'Yes, We Will Recover,' ESI Chief Says

Having revealed an 85 percent loss in full-yearly revenue and resolved its costly United States legal issues, Anthony B. Greening, the chief executive of ESI Entertainment Systems Inc., said the company will recover.

"Yes, we will recover," Mr. Greening told Interactive Gaming News by telephone Wednesday. "We're interacting with a number of groups to build the volumes and to look for various financing options."

For the 2008 fiscal year ended Feb. 29, 2008, ESI, which offers technology and services to the land-based and online gambling industries, reported consolidated revenue of 3.25 million Canadian dollars, or $3.2 million, from 22 million Canadian dollars in 2007.

ESI, based in Burnaby, British Columbia, said the sharp decline in revenue followed on from its January 2007 decision to discontinue offering United States residents payment processing services for Internet-gambling-related transactions.

ESI's Internet gambling money-transfer arm, Citadel Commerce Corporation, derived approximately 97 percent of its revenue from the United States, the company said in a stock exchange statement Wednesday.

With regard to Citadel's United States operation, on June 7, 2008, ESI agreed to pay $9.1 million to settle conspiracy charges brought by the United States government.

Following 14 months of negotiations with Michael J. Garcia, the United States attorney for the Southern District of New York, ESI agreed to a deferred prosecution agreement to avoid facing charges of "conspiracy to conduct illegal Internet gambling."

The same charges were leveled against Neteller, a British online money transfer company that in July 2007 agreed to forfeit $136 million to United States authorities.

When asked how the company would recover from damages incurred via the United States settlement, Mr. Greening said:

"We're obviously looking outside the United States. We're working with a number of large clients to encourage them to use our new instant bank-transfer product. It's been well received and hopefully there will be some announcements in the coming days and weeks."

Mr. Greening made no specification, however, as to the identities of the clients or their respective jurisdictions.

ESI, listed on the Toronto Stock Exchange, generates revenue across its three subsidiaries: Citadel, ESI Integrity Inc. and PlayLine.

Revenue from ESI Integrity, which supplies auditing and fraud-control technology and services to international parimutuel and lottery operators, was up 17 percent to 2.3 million Canadian dollars from 2.03 million Canadian dollars in 2007.

Playline, which supplies monitor gaming solutions, did not generate any revenue in fiscal 2008.

Gross profit across ESI was down to 518,000 Canadian dollars from 13.5 million Canadian dollars last year. Likewise, gross profit margins were down to 16 percent from 61 percent.