DCEG Profitable Second Quarter
By staff
TORONTO – dot com Entertainment Group, Inc. (DCEG), a leading supplier of software and services to the e-gaming industry through its affiliate, Parlay Entertainment Limited (Parlay), today reported a profitable second quarter and first six months of 2003, ended June 30, 2003.

Achievements include:

l Setting a new record for quarterly software licensing revenue;

l Further strengthening the Board of Directors with the appointment of Norman Inkster;

- Receiving a U.S. patent for DCEG’s method and system for operating a bingo game on the Internet;

- Expanding distribution channels through a VAR agreement with IGW Software;

- The implementation of Parlay’s wireless casino suite by WinwardCasino.com; and,

- Continued progress toward obtaining a listing for DCEG shares on the TSX Venture Exchange.

“We are pleased with the Company’s performance in what was a very active and productive first half of 2003,” said David Outhwaite, DCEG’s Chief Executive Officer. “Over the past three quarters, we have put in place a solid foundation for sustainable growth. With a return to profitability in 2003 and record software licensing revenue in the second quarter, we are seeing the positive impact of those changes. We will build on this momentum in the second half of the year by continuing to execute on new initiatives that drive organic growth and strengthen the Company’s competitive position.”

Solid Financial Performance

DCEG generates revenue from software licensing, installation fees and e-digital and support services. Consolidated revenue showed solid growth in the second quarter of 2003, increasing by 19% to $989,236, compared with $829,289 in the second quarter of 2002. Driving this growth was a strong increase in recurring software licensing revenue during the quarter.

At $894,464, software licensing revenue increased by 31% in the second quarter, from $684,193 in the corresponding period of 2002. Software licensing revenue also rose sequentially, increasing by 22% over the first quarter of 2003.

To enhance market competitiveness and secure long-term customer contracts, the Company implemented a standardized licensing revenue structure across its licensee base in the second quarter of 2002. This resulted in reduced licensing revenue rates for a number of licensees. Year-over-year organic growth and the addition of new customers more than offset the impact of licensing rate reductions under the fee structure implemented last year.

Installation fees, which are one-time fees charged to new clients for software implementation, totaled $56,272 in the second quarter of 2003. This compares with installation fees of $84,771 in the second quarter of 2002.

Total expenses were $979,714 in the second quarter of 2003 after deferring software development costs of $110,431, which compares with total expenses of $1,140,483 in the second quarter of 2002. Excluding a one-time charge of $345,207 pursuant to a negotiated contractual settlement, total expenses in the second quarter of 2002 were $795,276.

The strengthening Canadian dollar had an adverse impact on financial results. For the three-month period ended June 30, 2003, the Canadian dollar increased in value against the U.S. dollar by an average of 12.5%, versus the same period in 2002. Foreign exchange effects, together with fees associated with the Company’s application to list its shares for trading on the TSX Venture Exchange, have resulted in additional expenses in the amount of approximately $110,000 for the quarter and year-to-date. In addition, the Company incurred higher general and administrative costs year-over-year in support of the growth of the business.

Net income for the second quarter of 2003 increased to $5,713, compared with a net loss of $202,861 in the second quarter of the prior year. The loss for the second quarter of 2002 includes the after tax impact of the negotiated contractual settlement referred to above of approximately $207,000. Earnings per share for the second quarter of 2003 were $0.00, compared with a loss of $0.02 per share in the second quarter of 2002 (both basic and diluted).

Software licensing revenue increased by 21% to $1,627,714 in the first half of 2003, compared with the first six months of 2002. Consolidated revenue decreased by 7% to $1,916,956 in the first six months of 2003, compared with $2,063,324 in the corresponding period of the prior year. The decrease is due to lower revenue from installation fees and e-digital and support services in 2003. Total expenses increased by 11% to $1,833,187 in the first six months of 2003, after deferring software development costs of $166,222, from $1,646,805 (excluding the one-time charge of $345,207) in the first six months of 2002.

Net income increased by 89% in the first half of 2003, to $50,262, from $26,643 in the corresponding period in 2002. Earnings per share for the six-months ended June 30, 2003 were $0.00 per share, unchanged from the prior year (both basic and diluted).

Corporate Leadership Strengthened

DCEG recognizes that a strong, independent Board of Directors and good corporate governance practices are fundamental to long-term success. In the second quarter, DCEG continued to strengthen corporate leadership with the addition of Norman Inkster to its Board of Directors. A former Commissioner of the Royal Canadian Mounted Police, past President of Interpol and a member of the Order of Canada, Mr. Inkster brings a wealth of expertise in the areas of law and law enforcement to DCEG. His vast domestic and international experience will be of tremendous benefit as the Company grows its business in regulated gaming markets worldwide.

The Company is also pleased to announce that Mr. Robert Olsen has accepted the position of Chairman of the Board of Directors, effective July 30, 2003. Mr. Olsen has been a member of the Board of Directors since July 11, 2002 and presently serves as the Chair of the Audit Committee. Mr. Olsen is also a member on the Compliance, Governance and Compensation Committee of the Board of Directors.

Bingo Patent Granted

Subsequent to the quarter end, a United States Patent (#6,585,590) was issued registering a new method and system of operating a bingo game on the Internet. The granting of this patent protects the significant investment the Company has made in developing and marketing its online bingo technology. As the patent holder, the DCEG group of companies are the only companies authorized to incorporate the patented technology into their bingo product.

Technological Leadership Maintained

During the second quarter, DCEG achieved a technological milestone when WinwardCasino.com launched the world’s first real-time, real-money, full-function wireless casino using Parlay’s wireless casino suite. By offering wireless functionality, Parlay enables its customers to extend their brand to the vast and growing market of wireless gamers. WinwardCasino.com’s wireless casino suite offers 17 games including blackjack, slots and video poker for real money wagering on phones and PDA handhelds powered by the PocketPC® or Palm OS®. Future enhancements will include new games, such as roulette and craps, and support for additional handheld device platforms.

Distribution Channels Expanded

DCEG is continually exploring innovative ways to capitalize on the increased demand for online gaming worldwide. During the quarter, the Company announced the signing of a letter of understanding to form a strategic alliance with IGW Software, a leading provider of software to online sportsbooks and horsebooks. Under the agreement, IGW will offer Parlay’s Flash-based casino games, including a downloadable Flash-based casino version, across its customer base.

In addition, Global Interest Gaming launched www.iplay

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