ESI Entertainment announces Fiscal 2014 First Quarter Financial Results

BURNABY, BC, July 29, 2013 /CNW/ - ESI Entertainment Systems Inc. ("ESI" or the "Company") (CNSX : ESY) reported today its financial results (unaudited) for fiscal Q1 2014 ended May 31, 2013. (All dollar amounts reported in Canadian funds).

Consolidated financial highlights for the quarter include (Q1 2014 compared to Q1 2013):

• Revenues increased by 11% to $807,000 from $725,000
  
  
• Gross profit increased by 41% to $185,000 from $131,000
  
  
• Operating Expenses decreased by 43% to $64,000 from $112,000
  
  
• Income from continuing operations was $105,000 compared to a loss of  $121,000 in the period year

These results, for both comparative periods, represent the Citadel business unit alone as the Integrity business unit was disposed of in the period ending May 31, 2012.  The Integrity business units results are recorded as discontinued operations in the prior period.

As we continue to face a significant Shareholders' Deficit, our main operating subsidiary, Citadel Commerce, continues to closely govern expenditures while focusing on opportunities and new initiatives.

"Michael Meeks"
President & CEO

Selected Financial Information

		Quarter Ended
		May 31,	May 31,	May 31,
		2013	2012	2011
($ 000) except for EPS
Revenue		807	725	526
Gross Profit		185	131	(130)
Total operating expenses		64	112	165
Income (loss) from continuing operations		105	(121)	(486)
Income (loss) attributable to equity holders		111	1,348	(391)
Earnings (loss) per share
	Basic and Diluted	0.01	0.10	(0.03)
Total Assets		8,335	8,323	4,975
Shareholders' deficit		(2,715)	(2,815)	(5,626)

Results of Operations

Citadel Revenues

			Quarter Ended
($ 000)			May 31, 2013	May 31, 2012		% change
Citadel			807	725		11%

Revenues increased by 11% to $807,000 for the three month period ended May 31, 2013 from $725,000 during the same period last year.

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 to its merchants on a fee per transaction basis.

The increase in revenue over the prior comparative period 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 gross profit from continuing operations for the three months ended:

($ 000)			May 31, 2013	May 31, 2012
Revenues			807	725
Direct Costs			622	594
Gross profit			185	131
Gross profit margin (%)			23%	18%

General and Administrative

General and administrative expenses were $64,000 for the three months ended May 31, 2013, a decrease of 43% compared to $112,000 during the same period last year.  This reduction is primarily attributable to the Company's ongoing efforts to minimize its operating expenses.

Net Comprehensive income

Net comprehensive income from continuing operations for the three months ended May 31, 2013 was $105,000 ($0.01 earnings per share) compared to a loss of $121,000 ($0.01 loss per share) for the same period last year. The increase in net comprehensive income from continuing operations is primarily attributable to the increased revenue and reductions of operating costs in the current period and the foreign exchange expense in the prior period.

Citadel Processing Accounts and Liabilities

Citadel processing accounts represent the bank accounts maintained by the Company for the purpose of payment processing for Citadel merchants and clients. These accounts are recorded separately from the Company's operating bank accounts.

Citadel processing liabilities represent balances due to Citadel clients, merchants and their clients from funds held in trust, pending transaction cancellation periods and processing times. These amounts are funds held with Citadel on behalf of the merchants and are available on demand.

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 months ended May 31, 2013, cashflow provided from operating activities was $157,000 compared to $111,000 used during the same period last year. The change is attributable to the disposition of the assets and operations of ESI Integrity during the prior comparative period.

Cash used in investing activities was $3,000 during the three months ended May 31, 2013 compared to $81,000 provided during the same period last year.  The change is attributable to the disposition of the assets and operations of ESI Integrity during the prior comparative period.

Cash used in financing activities was $126,000 during the three months ended May 31, 2013 compared to $11,000 during the same period last year. The change is due to the ongoing repayment of the Loan Payable.

Overall, the increase in cash totaled $28,000 for the three months ended May 31, 2013 compared to a decrease of $40,000 during the same period last year.

For the three month period ending May 31, 2013 the Company recorded a comprehensive income from operations of $105,000 and an increase in operating cash flow of $28,000.

