Espial Group Inc Reports 2010 Second Quarter Results

OTTAWA, Aug. 11 /CNW Telbec/ - Espial(R) Group Inc. ("Espial" or the "Company"), (TSX:ESP), a leader in the delivery of TV software, today announced its second quarter financial results for the three month period ended June 30, 2010.

HIGHLIGHTS:

    
    -   Announced Espial's customer, Optimus Clix, has doubled the usage of
        its Time-Shift TV Services which utilizes Espial's MediaBase VOD
        product, in the first 5 months of 2010. Optimus Clix is a fixed and
        mobile telecom operator in Portugal with a national DSL network
        reaching 1.6 million homes and a FTTH deployment already covering
        more than 200,000 households.
    -   Announced a partnership with Conax, the global content security
        specialist, to deliver a Hybrid-IP TV solution for cable, satellite,
        terrestrial and telecom operators.
    -   Announced a partnership with Sigma Designs to have pre-integrated
        Espial TV Browser version 6.0 on Sigma Design chipset reference
        platforms, which, includes support for Adobe Flash, Flash video and
        HTML5 Video.
    

For the three-month period ended June 30, 2010, the Company reported revenues of $3.1 million compared to revenues of $3.1 million for the three months ended June 30, 2009. Earnings before interest, foreign exchange, taxes, stock compensation, depreciation and amortization (EBITDA) for the second quarter of fiscal 2010 was a loss of $0.2 million compared to a loss of $0.5 million in the second quarter of fiscal 2009. Net loss for the quarter was $0.8 million or $0.06 per share, compared to a net loss of $1.1 million last year, or $0.08 per share.

"Our customers saw increased subscriber growth along with the take up rates of video on demand services in this past quarter. These are positive signs for the industry as the consumer continues to get better educated on interactive and video-on-demand services. In this quarter, we also expanded our ecosystem to better target web connected consumer electronics devices and Hybrid-IP TV solutions for traditional cable and satellite Pay-TV operators" said Jaison Dolvane, President and CEO. "Partnerships with Sigma and Conax help us continue to expand our vision to enable managed or over the top video services across multiple devices like set-top boxes, TVs, PCs, iPads and mobile devices."

Q2 Financial Results

Second quarter revenues were $3,126,270 compared with revenues of $3,110,403 in the same period a year ago. Second quarter software license and royalty revenues were $1,965,726 compared to software license and royalty revenues of $1,780,734 in the second quarter of fiscal 2009. Professional services for the second quarters of 2010 and 2009 were $372,756 and $488,662 respectively. Maintenance and support revenues for the second quarter were $787,788 compared to $841,007 last year.

Gross margins for the second quarter of fiscal 2010 were 78% compared with 75% in the second quarter of fiscal 2009.

Operating expenses in the second quarter of fiscal 2010 were $3,121,297 compared to $3,229,577 in the second quarter of fiscal 2009.

Earnings before interest, foreign exchange, taxes, stock compensation, depreciation and amortization (EBITDA) for the second quarter of fiscal 2010 was a loss of $217,554 compared to a loss of $478,998 in fiscal 2009.

Net loss in the second quarter was $784,410 compared to a loss of $1,103,872 last year.

Cash and cash equivalents at June 30, 2010 was $8,069,350

The Company will be hosting a conference call to discuss the first quarter financial results on Wednesday, August 11th, 2010 at 5:00 PM Eastern Standard Time (EST). The phone number to join the results discussion is:

    
    -   Toll Free line (Canada/US) - 888-231-8191
    -   Local/International - 647-427-7450
    

The playback for the call will be available until midnight on Friday, September 10th, 2010, at the following numbers and passcode:

    
    -   Toll line: 416-849-0833 - passcode: 92447964
    -   Toll free line: 1-800-642-1687- passcode: 92447964
    

About Espial (www.espial.com)

Espial is a leading supplier of high performance and open digital and IP TV software and solutions to service providers in the cable, telecommunications, hospitality and consumer electronics industries. Its middleware, video-on-demand and browser solutions provide superior service delivery, advanced service innovation tools and the flexibility to implement diverse pay-TV business models. Over 7 million licenses of its patented software are in use across the world. Espial is headquartered in Ottawa, Canada and has offices in the United States, Europe and Asia. For more information please call +1.613.230.4770 or visit www.espial.com.

Forward Looking Statement

This press release contains information that is forward looking information with respect to Espial within the meaning of Section 138.4(9) of the Ontario Securities Act (forward looking statements) and other applicable securities laws. In some cases, forward-looking information can be identified by the use of terms such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "potential", "continue" or the negative of theses terms or other similar expressions concerning matters that are not historical facts. In particular, statements about anticipated benefits of new customer and partner relationships, future opportunities for the company and products and any other statements regarding Espial's future expectations, beliefs, goals or prospects are or involve forward-looking information.

