Guest-Tek announces results for the year ended March 31, 2008



    CALGARY, June 17 /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 today that
the Company will file its financial statements for the year ended March 31,
2008 ("Fiscal 2008") with SEDAR on June 18th, 2008. Once filed, the financial
statements, related management's discussion and analysis, and annual
information form can be viewed on SEDAR at www.sedar.com.
    Arnon Levy commented, "We are continuing to see strong interest in our
OneView Internet product offering with both new installations, such as with
Hyatt Place, and upgrades of previously installed equipment such as with
Tharaldson Property Management Inc. We have also completed significant new
installations of OneView Media (digital video-on-demand ("VOD") and
free-to-guest TV) and expect more traction in Fiscal 2009. Fiscal 2008 was
challenging due to the appreciation of the Canadian dollar relative to the US
dollar, however, I am pleased with our ability to improve gross margin as a
percentage of revenue, and to reduce operating expenses (before foreign
exchange loss)."
    Fiscal 2008 was a year of improvement for Guest-Tek. Revenue increased
8.1% to $38.14 million compared to $35.28 million for the fiscal year ended
March 31, 2007 ("Fiscal 2007"). High-speed Internet Access ("HSIA")
installation revenue and VOD revenue increased significantly over Fiscal 2007,
while HSIA recurring revenue showed a more modest gain.
    The 28.3% increase in HSIA installation revenue (to $14.34 million in
Fiscal 2008 compared to $11.17 million in Fiscal 2007) was due principally to
the substantial completion of a major installation at the Renaissance
Montgomery Hotel and Spa, and the substantial completion of the Hyatt Place
multi-property installation contract during Fiscal 2008. Management believes
that there are limited opportunities for such large scale multi-property
installations in North America in the future. However, there may be more
opportunities to secure multi-property upgrade contracts such as the agreement
to upgrade 371 properties managed by Tharaldson Property Management Inc. which
was signed by the Company in Fiscal 2008. HSIA recurring revenue increased
2.4% to $22.77 million in Fiscal 2008 from $22.23 million in Fiscal 2007,
despite a net decrease in the average number of rooms supported during Fiscal
2008 compared to Fiscal 2007, and the appreciation of the Canadian dollar
relative to the US dollar. The Company was able to show a slight increase in
HSIA recurring revenue by increasing HSIA maintenance and support pricing
where possible. The Company also saw an increase of 51.7% in its VOD revenue
from $682 thousand in Fiscal 2007 to $1.03 million in Fiscal 2008. The
increase comes as a result of the increase in the number of VOD customers
installed during the year and the cumulative effect of the deferred revenue
from previous installations. The Company did not record VoIP product revenue
in Fiscal 2008 as demand for its existing VoIP products has not developed as
quickly as expected and new products have not yet entered production. The
Company recorded $1.19 million in VoIP product revenue in Fiscal 2007.
    Net loss for Fiscal 2008 was $5.28 million compared to $13.90 million for
Fiscal 2007. The decrease in net loss was due to several factors. During
Fiscal 2007 the Company recorded a valuation allowance of $4.32 million
against all of its future tax assets. Given that the future tax asset was
increased in the first two quarters of Fiscal 2007, the total tax expense was
$2.92 million in Fiscal 2007. The net loss before income taxes was
$10.98 million in Fiscal 2007 compared to $5.89 million in Fiscal 2008. The
decrease in net loss before income taxes is due to two factors. Firstly, in
Fiscal 2007, the Company determined that certain assets and goodwill acquired
in the Sigpro, LLC acquisition had become impaired and consequently wrote down
the value of those assets as at March 31, 2007. The write-down totaled
$3.05 million. Subsequently, as of the year ended March 31, 2008, those assets
were further written down to zero. The total intangible asset write down for
Fiscal 2008 was $1.19 million. Secondly, gross margin increased to $13.96
million in Fiscal 2008 from $10.82 million in Fiscal 2007. The increase is due
to the increase in revenue and a decrease in cost of revenue as a percentage
of revenue. Cost of revenue as a percentage of revenue was 63.4% in Fiscal
2008 compared to 69.3% in Fiscal 2007. The decrease is due to lower call
centre costs and sales price increases, partially offset by an appreciation of
the Canadian dollar relative to the US dollar and losses associated with VOD
contracts. Operating expenses, excluding the write-down of intangible assets
and goodwill decreased to $18.69 million in Fiscal 2008 compared to
$18.79 million in Fiscal 2007. The decrease in operating expenses was achieved
despite a foreign currency loss of $995 thousand in Fiscal 2008, compared to a
foreign currency gain of $582 thousand in Fiscal 2007.
    Adjusted EBITDA(1) was negative $1.32 million for Fiscal 2008, an
improvement over the negative $2.92 million recorded in Fiscal 2007.

