Guest-Tek announces results for the three months ended December 31, 2007



    CALGARY, Feb. 14 /CNW/ - Guest-Tek Interactive Entertainment Ltd.,
("Guest-Tek" or the "Company") (TSX:GTK), a leader in providing broadband
technology solutions to the global hospitality industry, announced results for
the three and nine months ended December 31, 2007, the Company's third quarter
of fiscal 2008 ("Q3, 2008"). The Company has also restated its Fiscal 2008
interim financial statements for three months ended June 30, 2007, and the
three and six months ended September 30, 2007. The restatement has the effect
of increasing the Company's net loss for Q1, 2008 by $180 thousand and
decreasing the Q2, 2008 net loss by $29 thousand and decreasing the Company's
revenue for Q1, 2008 by $30 thousand and decreasing the Company's Q2, 2008
revenue by $55 thousand.
    The Company's performance for Q3 continued to be hampered by a
significant appreciation of the Canadian dollar relative to the US dollar.
During Q3, 2008, the Company received 82% of its revenue from US based hotels,
while an estimated 50% of its cost of revenue is incurred in US dollars. The
appreciation of the Canadian dollar contributed to a decline in revenue in Q3,
2008, compared to the three months ended December 31, 2006 ("Q3, 2007").
Revenue for Q3, 2008 was $9.07 million compared to $9.46 million for Q3, 2007.
Despite the currency appreciation, the Company saw a significant improvement
in gross margin in Q3, 2008 compared to Q3, 2007. Gross margin as a percentage
of sales increased to 33.3% in Q3, 2008 compared to 28.0% in Q3, 2007.
Operating expenses decreased to $4.30 million in Q3, Fiscal 2008 compared to
$4.70 million in Q3, 2007, primarily due to a decrease in selling, general and
administrative expense, amortization, and stock based compensation which was
offset by an increase in foreign currency loss. Net loss decreased
significantly, due primarily to the significant income tax expense incurred in
Q3, 2007 resulting from a valuation allowance recorded against the Company's
future income tax asset. Net Loss for Q3, 2008 was $1.12 million compared to
$6.19 million for Q3, 2007. Net loss before income taxes was $1.27 million for
the three months ended December 31, 2007, compared to $2.04 million for the
three months ended December 31, 2006. Adjusted EBITDA improved to negative
$495 thousand in Q3, 2008 from negative $673 thousand in Q3, 2007. Significant
events for the quarter include:

    
    -   20 installations completed under an agreement to provide OneView
        Internet to all corporately owned Hyatt Place locations;

    -   Commencement of a major installation of HSIA, VOD, VoIP, and IPTV at
        Renaissance Montgomery, operated by PCH resorts;

    -   Installed OneView Media high-definition at the Liberty Hotel in
        Boston, MA;

    -   Completion of VOD installation at Peninsula's hotel in Tokyo, Japan;

    -   Significant new OneView Media contracts signed with Connexion
        Technologies for the Pointe Orlando - a Premier Resort and the Grande
        Palisades;

    -   Installation of OneView Internet in 12,188 rooms, with a total
        supported base of 504,527 rooms;

    -   Installation of 169 OneView Media rooms, with a total service base of
        3,667 rooms;
    

    The unaudited financial statements and related management's discussion
and analysis can be viewed on SEDAR at www.sedar.com.
    Arnon Levy commented, "Guest-Tek continues to be negatively affected by
the strength of the Canadian dollar, as we have seen our revenue and net
income suffer. While we are continuing our efforts to increase prices, as well
as increase our proportion of US dollar denominated expenditures, the efforts
have not completely compensated for the rise of the dollar. On a positive
note, despite the rise in the dollar we have seen improvement in our gross
margin during the quarter compared to the same quarter a year ago. We are also
pleased with the improvement in operating expenditures. We continue to see
more interest in OneView Media, with several new contracts recently
announced."
    While preparing the financial statements for the period ended December
31, 2007, management identified and corrected errors in accounting for
deferred costs, deferred revenue, accrued liabilities and foreign exchange
gains and losses. Management has concluded that these errors originated in
prior quarters and, as such, have restated the previously issued quarterly
results for the three month periods ended June 30, 2007 and September 30,
2007. The effect of the restatement on previously issued consolidated interim
financial statements is summarized below. These errors had no impact on the
consolidated financial statements for the year ended March 31, 2007, interim
periods within the year ended March 31, 2007, or any other prior periods.

