Espial Group Inc. Reports Second Quarter 2008 Results



    OTTAWA, Aug. 12 /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, 2008.

    Q2 HIGHLIGHTS:

    
    - Announced acquisition of Kasenna, a leading Video on Demand software
      company
    - Signed a global software and distribution agreement with Motorola
    - Announced appointment of cable executive, Michael Lee, from Rogers
      Communications to the Espial board of directors

    For the three-month period ended June 30, 2008 the Company reported
revenues of $1,827,475 compared to revenues of $2,007,947 for the three months
ended June 30, 2007. For the three-month period, net loss was $1,365,135, or
$0.15 per share, compared to a net loss of $4,758,508 last year, or $1.79 per
share.
    "We are pleased with the significant progress we've made and momentum
we've gained in Q2. The acquisition of Kasenna positions us as a leading
supplier of TV software to the telco, cable and hospitality industries. The
signing of the software license and distribution agreement with Motorola
provides a new, tier 1 channel for our products and services" noted
Jaison Dolvane, President and CEO of Espial. "It's also noteworthy that the
addition of Michael Lee, Chief Strategy Officer for Rogers Communications,
bolsters the experience of our board of directors with the insight and
expertise of a seasoned cable executive."
    "During the quarter we solidified our position in the industry with the
Kasenna acquisition and significantly broadened our customer base. We also
made strong progress in developing our pipeline directly and via channels.
Through these, we will continue to strengthen the foundation of our business
to leverage future industry growth" added Mr. Dolvane. "Our key objectives for
the remainder of 2008 are to successfully integrate Kasenna operations, deploy
our key customers for the Evo TV Service Platform, improve channel
productivity, and to secure 2 new major customers for our high value products.

    Q2 Financial Results

    Second quarter revenues were $1,827,475 compared with revenues of
$2,027,947 in the same period a year ago. Second quarter software license and
royalty revenues were $1,243,644 compared to software license and royalty
revenues of $1,424,957 in the second quarter of fiscal 2007. Professional
services for the second quarters of 2008 and 2007 were $240,702 and
$190,199 respectively. Maintenance and support revenues for the second quarter
were $343,129 compared to $412,792 last year.
    Gross margins for the second quarter of fiscal 2008 were 71% compared with
72% in the second quarter of fiscal 2007.
    Operating expenses in the second quarter of fiscal 2008 were $2,736,182
compared to $5,444,142 in the second quarter of fiscal 2007.
    Earnings before interest, foreign exchange, taxes, stock compensation,
depreciation and amortization (EBITDA) for the second quarter of fiscal 2008
was a loss of $1,412,930 compared to a loss of $1,802,831 in fiscal 2007.
    Net loss in the second quarter was $1,365,135 compared to a loss of
$4,758,508 last year.
    Cash and cash equivalents at June 30, 2008 was $13,821,950.

    The Company will be hosting a conference call to discuss the second
quarter financial results on August 12, 2008 at 5:00 PM Eastern Standard Time
(EST). The phone number to join the results discussion is:
    - Toll line - 416 644 3422
    - Toll free line - 800-814-4860

    The playback for the call will be available until Friday, September 12,
2008 at the following numbers and passcode:
    - Toll line: 416-640-1917 - passcode: 21280124#.
    - Toll free line: 877-289-8525 - passcode: 21280124#.

    About Espial (www.espial.com)

    Espial provides intelligent and open TV software to service providers in
the cable, telecommunications and hospitality industries. It's middleware and
video-on-demand solutions provide superior service delivery, advanced service
innovation tools and the ability to serve a wide range of market segments -
including over-the-top, IPTV, hybrid IP, multi-dwelling unit and enterprise.
With over 2.5 million licenses of its patented software technology in use,
Espial is a leading supplier of TV software. Espial is headquartered in
Ottawa, Canada. For more information please visit the Espial website @
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 the benefits and synergies of the Kasenna acquisition transaction,
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, 2007 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

    In addition to our GAAP results, Espial discloses a "Earnings before
interest, foreign exchange, taxes, stock compensation, depreciation and
amortization (EBITDA)", which is referred to as a "Non-GAAP Measure". Because
the Non-GAAP Measure is not calculated in accordance with GAAP, it is used by
management as a supplement to, and not an alternative to, or superior to,
financial measures calculated in accordance with GAAP.