    
    Other highlights for the year include:

    -   Substantial completion of a contract for OneView Internet
        installations at 94 corporately owned Hyatt Place hotels;
    -   Agreement with Tharaldson Property Management Inc. to upgrade
        networks and install OneView Internet at 371 properties including a
        significant increase in monthly support fees - with 60 properties
        completed in Fiscal 2008;
    -   Substantial completion of a major triple play installation of HSIA,
        HD VOD, HD IPTV, and VoIP at Renaissance Montgomery Hotel & Spa
        (Montgomery, AL), operated by PCH Resorts;
    -   Installation of OneView Media HD at the Liberty Hotel (Boston, MA);
        Willows Lodge (Woodinville, WA) Fairmont Plaza (New York City, NY);
        Hotel 1000 (Seattle, WA); Hotel Terra Jackson Hole (Jackson Hole,
        WY);
    -   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, the Grande
        Palisades, Reunion Resort, Portofino Resort and Spa; and the Meridian
        Las Vegas;
    -   New contract signed to provide OneView Internet HSIA to Ritz-Carlton
        St. Louis, making Guest-Tek the exclusive HSIA provider to Ritz-
        Carlton in North America;
    -   An agreement with Real Hotels & Resorts to install Guest-Tek's
        OneView Media VOD in over 1300 rooms spread over seven properties
        located in Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua,
        and Panama;
    -   Completion of significant HSIA projects at Hyatt Regency Chicago and
        Chicago Marriott Downtown Magnificent Mile under our network upgrade
        program;
    -   Installation of wireless HSIA at Center Parcs UK - Sherwood Forest -
        the first of a total of four, 400 acre UK Villages;
    -   Strengthened relationship with Intrawest with the installation of
        OneView Internet at Westin Monache (Mammoth Lakes, CA) and Winter
        Park Resort (Winter Park, CO);
    -   Completion of an agreement with Echostar Communications Corporation
        to provide network programming for the Company's free-to-guest
        OneView Media IPTV service;
    -   Agreement signed with TeleMatrix, Inc. to co-develop, manufacture and
        market VoIP products under license from the Company's subsidiary,
        Sigpro.
    -   Installation of OneView Internet in 62,399 rooms, with a total
        supported base of 506,541 rooms;
    -   Installation of 2,983 OneView Media rooms, with a total service base
        of 5,236 rooms;

    --------------------------------------
    (1) Adjusted EBITDA is earnings before interest, taxes, depreciation,
        amortization, gain or loss on sale of assets and stock based
        compensation expense and is provided to assist investors in assessing
        the Company's performance. Adjusted EBITDA has no standardized
        definition in Canadian GAAP and therefore may not be comparable to
        similar measures presented by other companies. Management believes
        that Adjusted EBITDA, in addition to net income, is a useful
        indication of performance and the Company's ability to generate cash
        from operations. Please see the reconciliation of Adjusted EBITDA to
        net income included in the Company's Fiscal 2008 MD&A.
    

    Highlights for the Fourth Quarter

    The Company's performance for the three months ended March 31, 2008 ("Q4,
2008" or "Q4, Fiscal 2008") showed significant improvement over the three
months ended March 31, 2007 ("Q4, 2007" or "Q4, Fiscal 2007"). Revenue for Q4,
2008 was $11.09 million compared to $9.10 million for Q4, 2007. The Company
also saw a significant improvement in gross margin in Q4, 2008 compared to Q4,
2007. Gross margin as a percentage of sales increased to 32.8% in Q4, Fiscal
2008 compared to 30.9% in Q4, Fiscal 2007. Operating expenses decreased to
$5.54 million in Q4, Fiscal 2008 compared to $7.63 million in Q4, 2007,
primarily due to a decrease in intangible asset write-down and goodwill
impairment. As a result, net loss decreased significantly, to $1.87 million
for Q4, 2008 compared to $5.04 million for Q4, 2007. Adjusted EBITDA improved
to $86 thousand in Q4, 2008 from negative $439 thousand in Q4, 2007.
Significant events for the quarter include:

    
    -   15 installations completed under an agreement to provide OneView
        Internet to all corporately owned Hyatt Place locations, marking
        substantial completion of the contract;
    -   Installation of OneView Internet in 16,544 rooms, with a total
        supported base of 506,541 rooms;
    -   Installation of 1,569 OneView Media rooms, with a total service base
        of 5,236 rooms;
    

    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
2,943 properties and over 506,000 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)

    March 31, 2008 and 2007
    -------------------------------------------------------------------------
                                                          2008          2007
    -------------------------------------------------------------------------