    
    Effect of restatement on the three months ended June 30, 2007
    -------------------------------------------------------------------------
                                      Originally
                                        reported    Adjustment   As restated
    -------------------------------------------------------------------------
    Accounts receivable             $  6,970,553  $   (309,623) $  6,660,930
    Accounts payable                   4,230,721      (130,000)    4,100,721
    -------------------------------------------------------------------------

    Deficit                         $(29,402,596) $   (179,623) $(29,582,219)

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

    Revenue                         $  9,008,652  $    (29,623) $  8,979,029

    Cost of revenue                    5,540,417       130,000     5,410,417
    Gross Margin                       3,468,235       100,377     3,568,612
    Foreign currency loss                 73,298       280,000       353,298
    -------------------------------------------------------------------------

    Loss from operations                (887,821)     (179,623)   (1,067,444)
    Net loss                            (540,870)     (179,623)     (720,493)
    Adjusted EBITDA                 $     13,325  $   (179,623) $   (166,298)
    -------------------------------------------------------------------------

    Effect of restatement on the three months ended September 30, 2007
    -------------------------------------------------------------------------
                                      Originally
                                        reported    Adjustment   As restated
    -------------------------------------------------------------------------
    Accounts receivable             $  6,400,667  $    (29,623) $  6,371,044
    Deferred costs                     3,592,387       (66,435)    3,525,952
    Deferred revenue                   1,847,167        54,528     1,901,695
    -------------------------------------------------------------------------

    Deficit                         $(31,005,564) $   (150,586) $(31,156,150)

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

    Revenue                         $  9,055,917  $    (54,528) $  9,001,389

    Cost of revenue                    5,073,592       196,435     5,270,027
    Gross Margin                       3,982,325      (250,963)    3,731,362
    Foreign currency loss                981,524      (280,000)      701,524


    Loss from operations              (1,704,890)       29,037    (1,675,853)
    Net loss                          (1,602,968)       29,037    (1,573,931)
    Adjusted EBITDA                 $   (774,923) $     29,037  $   (745,886)


    Effect of restatement on the six months ended September 30, 2007
    -------------------------------------------------------------------------

    Revenue                         $ 18,064,569  $    (84,151) $ 17,980,418
    Cost of revenue                   10,614,009        66,435    10,680,444
    Gross Margin                       7,450,560      (150,586)    7,299,974
    -------------------------------------------------------------------------

    Loss from operations              (2,592,710)     (150,586)   (2,743,296)
    Net loss                          (2,143,838)     (150,586)   (2,294,424)
    Adjusted EBITDA                 $   (761,597) $   (150,586) $   (912,183)
    -------------------------------------------------------------------------
    

    About Guest-Tek

    Guest-Tek is the world's largest provider of IP based technology
solutions for the hospitality industry. Guest-Tek's OneView platform provides
hotels with converged data, video and telephony services. Guest-Tek is a
preferred vendor to major hotel brands, providing services including network
design, procurement, implementation, and post sales customer support to 3,019
properties and over 504,000 rooms. Guest-Tek's common shares trade on The
Toronto Stock Exchange under the trading symbol "GTK". The company's head
offices are in Calgary, Alberta, and it has major support facilities in
Irvine, California, and Warsaw, Poland as well as Sales offices located
throughout North America and Europe. For more information about Guest-Tek, go
to www.guest-tek.com.

    The above disclosure contains certain forward-looking statements that
involve substantial known and unknown risks and uncertainties. These
forward-looking statements are subject to numerous risks and uncertainties,
certain of which are beyond Guest-Tek's control, including: the impact of
general economic conditions, industry conditions, increased competition, the
lack of availability of qualified personnel or management, fluctuations in
foreign exchange or interest rates, stock market volatility and market
valuations of companies with respect to the announced transactions and the
final valuations thereof, and obtaining required approvals of regulatory
authorities. Guest-Tek's actual results, performance or achievement could
differ materially from those expressed in, or implied by these forward-looking
statements and, accordingly, no assurances can be given that any of the events
anticipated by the forward-looking statements will transpire or occur, or if
any of them do so, what benefits, including the amount of proceeds, that
Guest-Tek will derive therefrom.