Forward-looking information is based on certain factors and assumptions. While the company considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. Forward-looking information, by its nature necessarily involves risks and uncertainties, including Espial's ability to effectively integrate Kasenna operations and effectively develop its distribution channels, and generate increased demand for its products. Additional risks and uncertainties affecting Espial can be found in Espial's Annual Report for the fiscal year ended December 31, 2009 and in its most recent quarterly report filed on SEDAR at www.sedar.com. If any of these risks or uncertainties were to materialize, or if the factors and assumptions underlying the forward-looking information were to prove incorrect, actual results could vary materially from those that are expressed or implied by the forward-looking information contained herein. Espial assumes no obligation to update or revise any forward looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

Non-GAAP Financial Measures

Earnings before interest, foreign exchange, taxes, stock compensation, depreciation and amortization (EBITDA) is a non-GAAP financial measure that does not have any prescribed meaning by GAAP and is therefore unlikely to be comparable to similar measures presented by other issuers. Management believes that this non-GAAP financial measure, when taken together with the corresponding consolidated GAAP measures, increases the transparency of the Company's current results and enables investors to more fully understand trends in its current and future performance. A reconciliation of net loss to earnings before interest, foreign exchange, taxes, stock compensation, dividends on redeemable preferred shares, depreciation and amortization is as follows:

    
                                                          June          June
                                                      30, 2010      30, 2009
                                                 ----------------------------
                                                     (3 months)    (3 months)
                                                    (Unaudited)   (Unaudited)

    Net loss and Comprehensive loss               $   (784,410) $ (1,103,872)
    Add
    Stock compensation                                 120,000        50,000
      Depreciation of property and equipment            56,918        74,482
    Amortization of intangibles                        283,083       283,443
    -------------------------------------------------------------------------
                                                      (324,409)     (695,947)
    -------------------------------------------------------------------------
    Less (add)
    Interest income                                      6,757        18,569
    Foreign exchange gain (loss)                      (113,612)     (235,518)
                                                 ----------------------------
    Earnings before interest, foreign exchange,
     taxes, stock compensation,  depreciation
     and amortization                             $   (217,554) $   (478,998)
                                                 ----------------------------
                                                 ----------------------------



    ESPIAL GROUP INC.
    Consolidated Balance Sheets
    (in Canadian dollars)
    -------------------------------------------------------------------------
                                                       June 30,  December 31,
                                                          2010          2009
                                                    (unaudited)     (audited)
    -------------------------------------------------------------------------

    CURRENT ASSETS
      Cash and cash equivalents                   $  8,069,350  $  8,711,699
      Short-term investments                           110,000       122,246
      Accounts receivable                            2,092,235     1,989,367
      Investment tax credits receivable                450,000       550,000
      Prepaid expenses                                 355,042       178,003
    -------------------------------------------------------------------------
                                                    11,076,627    11,551,315

    Property and equipment                             709,763       767,451
    Intangible assets                                3,814,316     4,380,482
    Goodwill                                         3,340,808     3,340,808
    -------------------------------------------------------------------------
                                                  $ 18,941,514  $ 20,040,056
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    CURRENT LIABILITIES

      Operating line                              $  1,000,288  $    500,044
      Accounts payable and accrued liabilities       1,524,163     1,643,717
      Deferred revenue                               1,567,967     2,064,598
    -------------------------------------------------------------------------
                                                     4,092,418     4,208,359
    -------------------------------------------------------------------------
    COMMITMENTS

    SHAREHOLDERS' EQUITY
      Share capital                                 74,859,576    74,859,576
      Warrants                                         164,435       164,435
      Contributed surplus                           10,768,844    10,568,844
      Deficit                                      (70,943,759)  (69,761,158)
    -------------------------------------------------------------------------
                                                    14,849,096    15,831,697
    -------------------------------------------------------------------------
                                                  $ 18,941,514  $ 20,040,056
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    ESPIAL GROUP INC.
    Consolidated Statements of Loss and Comprehensive Loss
    (in Canadian dollars except share data)

                             Three Months Ended           Six Months Ended
    -------------------------------------------------------------------------
                           June 30,      June 30,      June 30,      June 30,
                              2010          2009          2010          2009
                        (unaudited)   (unaudited)   (unaudited)   (unaudited)
    -------------------------------------------------------------------------
    Revenue           $  3,126,270  $  3,110,403  $  6,920,253  $  6,193,524

    Cost of revenue        682,528       767,749     1,776,117     1,411,155
    -------------------------------------------------------------------------

    Gross margin         2,443,742     2,342,654     5,144,136     4,782,369
    -------------------------------------------------------------------------

    Expenses

      Sales and
       marketing           976,143       973,355     2,101,534     2,115,619

      General and
       administrative      448,287       511,967       952,773     1,055,704

      Research and
       development       1,236,866     1,336,330     2,173,462     2,899,310

      Stock
       compensation
       expense             120,000        50,000       200,000       103,000
      Depreciation of
       property and
       equipment            56,918        74,482       110,703       139,541

      Amortization of
       intangible
       assets              283,083       283,443       566,166       566,884
    -------------------------------------------------------------------------

                         3,121,297     3,229,577     6,104,638     6,880,058
    -------------------------------------------------------------------------
    Loss before other
     income (expense)     (677,555)     (886,923)     (960,502)   (2,097,689)
    -------------------------------------------------------------------------
    Other income
     (expenses)

      Interest income        6,757        18,569         2,780        50,635

      Foreign exchange
       gain (loss)        (113,612)     (235,518)     (224,879)     (239,120)
    -------------------------------------------------------------------------
                          (106,855)     (216,949)     (222,099)     (188,485)
    -------------------------------------------------------------------------
    Net loss and
     comprehensive
     loss             $   (784,410) $ (1,103,872) $ (1,182,601) $ (2,286,174)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net loss per
     common share -
     basic and
     diluted          $      (0.06) $      (0.08) $      (0.08) $      (0.16)
    Weighted average
     number of common
     shares - basic
     and diluted        14,101,829    14,101,829    14,101,829    14,101,829

    

%SEDAR: 00025301E

SOURCE Espial Group

For further information: For further information: Inquiries from financial press or analysts: Carl Smith, Chief Financial Officer, Espial Group Inc., Email: csmith@espial.com, Phone: 613-230-4770; Kirk Edwardson, Director, Marketing, Espial Group Inc., Email: kedwardson@espial.com, Phone: +1-613-230-4770 x1145

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Espial Group

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