ESI Entertainment announces Fiscal 2013 Third Quarter Financial Results
BURNABY, BC, Jan. 14, 2013 /CNW/ - ESI Entertainment Systems Inc. ("ESI" or the "Company") (CNSX : ESY) reported today its financial results (unaudited) for fiscal Q3 2013 ended November 30, 2012. (All dollar amounts reported in Canadian funds).
Consolidated financial highlights for the quarter include (Q3 2013 compared to Q3 2012):
- Gross Revenues for the quarter decreased by 28% to $783,000 from $1,094,000 during the same period last year.
- Gross profit decreased 84% to $49,000 from $310,000 during the same period last year.
- Operating expenses decreased by 81% to $57,000 from $304,000 during the same period last year.
- Net comprehensive loss was $52,000 compared to $197,000 in the same period last year.
With the asset sale of ESI Integrity occurring in the first quarter of fiscal 2013, the second and third quarter results only represent the activities and operations of our Citadel business unit. In addition, during the prior fiscal year, the Company received approval from certain Executives, Directors and Officers to forgive the majority of the amounts owed to them by the Company for their deferred salaries and the accrued interest. These two factors significantly impact the comparison between the current quarter results and the results from the previous year.
Revenue is continuing to grow within Citadel and we are integrating new Merchants every month. We are excited about what 2013 has to come. Citadel Commerce continues to closely govern expenditures while focusing on its pipeline of payment processing opportunities and new initiatives.
"Michael Meeks"
President & CEO
Selected Financial Information
| Three Months Ending | Nine Months Ending | ||||
| November 30 2012 |
November 30 2011 |
November 30 2012 |
November 30 2011 |
||
| ($ 000) except for EPS | |||||
| Revenue | 783 | 1,094 | 3,171 | 3,213 | |
| Gross Profit | 49 | 310 | 814 | 1,676 | |
| Total operating expenses | 57 | 304 | 577 | 708 | |
| Net Income(Loss) | (52) | (198) | 1,403 | 711 | |
| Earnings per share | |||||
| Basic and Diluted | ($0.01) | ($0.01) | $0.10 | $0.05 | |
| Cash generated from operations | (110) | (114) | 1,085 | (359) | |
Results of Operations
Consolidated Revenues
The following table provides a breakdown of the Company's revenues from its subsidiaries for the reported periods:
| Three months ended November 30 | Nine months ended November 30 | |||||||||||
| ($ 000) | 2012 | 2011 | % Change | 2012 | 2011 | % Change | ||||||
| Integrity | - | 351 | (100%) | 1,016 | 1,113 | 9% | ||||||
| Citadel | 783 | 743 | 5% | 2,155 | 2,100 | 3% | ||||||
| Total Revenue | 783 | 1,094 | (28%) | 3,171 | 3,213 | (1%) | ||||||
Total revenue decreased by 28% to $783,000 for the three months ended November 30, 2012 from $1,094,000 for the three months ended November 30, 2011 and decreased by 1% to $3,171,000 for the nine months ended November 30, 2012 from $3,213,000 for the nine months ended November 30, 2011. The third quarter decrease is due to Citadel being the only active and operational business unit.
Integrity Revenues
ESI Integrity provided software solutions for real-time auditing of transaction processing systems to businesses requiring high levels of security, integrity, and trust, including government regulated lotteries and pari-mutuel (horse tracks) organizations.
ESI Integrity Revenues were generated from long term customer license and support contracts where it charged a fixed license fee for the use of its audit and risk management software, as well as an annual support fee. Revenue was typically earned over a two to five year period, depending on a contract's respective term.
The reader should note that as a consequence of the sale of the ESI Integrity business effective May 31, 2012, revenue and expense of ESI Integrity will no longer impact the results of operations for future periods.
Citadel Revenues
Citadel revenues are generated from its on-line payment processing which include electronic cheques and paper cheques but its main focus is its Instant Bank Transfer service. All of Citadel's services are charged on a fee per transaction charged to its merchants.
100% of ESI's revenues are now generated solely by Citadel.
The increase in revenue is due to new merchants implementing Citadel's Instant Bank Transfer service as well as additional volume from existing customers.