    
    GUEST-TEK INTERACTIVE ENTERTAINMENT LTD.
    Consolidated Balance Sheets (Unaudited)

    December 31, 2007 and March 31, 2007
    -------------------------------------------------------------------------
                                                   December 31,     March 31,
                                                          2007          2007
    -------------------------------------------------------------------------

    Assets

    Current assets:
      Cash and cash equivalents                   $  1,494,548  $  1,977,327
      Accounts receivable                            6,584,915     8,637,068
      Installations in progress                      1,409,300       380,749
      Inventory                                      1,510,175     1,840,810
      Prepaid expenses and deposits                    655,219       603,158
      -----------------------------------------------------------------------
                                                    11,654,157    13,439,112

    Property and equipment                           4,554,143     5,197,564
    Deferred costs                                   3,833,862     3,003,785
    Intangible assets                                5,819,631     6,580,193
    Goodwill                                        11,768,224    11,768,224

    -------------------------------------------------------------------------
                                                  $ 37,630,017  $ 39,988,878
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity

    Current liabilities:
      Operating credit facility                   $          -  $    926,028
      Accounts payable and accrued liabilities       5,446,441     5,303,520
      Customer deposits                              3,688,330     1,720,163
      Deferred revenue                                 496,356       281,288
      Current portion of notes payable                 164,002       167,027
      Current portion of capital lease obligations      10,624        49,729
      -----------------------------------------------------------------------
                                                     9,805,753     8,447,755

    Capital lease obligations                                -        12,505
    Deferred leasehold inducement                      152,292       243,641
    Notes payable                                            -       150,325
    Deferred revenue                                 2,231,103     1,803,822
    Future income tax liability                      1,079,101     1,716,270
    Shareholders' equity:
      Share capital                                 53,775,144    53,761,394
      Contributed surplus                            2,858,742     2,714,892
      Deficit                                      (32,272,118)  (28,861,726)

      -----------------------------------------------------------------------
                                                    24,361,768    27,614,560

    -------------------------------------------------------------------------
                                                  $ 37,630,017  $ 39,988,878
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    GUEST-TEK INTERACTIVE ENTERTAINMENT LTD.
    Consolidated Statements of Operations, Comprehensive loss and Deficit
    (Unaudited)

    -------------------------------------------------------------------------
                              Three months ended          Nine months ended
                                 December 31                 December 31
                      --------------------------- ---------------------------
                              2007          2006          2007          2006
    -------------------------------------------------------------------------

    Revenue              9,065,913     9,455,975    27,046,331    26,180,965

    Cost of revenue      6,044,653     6,810,902    16,725,097    18,170,028
    -------------------------------------------------------------------------
    Gross margin         3,021,260     2,645,073    10,321,234     8,010,937
    Operating expenses:
      Selling,
       general and
       administrative    2,984,987     3,347,285     9,427,215     9,887,827
      Research and
       development         300,494       362,215     1,015,603     1,195,791
      Amortization of
       property and
       equipment           332,545       512,758     1,316,318     1,296,323
      Amortization of
       intangible assets   298,284       507,087       881,967     1,394,040
      Amortization of
       deferred
       compensation              -       114,085             -       342,255
      Amortization of
       internally
       developed
       software             85,842        81,283       233,049       219,963
      Stock based
       compensation         62,990       165,198       162,011       434,313
      Interest expense       3,246         3,184        20,674        19,165
      Research and
       development tax
       credits                   -             -             -      (346,306)
      Foreign currency
       (gain) loss         230,642      (391,563)    1,285,464      (241,699)
      -----------------------------------------------------------------------
                         4,299,030     4,701,532    14,342,301    14,201,672

    -------------------------------------------------------------------------
    Loss from
     operations         (1,277,770)   (2,056,459)   (4,021,067)   (6,190,735)

    Interest income          6,229        19,689        18,752        39,281
    -------------------------------------------------------------------------
    Loss before income
     taxes              (1,271,541)   (2,036,770)   (4,002,315)   (6,151,454)
    Income tax
     (recovery)/expense   (155,573)    4,148,448      (591,923)    2,715,165

    -------------------------------------------------------------------------
    Net loss and
     comprehensive loss (1,115,968)   (6,185,218)   (3,410,392)   (8,866,619)
    Deficit, beginning
     of period         (31,156,150)  (17,641,226)  (28,861,726)  (14,959,825)
    -------------------------------------------------------------------------
    Deficit, end of
     period           $(32,272,118) $(23,826,444) $(32,272,118) $(23,826,444)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net loss per
     share:
      Basic           $      (0.07) $      (0.39) $      (0.22) $      (0.56)
      Diluted         $      (0.07) $      (0.39) $      (0.22) $      (0.56)
    Weighted average
     number of shares:
      Basic             15,823,886    15,820,590    15,823,624    15,800,001
      Diluted           15,825,968    15,830,852    15,825,599    15,857,621
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    %SEDAR: 00020221E




For further information:

For further information: Arnon Levy, President & CEO Guest-Tek, (403)
444-8488, arnon.levy@guest-tek.com; Geoff Clark, CFO, Guest-Tek, (403)
444-8427, geoff.clark@guest-tek.com

Organization Profile

GUEST-TEK INTERACTIVE ENTERTAINMENT LTD.

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