTAINMENT SYSTEMS INC. Condensed Consolidated Interim Statements of Financial Position As at May 31, 2011, February 28, 2011 and March 1, 2011 (Unaudited - expressed in Canadian dollars) May 31,2011 February 28,2011 CDN GAAP March 1, 2011IFRS Assets Current Cash and cash equivalents $ 406,373 $ 17,742 $ 17,742 Accounts receivable 82,711 210,160 210,160 Prepaids and other 90,525 66,912 66,912 Citadel processing accounts 4,280,435 4,277,252 4,277,252 4,860,004 4,572,066 4,572,066 Non-current Capitalized Development Costs 152,307 160,255 160,255 Property and equipment 114,291 123,002 123,002 Deferred contract costs 378,463 382,682 382,682 Total Assets 5,505,105 5,238,005 5,238,005 Liabilities Current Accounts payable and accrued liabilities $ 2,299,615 $ 2,085,028 $ 2,085,028 Loan Payable 2,106,022 2,081,567 2,081,567 Citadel Processing Liabilities 5,681,601 5,321,142 5,321,142 Deferred Revenue 556,887 485,367 485,367 10,644,125 9,973,104 9,973,104 Non-current Deferred Revenue 486,856 519,494 514,494 Total Liabilities 11,130,981 10,492,598 10,492,598 Equity Share Capital 9,957,969 9,957,969 9,957,969 Contributed Surplus 4,619,298 4,560,531 4,599,296 Other Comprehensive Income (Loss) 19,405 - 23,318 Deficit (20,222,548) (19,773,093) (19,835,176) Total Equity (5,625,876) (5,254,593) (5,254,593)Total liabilities and equity 5,505,105 5,238,005 5,238,005 ESI ENTERTAINMENT SYSTEMS INC. Condensed Consolidated Interim Statements of Loss and Comprehensive Loss Three months ended May 31, 2011 and May 31, 2010 (Unaudited - expressed in Canadian dollars) For the three months ended May31 2011 2010Continuing operations Revenues $ 942,861 $ 743,265 Direct Costs 809,189 497,413 Gross Profit 133,672 245,852 General and administration expenses 351,666 714,676 Operating loss (217,994) (468,824) Foreign exchange (gain) loss 138,123 (28,133) Finance Income (10) (44) Finance expense 31,265 48,707 Loss for the period attributable to equity holders (387,372) (489,354) Other comprehensive income (loss) Foreign currency translation gain (loss) (3,913) 64,276 Total comprehensive income (loss) for the period attributable to the equity holders (391,285) (425,078) Basic and diluted loss per share (0.03) (0.03) ESI ENTERTAINMENT SYSTEMS INC. Condensed Consolidated Interim Statements of Cash Flows Three months ended May 31, 2011 and May 31, 2010 (Unaudited - expressed in Canadian dollars) Three months ended May 31 2011 2010Cash flows provided by (used for) the following activities Operating activities Loss for the period $ (387,372) $ (489,354) Add (deduct) Depreciation 22,086 13,975 Other (3,913) 64,703 Stock-based compensation 20,002 10,278 (349,197) (400,398) Changes in non-cash working capital: Accounts receivable 127,449 (51,574) Prepaids (23,613) (32,218) Accounts payable and accrued liabilities 214,587 456,611 Deferred revenue 38,882 (26,037) Deferred contract costs 4,219 29,785 Cash flow (used in) from operations 12,327 (23,831) Investment activities Capitalized development costs - (37,775) Acquisition of property and equipment (5,427) - Cash from (used in) investing activities (5,427) (37,775) Financing activities Loan payable 24,455 967 Change in Citadel processing liabilities 360,459 (1,034,636) Change in Citadel processing assets (3,183) 1,181,843 Cash from (used in) financing activities 381,731 148,174 Increase (decrease) in cash and cash equivalents 388,631 86,568Cash and cash equivalents,beginning of period 17,742 89,208Cash and cash equivalents, end of period $406,373$175,776 Forward- looking Statements This news release contains forward-looking statements concerning ESI Entertainment Systems Inc, which statements can be identified by the use of forward-looking terminology such as "expect", "proposed", "may", "plan", "intend", "will", "would" or the negative thereof or any other variations thereon or comparable terminology referring to future events or results. Forward-looking statements are statements about the future and are inherently uncertain, and the actual events or results could be materially different than those anticipated in those forward-looking statements as a result of numerous factors. These risks include risks related to revenue growth, operating results, industry growth, changes in regulation and legislation, products, technology, financing, competition, personnel and other factors affecting the Company and its business, any of which could cause actual events or results to vary materially from ESI's anticipated future results. Forward-looking statements are based on beliefs, opinions and expectations of ESI's management at the time they are made, and ESI does not assume any obligation to update its forward-looking statements if those beliefs, opinions or expectations, or other circumstances should change. The Canadian National Stock Exchange does not accept responsibility for this press release. About ESI Entertainment Systems Inc. ESI Entertainment Systems Inc (CNSX: ESY) is an idea generation and software development company. We develop concepts, create prototypes, establish partnerships and validate potential markets. When we have proven a product and its opportunities we create subsidiaries with a dedicated team, infrastructure, and resources to allow it to focus on building and selling the product to its market niche. Our team of experienced and dedicated people have led us to be revolutionary market leaders in many industries, including e-commerce payment technologies, hardware based input devices, real time auditing systems, transaction processing systems, graphical 3D displays, ecommerce web services, and payment fraud and risk mitigation. Since formation in 1999 ESI Entertainment Systems Inc has created three independently operated and controlled subsidiaries based on validated and proven products: Citadel Commerce Corp., ESI Integrity Inc., and PlayLine Inc. PlayLine Inc. is presently dormant. |