Consolidated Gross Profit
The following table provides a summary of the Company's gross profit for the reported periods:
| Three months ended Nov 30 | Nine months ended Nov 30 | ||||||
| ($ 000) | 2012 | 2011 | 2012 | 2011 | |||
| Revenues | 783 | 1,094 | 3,171 | 3,213 | |||
| Direct Costs | 734 | 784 | 2,357 | 1,537 | |||
| Gross profit | 49 | 310 | 814 | 1,676 | |||
| Gross profit margin (%) | 6% | 28% | 26% | 52% | |||
With the asset sale of ESI Integrity occurring in the first quarter of fiscal 2013, the third quarter ending November 30, 2012 results only represent the activities and operations of the Citadel business unit. In addition, during the same period last year, the Company received approval from certain Executives, Directors and Officers to forgive the majority of the amounts owed to them by the Company for their deferred salaries and the accrued interest. The reversal of the Salary Expense reduced the Direct Costs for the same period last year, and increased the Gross Profit. These two factors significantly impact the comparison between the current quarter results and the results from the previous year.
General and Administrative
General and administrative expenses were $56,928 and $577,026 during the three and nine months ended November 30, 2012 respectively, representing a decrease of 81% and 18% compared to $303,642 and $707,879 for the three months and nine months ended November 30, 2011.
With the asset sale of ESI Integrity occurring in the first quarter of fiscal 2013, the second and third quarter results only represent the activities and operations of our Citadel business unit. In addition, during the same period last year, the Company received approval from certain Executives, Directors and Officers to forgive the majority of the amounts owed to them by the Company for their deferred salaries and the accrued interest. The reversal of the Salary Expense reduced the General and Administration Expense for the same quarter last year. These two factors significantly impact the comparison between the current quarter results and the results from the previous year.
Net Income/Loss
Net loss for the three months ended November 30, 2012 was $51,760 ($0.01 net loss per share) and the net income for the nine months ended November 30, 2012 was $1,403,265 ($0.10 net earnings per share), compared to net loss of $197,559 (($0.01 net loss per share) and a net income of $710,795 ($0.05 net earnings per share) for the prior comparative periods.
Citadel Processing Accounts
Citadel processing accounts as at November 30, 2012 totaled $8.5 million compared to $6.3 million as at February 29, 2012. The accounts are comprised of cash and accounts receivables arising from the processing of deposits and payments for Citadel merchants and consumers.
Liquidity and Capital Resources
ESI has historically financed its operations through the sale of equity and through cash generated by its operations.
During the three and nine months ended November 30, 2012, cash flow used in operating activities was $110,541 and provided was $1,084,685 respectively, compared to cash used in operating activities of $114,122 and $358,806 during the comparative periods ended November 30, 2011, respectively.
Cash from financing activities totaled $176,752 and cash used was $1,321,614 during the three months and nine months ended November 30, 2012 respectively. These activities related mainly to the loan payable. Cash provided from financing activities for the comparative periods for the three and nine months ending November 30, 2011, were $135,358 and $476,439 respectively.
As at November 30, 2012, the Company had cash and cash equivalents of $143,565, compared to $151,182 on November 30, 2011.
For the three month period ending November 30, 2012 the Company earned an income from operations of $3,855 with a decrease of operating cash flow of $110,541. In addition, the Company has incurred operating losses and net utilization of cash in operations in prior periods. Accordingly, the Company will require continued financial support from its shareholders and creditors and/or new debt or equity financing until it is able to generate sufficient cash flow from operations on a sustained basis.
Consolidated Financial Statements (Unaudited)
NOTE TO READER: The following financial statements (unaudited) are extracted from the complete financial statements of the Company which have been filed with the Management's Discussion and Analysis. The Company's documents can be found on www.sedar.com to which the reader is referred.