    ESPIAL GROUP INC.
    Consolidated Balance Sheet
    (in Canadian dollars)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                       June 30,  December 31,
                                                          2008          2007
                                                    (unaudited)
    -------------------------------------------------------------------------

    CURRENT ASSETS
      Cash and cash equivalents                   $ 13,821,950  $    631,027
      Short-term investments                           110,000    16,402,949
      Accounts receivable                            1,853,257     1,950,267
      Investment tax credits receivable                300,000       626,815
      Prepaid expenses                                 255,455       243,034
    -------------------------------------------------------------------------
                                                    16,340,662    19,854,092
    PROPERTY AND EQUIPMENT                             769,011       806,305
    -------------------------------------------------------------------------
                                                  $ 17,109,673  $ 20,660,397
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    CURRENT LIABILITIES

      Accounts payable and accrued liabilities    $  1,393,388  $  1,714,774
      Deferred revenue                                 661,304       668,485
    -------------------------------------------------------------------------
                                                     2,054,692     2,383,259
    DEFERRED REVENUE                                         -        51,719
    -------------------------------------------------------------------------
                                                     2,054,692     2,434,978
    -------------------------------------------------------------------------
    COMMITMENTS

    SHAREHOLDERS' EQUITY

      Share capital                                 68,248,462    68,248,462
      Warrants                                          76,900        76,900
      Contributed surplus                           10,132,543    10,135,043
      Deficit                                      (63,402,924)  (60,234,986)
    -------------------------------------------------------------------------
                                                    15,054,981    18,225,419
    -------------------------------------------------------------------------
                                                  $ 17,109,673  $ 20,660,397
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

                           Three Months Ended            Six Months Ended
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                           June 30,      June 30,      June 30,      June 30,
                              2008          2007          2008          2007
                        (unaudited)   (unaudited)   (unaudited)   (unaudited)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Revenue           $  1,827,475  $  2,027,947  $  3,101,761  $  4,207,409
    Cost of revenue        522,970       562,678     1,184,031     1,085,876
    -------------------------------------------------------------------------
    Gross margin         1,304,505     1,465,269     1,917,730     3,121,533
    -------------------------------------------------------------------------
    Expenses
      Sales and
       marketing         1,251,181     1,356,530     2,461,563     2,683,609
      General and
       administrative      492,688       644,610       969,336       995,383
      Research and
       development         973,566     1,216,588     1,886,507     2,241,734
      Stock compensation
       expense             (46,500)    4,165,738        (2,500)    4,169,313
      Amortization          65,247        75,814       129,236       134,657
    -------------------------------------------------------------------------
                         2,736,182     7,459,281     5,444,142    10,224,696
    -------------------------------------------------------------------------
    Loss before other
     income (expense)   (1,431,677)   (5,994,012)   (3,526,412)   (7,103,163)
    -------------------------------------------------------------------------
    Other income
     (expenses)
      Dividends on
       redeemable
       preferred shares          -      (290,662)            -      (713,381)
      Interest income       98,435        54,927       246,958        75,217
      Foreign exchange
       gain (loss)         (31,893)    1,831,202       111,513     1,574,380
      Interest on
       loan payable              -      (359,962)            -      (500,639)
    -------------------------------------------------------------------------
                            66,542     1,235,504       358,471       435,576
    -------------------------------------------------------------------------
    Net loss and
     comprehensive
     loss             $ (1,365,135) $ (4,758,508) $ (3,167,941) $ (6,667,587)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net loss per
     common share -
      basic and
      diluted         $      (0.15) $      (1.79) $      (0.34) $      (4.31)
    Weighted average
     number of common
     shares - basic
     and diluted         9,329,605     2,663,380     9,329,605     1,548,535
    
    %SEDAR: 00025301E




For further information:

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

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