Consolidated Interim Financial Statements (Unaudited)

NOTE TO READER: The following financial statements (unaudited) are extracted from the complete unaudited interim financial statements of the Company which have been filed together 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 May 31, 2013 and February 28, 2013 (Unaudited - expressed in Canadian dollars)
			May  31, 2013		February 28, 2013
Assets
Current
	Cash and cash equivalents	$	111,333	$	83,351
	Accounts receivable		2,729		68,665
	Prepaids and other		68,964		75,916
	Citadel processing accounts		8,094,818		9,236,421
			8,277,844		9,464,353
Non-current
	Property and equipment		57,661		61,168
Total Assets		$	8,335,505	$	9,525,521
Liabilities
	Accounts payable and accrued liabilities	$	1,265,025	$	1,287,312
	Loan Payable		662,976		736,556
	Citadel Processing Liabilities		9,122,249		10,316,509
Total Liabilities		$	11,050,250	$	12,340,377
Shareholders' deficit
	Share Capital	$	9,957,959	$	9,957,959
	Contributed Surplus		4,591,829		4,591,829
	Other Comprehensive Income		286,598		291,977
	Deficit		(17,551,131)		(17,656,621)
Total deficit			(2,714,745)		(2,814,856)
Total liabilities and shareholders' deficit		$	8,335,505	$	9,525,521

ESI ENTERTAINMENT SYSTEMS INC. Condensed Consolidated Interim Statements of Income (Loss) and Comprehensive Income (Loss) For The Three Months Ending May 31, 2013 and 2012. (Unaudited - expressed in Canadian dollars)
			2013		2012
Continuing Operations
	Revenues	$	807,567	$	724,777
	Direct Costs		622,223		593,697
Gross Profit			185,344		131,080
General and administration expenses			64,212		112,157
Income before under noted items			121,132		18,923
Other expenses (income)
	Foreign exchange loss		5,432		138,862
	Tax expense		458		10
	Other Income		(546)		(29,177)
	Interest income		-		(2,028)
	Interest expense		10,298		32,529
Income (loss) for period attributable to equity holders from continuing operations			105,490		(121,273)
Discontinued operations
Profit from discontinued operations			-		1,417,825
Income attributable to equity holders			105,490		1,296,552
Other comprehensive income
Foreign currency translation gain			5,379		51,483
Total Comprehensive income for the period attributable to equity holders		$	110,869	$	1,348,035
Basic and diluted income per share		$	0.01	$	0.09

ESI ENTERTAINMENT SYSTEMS INC. Condensed Consolidated Interim Statements of Cash Flows For the Three Months Ending May 31, 2013 and 2012. (Unaudited - expressed in Canadian dollars)
							Three Months Ending May 31
							2013		2012
Cash provided by (used for) the following activities
Operating activities
Income for the period						$	105,490	$	1,296,552
Add (deduct)
	Depreciation						6,769		16,437
	Other						(5,379)		51,483
	Stock-based compensation						-		3,382
							106,880		1,367,854
Changes in non-cash working capital:
	Accounts receivable						65,936		(1,312,552)
	Prepaids						6,952		48,554
	Accounts payable and accrued liabilities						(22,288)		235,622
	Deferred revenue						-		(780,980)
	Deferred contract costs						-		330,758
Cash flow (used in) from operations							157,480		(110,744)
Investment activities
	Capitalized development costs						-		127,940
	Acquisition of property and equipment						(3,261)		(45,521)
Cash from (used in) investing activities							(3,261)		81,419
Financing activities
	Loan payable						(73,580)		46,749
	Change in Citadel processing liabilities						(1,194,260)		15,212
	Change in Citadel processing assets						1,141,603		(72,545)
Cash from (used in) financing activities							(126,237)		(10,584)
Increase (decrease) in cash and cash equivalents							27,982		(39,909)
Cash and cash equivalents, beginning of period							83,351		231,570
Cash and cash equivalents, end of period						$	111,333	$	191,661

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, real time auditing systems, transaction processing systems, graphical 3D displays, ecommerce web services, and payment fraud and risk mitigation. Since formation in 1999 ESI Entertainment Systems Inc has created three independently operated and controlled subsidiaries based on validated and proven products: Citadel Commerce Corp., ESI Integrity Inc., and PlayLine Inc. PlayLine Inc. is presently dormant and ESI Integrity Inc assets were sold in fiscal 2013.

 

SOURCE: ESI Entertainment Systems Inc.

ESI Entertainment Systems Inc.
Michael Meeks
President and CEO
Telephone: [phone]
email: [email protected]
Web: www.esi.ca