_________________________________________________________________________________________________________________________________________
| ESI ENTERTAINMENT SYSTEMS INC. Condensed Consolidated Interim Statements of Financial Position As at November 30, 2012 and February 29, 2012 (Unaudited - expressed in Canadian dollars) |
||||||
| November 30, 2012 |
February 29, 2012 |
|||||
| Assets | ||||||
| Current | ||||||
| Cash and cash equivalents | $ | 143,565 | $ | 231,570 | ||
| Accounts receivable | 271,734 | 173,695 | ||||
| Prepaids and other | 84,781 | 133,410 | ||||
| Citadel processing accounts | 8,493,940 | 6,340,666 | ||||
| Deferred contract costs | - | 114,495 | ||||
| 8,994,020 | 6,993,836 | |||||
| Non-current | ||||||
| Capitalized Development Costs | - | 127,940 | ||||
| Property and equipment | 65,271 | 116,509 | ||||
| Deferred contract costs | - | 216,263 | ||||
| Total Assets | $ | 9,059,291 | $ | 7,454,548 | ||
| Liabilities | ||||||
| Current | ||||||
| Accounts payable and accrued liabilities | $ | 1,513,806 | $ | 1,368,350 | ||
| Loan Payable | 766,764 | 2,145,232 | ||||
| Citadel Processing Liabilities | 9,752,949 | 7,542,821 | ||||
| Deferred Revenue | - | 426,162 | ||||
| 12,033,519 | 11,482,565 | |||||
| Non-current | ||||||
| Deferred Revenue | - | 354,818 | ||||
| Total Liabilities | $ | 12,033,519 | $ | 11,837,383 | ||
| Shareholders' deficit | ||||||
| Share Capital | $ | 9,957,959 | $ | 9,957,959 | ||
| Contributed Surplus | 4,596,210 | 4,590,868 | ||||
| Other Comprehensive Income | 398,905 | 362,048 | ||||
| Deficit | (17,927,302) | (19,293,710) | ||||
| Total deficit | (2,974,228) | (4,382,835) | ||||
| Total liabilities and shareholders' deficit | $ | 9,059,291 | $ | 7,454,548 | ||
| ESI ENTERTAINMENT SYSTEMS INC. Condensed Consolidated Interim Statements of Income (Loss) and Comprehensive Income (Loss) For The Three and Nine Months Ending November 30, 2012 and 2011. (Unaudited - expressed in Canadian dollars) |
||||||||||
| Three Months Ended November 30, |
Nine Months Ended November 30, |
|||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||
| Continuing Operations | ||||||||||
| Revenues | $ | 783,086 | $ | 1,094,334 | $ | 3,171,562 | $ | 3,213,185 | ||
| Direct Costs | 733,717 | 783,856 | 2,357,025 | 1,537,422 | ||||||
| Gross Profit | 49,369 | 310,478 | 814,537 | 1,675,763 | ||||||
| General and administration expenses | 56,928 | 303,642 | 577,026 | 707,879 | ||||||
| Income (loss) before under noted items |
(7,559) | 6,836 | 237,511 | 967,884 | ||||||
| Other expenses (income) | ||||||||||
| Foreign exchange (gain) loss | (26,429) | 175,983 | 69,296 | 97,456 | ||||||
| Tax expense | 4,508 | - | (23,625) | (564) | ||||||
| Other Income | 0 | - | (64,271) | - | ||||||
| Interest income | 0 | - | (2,029) | (10) | ||||||
| Interest expense | 10,507 | 32,979 | 59,837 | 95,750 | ||||||
| (Gain) Loss on asset sale | 0 | - | (1,168,105) | - | ||||||
| Income (loss) for period attributable to equity holders |
3,855 | (202,126) | 1,366,408 | 775,252 | ||||||
| Other comprehensive income | ||||||||||
| Foreign currency translation gain (loss) | (55,615) | 4,567 | 36,857 | (64,457) | ||||||
| Total Comprehensive income(loss) for the period attributable to equity holders |
$ | (51,760) | $ | (197,559) | $ | 1,403,265 | $ | 710,795 | ||
| Basic and diluted earnings(loss) per share |
$ | (0.01) | $ | (0.01) | $ | 0.10 | $ | 0.05 | ||
| ESI ENTERTAINMENT SYSTEMS INC. Condensed Consolidated Interim Statements of Changes in Equity (Unaudited - expressed in Canadian dollars) |
|||||||||||||||||
| Number of shares |
Share capital | Contributed Surplus |
Other Comprehensive Income (Loss) |
Deficit | Total equity |
||||||||||||
| Balance, February 28, 2011 | 14,234,727 | $ | 9,957,959 | $ | 4,575,772 | $ | 23,318 | $ | (19,811,652) | $ | (5,254,603) | ||||||
| Share-based compensation | - | - | 17,175 | - | - | 17,175 | |||||||||||
| Foreign currency translation differences for foreign operations |
