ESI Entertainment Systems Inc announces fiscal 2010 third quarter financial
results

BURNABY, BC, Feb. 1 /CNW/ - ESI Entertainment Systems Inc. ("ESI" or the "Company") (CNSX: ESY) reported today its financial results (unaudited) for fiscal Q3 2010 ended November 30, 2009. (All dollar amounts reported in Canadian funds)

Financial highlights for the period ending November 30, 2009 include:

    
    -   Consolidated revenues decreased by 7% to $2,618,546 from $2,808,153
        during the same period last year.

    -   Citadel revenues increased by 87% to $786,088 from $420,435 during
        the same period last year.

    -   Operating expenses decreased by 43% to $2,427,999 from $4,263,841
        during the same period last year.

    -   Net loss decreased by 60% to $525,232 from a net loss of $1,583,032
        during the same period last year.
    

Our financial results were mainly driven by efforts being made during the third quarter to reduce direct and operating expenses while at the same time working to expand the business base of ESI Integrity and rebuild the business of Citadel Commerce.

During the third quarter of fiscal 2010, Citadel continued to see a steady growth in revenues while holding its costs to a minimum. ESI Integrity has decreased its resource levels due to lower than expected third quarter revenues however it continues to be profitable and has built a strong funnel of business for 2010.

The Company is building its customer base to allow us to work for future accelerated growth. Our team of employees and our Board continued to work well together with skill and dedication. Many have accepted additional workloads to accommodate the growing business while holding down our costs.

Financial Review

Total revenue decreased by 30% to $832,284 for the three months ended November 30, 2009 from $1,196,471 for the three months ended November 30, 2008.

Product development expenses were $56,794 and $179,682 during the three and nine months ended November 30, 2009 respectively, a decrease of 5% and 33% respectively compared to $59,986 and $267,764 for the three and nine months ended November 30, 2008.

Sales, marketing and customer service expenses were $39,423 and $117,702 during the three and nine months ended November 30, 2009 respectively, a decrease of 78% and 82% respectively compared to $181,946 and $658,789 for the three and nine months ended November 30, 2008.

General and administrative expenses were $699,865 and $1,970,403 during the three and nine months ended November 30, 2009 respectively, representing a decrease of 29% and 33% respectively compared to $985,757 and $2,957,975 for the three months and nine months ended November 30, 2008.

Amortization expenses were $28,710 and $160,212 during the three month and nine month periods ended November 30, 2009 respectively, a decrease of 66% and 58% respectively compared to $85,186 and $379,313 for the corresponding periods ended November 30, 2008. The decrease in amortization expense mainly relates to very few new assets being purchased and amortization being reduced on older equipment.

Net loss for the three and nine month periods ended November 30, 2009 was $525,232 ($0.04 net loss per share) and $1,583,032 ($0.11 net loss per share), respectively, compared to net loss of $1,106,477 ($0.07 net loss per share) and $3,965,574 ($0.28 net loss per share) for the prior comparative periods.

The decrease in all expense categories and Net Loss is due to the Company's ongoing efforts to minimize its operating expenses.

Citadel processing accounts as at November 30, 2009 totaled $8.2 million compared to $2.9 million as at February 28, 2009. These accounts are comprised of cash, which are segregated bank funds arising from the processing of deposits and payments for Citadel merchants and consumers, and accounts receivable relating to Citadel processing accounts for funds in transit from merchants and consumers.

    
    -------------------------------------------------------------------------
    ESI Entertainment Systems Inc.
    Consolidated Balance Sheets
    (expressed in Canadian dollars)

                                                   November 30,  February 28,
                                                          2009          2009
                                                    (unaudited)     (audited)
    -------------------------------------------------------------------------

    Assets

    Cash and cash equivalents                     $    105,544  $    909,785
    Accounts receivable                                390,207     1,100,023
    Prepaids                                           236,783       106,513
                                                   ------------  ------------
                                                       732,534     2,116,321

    Citadel processing accounts                      8,239,214     2,958,565
    Property and equipment                             124,996       280,725
    Deferred contract costs                            595,823       696,234
                                                   ------------  ------------

                                                  $  9,692,567  $  6,051,845
                                                   ------------  ------------
                                                   ------------  ------------

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

    Liabilities

    Accounts payable and accrued liabilities      $  1,562,290  $  1,049,700
    Loan Payable                                     2,161,636     2,564,704
    Capital lease obligations                                -        30,684
    Deferred revenue                                   672,487       535,667
                                                   ------------  ------------
                                                     4,396,413     4,180,755

    Citadel processing liabilities                   8,239,214     2,958,565
    Deferred revenue                                 1,051,839     1,324,392
                                                   ------------  ------------

                                                    13,687,466     8,463,712
                                                   ------------  ------------

    Shareholders' Equity (Deficit)

    Capital stock                                    9,957,959     9,957,959
    Contributed surplus                              4,328,885     4,328,885
    (Deficit)                                      (18,281,743)  (16,698,711)
                                                   ------------  ------------

                                                    (3,994,899)   (2,411,867)
                                                   ------------  ------------

                                                  $  9,692,567  $  6,051,845
                                                   ------------  ------------
                                                   ------------  ------------

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


    On behalf of the Board

        "Tony Greening"    Director            "Michael Meeks"    Director
    -----------------------                -----------------------
         Tony Greening                          Michael Meeks


    -------------------------------------------------------------------------
    ESI Entertainment Systems Inc.
    Consolidated Statements of Operations and Comprehensive Loss and Deficit
    (expressed in Canadian dollars)

                              Three Months Ended           Nine Months Ended
                                     November 30,                November 30,
    (unaudited)               2009          2008          2009          2008
    -------------------------------------------------------------------------

