Espial Group Inc. Reports Third Quarter 2010 Results

OTTAWA, Nov. 4 /CNW/ - Espial^® Group Inc. ("Espial" or the "Company"), (TSX:ESP), a leader in the delivery of digital TV software, today announced its third quarter financial results for the three-month period ended September 30, 2010.

Q3 HIGHLIGHTS:

• Secured new design wins for our Espial Browser v6 product with major TV and Consumer Electronic manufacturers
• Espial MediaBase Video-On-Demand (VOD) platform becomes first to support bandwidth reservation and is integrated with Cisco's aggregation and access solutions.
• Announced small footprint, low power network Edge Server Appliance for multi-tier and CDN video-on-demand streaming and capture services, in partnership with BTI.
• Hosted an OTT (Web Video) industry event in Japan with speakers from Netflix, Sonic Solutions, NTT Communications and several Consumer Electronic manufacturers.  In conjunction with this, we released a new whitepaper in support of an open browser, like Espial's WebKit based Browser, as the way forward to better scale video content and apps on Connected TVs.
• In early Q4, announced availability of Espial's WebKit based Browser with Flash 10.1 support for Intel 4100 and 4200 reference chipsets for Smart TV.

For the three-month period ended September 30, 2010 the Company reported revenues of $2.9 million compared to revenues of $2.9 million for the three months ended September 30, 2009. Earnings before interest, foreign exchange, taxes, stock compensation, depreciation and amortization (EBITDA) for the third quarter of fiscal 2010 was a loss of $0.3 million compared to a loss of $0.5 million in fiscal 2009.   Net loss for the quarter was $0.7 million or $0.05 per share, compared to a net loss of $1.0million last year, or $0.07 per share.

"There are disruptive forces challenging incumbent Pay TV operators, forcing telcos, cable & satellite operators to explore solutions for next generation service offerings across multiple screens and networks.  We are also seeing heightened interest from consumer electronic manufacturers and a host of new Internet TV entrants actively introducing new OTT video offerings" said Jaison Dolvane, CEO, Espial.  "In Q3, we saw positive signs of growth as our customers continued to increase their subscribers and we secured exciting new design wins for our WebKit based Espial Browser v6 product with consumer electronics manufacturers"

Q3 Financial Results

Third quarter revenues were $2,931,531 compared with revenues of $2,923,521 in the same period a year ago. Third quarter software license and royalty revenues were $1,849,230 compared to software license and royalty revenues of $1,894,381 in the third quarter of fiscal 2009.  Professional services for the third quarters of 2010 and 2009 were $ 238,413 and $282,048 respectively.  Maintenance and support revenues for the third quarter were $ 843,887 compared to $747,093 last year.

Gross margins for the third quarter of fiscal 2010 were 79% compared with 79% in the third quarter of fiscal 2009.

Operating expenses in the third quarter of fiscal 2010 were $3,078,943 compared to $3,216,395 in the third quarter of fiscal 2009.

Earnings before interest, foreign exchange, taxes, stock compensation, depreciation and amortization (EBITDA) for the third quarter of fiscal 2010 was a loss of $275,210 compared to a loss of $479,608 in fiscal 2009.

Net loss in the third quarter was $677,734 compared to a loss of $993,442 last year.

Cash and cash equivalents at September 30, 2010 was $7,365,333.

The Company will host a conference call to discuss the third quarter financial results on November 5, 2010 at 10:00 AM Eastern Standard Time (EST). The phone number to join the results discussion is:

• Toll Free line (Canada/US) - 888-231-8191
• Local/International - 647-427-7450

The playback for the call will be available until Friday, December 4, 2010 at the following numbers and passcode:

• Toll line: 416-849-0833 - passcode:  21343147
• Toll free line: 1-800-642-1687- passcode: 21343147

About Espial (www.espial.com)

Espial is a leading supplier of high performance and open digital and IP TV software and solutions to service providers in the cable, telecommunications, hospitality and consumer electronics industries. Its middleware, video-on-demand and browser solutions provide superior service delivery, advanced service innovation tools and the flexibility to implement diverse pay-TV business models. Over 7 million licenses of its patented software are in use across the world. Espial is headquartered in Ottawa, Canada and has offices in the United States, Europe and Asia. For more information please call +1.613.230.4770 or visit 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 these terms or other similar expressions concerning matters that are not historical facts. In particular, statements about anticipated benefits of new customer and partner relationships, 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 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, 2009 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