    Assets

    Current assets:
      Cash and cash equivalents                   $  2,956,869  $  1,977,327
      Accounts receivable                            8,665,885     8,637,068
      Installations in progress                      1,801,107       380,749
      Inventory                                      1,257,983     1,840,810
      Prepaid expenses and deposits                  1,495,486       603,158
      -----------------------------------------------------------------------
                                                    16,177,330    13,439,112

    Property and equipment                           4,412,159     5,197,564
    Deferred costs                                   4,566,026     3,003,785
    Intangible assets                                4,371,999     6,580,193
    Goodwill                                        11,768,224    11,768,224
    -------------------------------------------------------------------------
                                                  $ 41,295,738  $ 39,988,878
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity

    Current liabilities:

      Operating line of credit                    $          -  $    926,028
      Accounts payable and accrued liabilities       6,527,165     5,303,520
      Customer deposits                              6,085,687     1,720,163
      Deferred revenue                                 592,800       281,288
      Current portion of capital lease obligations           -        49,729
      Current portion of notes payable                 128,895       167,027
      -----------------------------------------------------------------------
                                                    13,334,547     8,447,755
      -----------------------------------------------------------------------
    Capital lease obligations                                -        12,505
    Deferred leasehold inducement                      121,843       243,641
    Notes payable                                    1,743,276       150,325
    Deferred revenue                                 2,496,438     1,803,822
    Future tax liability                             1,049,660     1,716,270
    -------------------------------------------------------------------------
                                                     5,411,217     3,926,563
    -------------------------------------------------------------------------

    Shareholders' equity:
      Share capital                                 53,779,555    53,761,394
      Contributed surplus                            2,912,440     2,714,892
      Deficit                                      (34,142,021)  (28,861,726)
      -----------------------------------------------------------------------
                                                    22,549,974    27,614,560
      -----------------------------------------------------------------------
    Commitments
    Contingencies
    -------------------------------------------------------------------------
                                                  $ 41,295,738  $ 39,988,878
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    GUEST-TEK INTERACTIVE ENTERTAINMENT LTD.
    Consolidated Statements of Operations, Comprehensive Loss and Deficit
    (Unaudited)
    -------------------------------------------------------------------------
                          Three months ended
                               March 31,              Year ended March 31,
                        -------------------------- --------------------------
                              2008          2007          2008          2007
    -------------------------------------------------------------------------

    Revenue             11,088,996     9,096,528    38,135,328    35,277,493

    Cost of revenue      7,448,956     6,286,050    24,174,053    24,456,078
    -------------------------------------------------------------------------

    Gross margin         3,640,040     2,810,478    13,961,275    10,821,415

    Operating expenses:
      Selling, general
       and
       administrative    3,655,050     3,303,083    13,082,266    13,190,910
      Research and
       development         189,408       286,518     1,205,010     1,482,309
      Amortization of
       property and
       equipment           336,080       719,507     1,652,399     2,113,547
      Amortization of
       intangible assets   299,772       367,177     1,181,739     1,649,541
      Write down of
       intangible
       assets            1,189,566     2,178,676     1,189,566     2,178,676
      Write down of
       goodwill                  -       867,325             -       867,325
      Amortization of
       deferred
       compensation              -        24,853             -       381,067
      Amortization of
       internally
       developed
       software             94,884        84,525       327,932       304,488
      Foreign currency
       (gain) loss        (290,643)     (340,527)      994,820      (582,226)
      Stock based
       compensation         58,109       131,573       220,120       565,886
      Interest expense       7,111         8,629        27,785        27,794
      Research and
       development
       tax credits               -             -             -      (346,306)
      -----------------------------------------------------------------------
                         5,539,337     7,631,339    19,881,637    21,833,011
    -------------------------------------------------------------------------

    Loss before interest
     income and
     income taxes       (1,899,297)   (4,820,861)   (5,920,362)  (11,011,596)

    Interest income        (16,090)      (10,549)       34,841        28,731

    -------------------------------------------------------------------------
    Loss before
     income taxes       (1,883,207)   (4,831,410)   (5,885,521)  (10,982,865)

    Income tax (recovery)  (13,304)      203,872      (605,226)    2,919,036

    -------------------------------------------------------------------------
    Net loss and
     comprehensive loss (1,869,903)   (5,035,282)   (5,280,295)  (13,901,901)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Deficit, beginning
     of period         (32,272,118)  (23,826,444)  (28,861,726)  (14,959,825)
    -------------------------------------------------------------------------

    Deficit, end of
     period           $(34,142,021) $(28,861,726) $(34,142,021) $(28,861,726)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net loss per
     share basic
     and diluted             (0.12)        (0.32)        (0.33)        (0.88)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    %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

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