- | - | - | (87,775) | - | (87,775) | |||||||||||
| Profit (loss) from continuing operations attributable to the equity holders |
- | - | - | - | 775,252 | 775,252 | |||||||||||
| Balance, November 30, 2011 | 14,234,727 | $ | 9,957,959 | $ | 4,592,947 | $ | (64,457) | $ | (19,036,400) | $ | (4,549,951) | ||||||
| Share-based compensation | - | - | (2,079) | - | - | (2,079) | |||||||||||
| Foreign currency translation differences for foreign operations |
- | - | - | 426,505 | - | 426,505 | |||||||||||
| Profit (loss) from continuing operations attributable to the equity holders |
- | - | - | - | (257,310) | (257,310) | |||||||||||
| Balance, February 29, 2012 | 14,234,727 | $ | 9,957,959 | $ | 4,590,868 | $ | 362,048 | $ | (19,293,710) | $ | (4,382,835) | ||||||
| Share-based compensation | - | - | 5,342 | - | - | 5,342 | |||||||||||
| Foreign currency translation differences for foreign operations |
- | - | - | 36,857 | - | 36,857 | |||||||||||
| Profit from continuing operations attributable to the equity holders |
- | - | - | - | 1,366,408 | 1,366,408 | |||||||||||
| Balance, November 30, 2012 | 14,234,727 | $ | 9,957,959 | $ | 4,596,210 | $ | 398,905 | $ | (17,927,302) | $ | (2,974,228) | ||||||
| ESI ENTERTAINMENT SYSTEMS INC. Condensed Consolidated Interim Statements of Cash Flows For the Three and Nine Months Ending November 30, 2012 and 2011. (Unaudited - expressed in Canadian dollars) |
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| Three Months Ending November 30 | Nine Months Ending November 30 | ||||||||
|
|
|
2012 |
|
2011 |
|
2012 |
|
2011 |
|
| Cash provided by (used for) the following activities |
|||||||||
| Operating activities | |||||||||
| Income(loss) for the period | $ | (51,760) | $ | (202,126) | $ | 1,403,265 | $ | 775,252 | |
| Add (deduct) | |||||||||
| Depreciation | 7,801 | 16,296 | 30,254 | 48,213 | |||||
| Stock-based compensation | 980 | 3,068 | 5,342 | 17,175 | |||||
| (42,979) | (182,762) | 1,438,861 | 840,640 | ||||||
| Changes in non-cash working capital: | |||||||||
| Accounts receivable | (243,096) | 35,319 | (98,039) | (166,548) | |||||
| Prepaids | (20,984) | (45,580) | 48,629 | (81,813) | |||||
| Accounts payable and accrued liabilities | 196,518 | 84,502 | 145,456 | (845,460) | |||||
| Deferred revenue | - | (13,083) | (780,980) | (127,643) | |||||
| Deferred contract costs | - | 7,482 | 330,758 | 22,018 | |||||
| Cash flow (used in) from operations | (110,541) | (114,122) | 1,084,685 | (358,806) | |||||
| Investment activities | |||||||||
| Capitalized development costs | - | 8,092 | 127,940 | 24,222 | |||||
| Acquisition of property and equipment | (5,187) | 8,352 | 20,984 | (8,415) | |||||
| Cash from (used in) investing activities | (5,187) | 16,444 | 148,924 | 15,807 | |||||
| Financing activities | |||||||||
| Loan payable | (48,461) | 119,083 | (1,378,468) | 164,418 | |||||
| Change in Citadel processing liabilities | 1,871,379 | 1,081,464 | 2,210.128 | 1,788,684 | |||||
| Change in Citadel processing assets | (1,646,166) | (1,065,189) | (2,153,274) | (1,476,663) | |||||
| Cash from (used in) financing activities | 176,752 | 135,358 | (1,321,614) | 476,439 | |||||
| Increase (decrease) in cash and cash equivalents | 61,024 | 37,680 | (88,005) | 133,440 | |||||
| Cash and cash equivalents, beginning of period | 82,541 | 113,502 | 231,570 | 17,742 | |||||
| Cash and cash equivalents, end of period | $ | 143,565 | $ | 151,182 | $ | 143,565 | $ | 151,182 | |
Forward- looking Statements
This news release contains 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. 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.
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, transaction processing systems, graphical 3D displays, ecommerce web services, and payment fraud and risk mitigation.
SOURCE: ESI Entertainment Systems Inc.
ESI Entertainment Systems Inc.
Michael Meeks
President and CEO
Telephone: (604) 299-6922
email: [email protected]
Web: www.esi.ca
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