Earnings before interest, foreign exchange, taxes, stock compensation, depreciation and amortization (EBITDA) is a non-GAAP financial measure that does not have any prescribed meaning by GAAP and is therefore unlikely to be comparable to similar measures presented by other issuers.  Management believes that this non-GAAP financial measure, when taken together with the corresponding consolidated GAAP measures, increases the transparency of the Company's current results and enables investors to more fully understand trends in its current and future performance. A reconciliation of net loss to earnings before interest, foreign exchange, taxes, stock compensation, dividends on redeemable preferred shares, depreciation and amortization is as follows:    

	September 30, 2010		September 30, 2009
	(3 months)		(3 months)
	(Unaudited)		(Unaudited)
Net loss and Comprehensive loss	$  (677,434)		$  (993,442)
Add
Stock compensation	150,000		75,000
Depreciation of property and equipment	58,433		74,274
Amortization of intangibles	283,083		282,365
	(185,918)		(561,803)
Less (add)
Interest income	7,950		13,103
Foreign exchange gain (loss)	81,343		(95,298)
Earnings before interest, foreign exchange, taxes, stock compensation,  depreciation and amortization	$     (275,211)		$     (479,608)

ESPIAL GROUP INC.
Consolidated Balance Sheet
(in Canadian dollars)

---

	September 30, 2010 (unaudited)		December 31, 2009 (audited)
CURRENT ASSETS
Cash and cash equivalents	$   7,365,333		$   8,711,699
Short-term investments	110,000		122,246
Accounts receivable	2,473,680		1,989,367
Investment tax credits receivable	225,000		550,000
Prepaid expenses	268,896		178,003
	10,442,909		11,551,315
Property and equipment	678,722		767,451
Intangible assets	3,531,233		4,380,482
Goodwill	3,340,808		3,340,808
	$  17,993,672		$ 20,040,056
CURRENT LIABILITIES
Operating line	$   1,000,370		$      500,044
Accounts payable and accrued liabilities	1,262,637		1,643,717
Deferred revenue	1,409,302		2,064,598
	3,672,309		4,208,359
COMMITMENTS
SHAREHOLDERS' EQUITY
Share capital	74,859,577		74,859,576
Warrants	164,435		164,435
Contributed surplus	10,918,844		10,568,844
Deficit	(71,621,493)		(69,761,158)
	14,321,363		15,831,697
	$  17,993,672		$   20,040,056

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

	Three Months Ended					Nine Months Ended
		September 30, 2010 (unaudited)		September 30, 2009 (unaudited)			September 30, 2010 (unaudited)		September 30, 2009 (unaudited)
Revenue		$2,931,531		$2,923,521			$9,851,783		$9,117,045
Cost of revenue		619,315		618,372			2,395,431		2,028,714
Gross margin		2,312,216		2,305,149			7,456,352		7,088,331
Expenses
Sales and marketing		1,007,661		1,073,955			3,109,194		3,188,495
General and administrative		415,617		461,387			1,368,390		1,516,123
Research and development		1,164,149		1,250,691			3,337,611		4,146,014
Stock compensation expense		150,000		75,000			350,000		178,000
Amortization of property & equipment		58,433		74,177			169,136		213,631
Amortization of intangible assets		283,083		282,365			849,249		849,249
		3,078,943		3,217,575			9,183,580		10,091,512
Loss before other income (expense)		(766,727)		(912,426)			(1,727,228)		(3,003,181)
Other income (expenses)
Interest income		7,950		12,996			10,730		63,576
Foreign exchange gain (loss)		81,343		(94,012)			(143,837)		(340,011)
		89,293		(81,016)			(133,107)		(276,435)
Net loss and comprehensive loss		$(677,434)		$(993,442)			$(1,860,335)		$(3,279,616)
Net loss per common share - basic and diluted		$(0.05)		$(0.07)			$(0.13)		$(0.23)
Weighted average number of common shares- basic and diluted		14,101,829		14,101,829			14,101,829		14,101,829

%SEDAR: 00025301E

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