    Revenues          $    832,284  $  1,196,471  $  2,618,546  $  2,808,153

    Direct costs           633,693       576,837     1,905,219     2,086,399
                       ------------  ------------  ------------  ------------

    Gross profit           198,591       619,634       713,327       721,754
                       ------------  ------------  ------------  ------------

    Operating
     expenses
      Product
       development          56,794        59,986       179,682       267,764
      Sales,
       marketing and
       customer
       service              39,423       181,946       117,702       658,789
      General and
       administrative      699,865       985,757     1,970,403     2,957,975
      Amortization of
       property and
       equipment            28,710        85,186       160,212       379,313
                       ------------  ------------  ------------  ------------

                           824,792     1,312,875     2,427,999     4,263,841
                       ------------  ------------  ------------  ------------

    Earnings before
     under noted
     items                (626,201)     (693,241)   (1,714,672)   (3,542,087)

    Other expenses
     (income)
      Foreign exchange
       loss (gain)        (143,733)      369,369      (240,407)      375,252
      Interest income         (640)       (6,574)      (20,840)      (34,779)
      Interest expense      43,404        43,619       129,607        74,485
                       ------------  ------------  ------------  ------------

    Earnings before
     income taxes
     and non-
     controlling
     interest             (525,232)   (1,099,655)   (1,583,032)   (3,957,045)
                       ------------  ------------  ------------  ------------

    Provision for
     income taxes
      Current                    -         6,822             -         8,529
                       ------------  ------------  ------------  ------------

                                 -         6,822             -         8,529
                       ------------  ------------  ------------  ------------

    Net loss and
     comprehensive
     loss             $   (525,232) $ (1,106,477) $ (1,583,032) $ (3,965,574)
                       ------------  ------------  ------------  ------------
                       ------------  ------------  ------------  ------------

    Earnings (Loss)
     per share
      Basic           $      (0.04) $      (0.07) $      (0.11) $      (0.28)

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

    Deficit, beginning
     of period        $(17,756,511) $(14,489,282) $(16,698,711) $(11,630,185)

    Net loss              (525,232)   (1,106,477)   (1,583,032)   (3,965,574)
                       ------------  ------------  ------------  ------------

    Deficit, end of
     period           $(18,281,743) $(15,595,759) $(18,281,743) $(15,595,759)
                       ------------  ------------  ------------  ------------
                       ------------  ------------  ------------  ------------



    -------------------------------------------------------------------------
    ESI Entertainment Systems Inc.
    Consolidated Statements of Cash Flows
    (expressed in Canadian dollars)

                              Three Months Ended           Nine Months Ended
                                     November 30,                November 30,
    (unaudited)               2009          2008          2009          2008
    -------------------------------------------------------------------------

    Cash flows provided
     by (used in)

    Operating activities
      Net earnings    $   (525,232) $ (1,106,477) $ (1,583,032) $ (3,965,574)
      Items not
       affecting cash:
        Amortization
         of property
         and
         equipment          28,710        85,186       160,212       379,313
        Impairment of
         intangible
         assets                  -             -             -       (34,746)
        Future income
         taxes                   -         6,822             -         8,529

      Net changes in
       non-cash
       operating
       items:
        Accounts
         receivable        146,013      (207,148)      709,816        88,206
        Prepaids           (64,990)      254,104      (130,270)       25,269
        Allowance for
         bad debts               -             -             -      (310,608)
        Accounts
         payable
         and
         accrued
         liabilities       483,128       463,896       512,590       (32,599)
        Deferred
         revenue           (72,334)     (495,627)     (135,733)     (463,095)
        Deferred
         contract
         costs              36,967       (63,691)      100,411      (124,487)
                       ------------  ------------  ------------  ------------

                            32,262    (1,062,935)     (366,006)   (4,429,792)
                       ------------  ------------  ------------  ------------

    Investing activities
      Acquisition of
       property and
       equipment            (9,685)            -        (4,483)            -
                       ------------  ------------  ------------  ------------

                            (9,685)            -        (4,483)            -
                       ------------  ------------  ------------  ------------

    Financing activities
      Loan payable         (47,472)            -      (403,068)    2,461,868
      Capital lease
       payments             (4,515)      (38,330)      (30,684)     (187,261)
                       ------------  ------------  ------------  ------------

                           (51,987)      (38,330)     (433,752)    2,274,607
                       ------------  ------------  ------------  ------------

    Decrease in cash
     and cash
     equivalents           (29,410)   (1,101,265)     (804,241)   (2,155,185)

    Cash and cash
     equivalents,
     beginning of
     period                134,954     1,988,543       909,785     3,042,463
                       ------------  ------------  ------------  ------------

    Cash and cash
     equivalents,
     end of
     period           $    105,544  $    887,278  $    105,544  $    887,278
                       ------------  ------------  ------------  ------------
                       ------------  ------------  ------------  ------------

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

    Supplemental
     information
      Interest
       received       $        640  $      6,574  $     20,840  $     34,779
      Interest paid         43,404        43,619       129,607        74,485
    

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, e-commerce 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.

Forward looking Statements

This news release may contain 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 discussed more fully in the Company's Final Prospectus dated March 22, 2006, Annual Information Form and elsewhere in other filings on www.sedar.com. 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.

SOURCE ESI Entertainment Systems Inc.

For further information: For further information: ESI Entertainment Systems Inc., Tony Greening, Chief Executive Officer, Telephone: (604) 299-6922, email: tgreening@esi.ca, Web: www.esi.ca

Organization Profile

ESI Entertainment Systems Inc.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890