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DCEG Results Down for Year

"2002 was a transitional year for DCEG, during which we made a number of significant structural and organizational changes," said Chief Executive Officer David Outhwaite. "While the short term impact of these initiatives is reflected in our 2002 results, we're confident that DCEG is now positioned for strong performance in a growing market in 2003 and beyond."

Significant developments during the year included:

- Increasing Parlay's licensee base by 88%;

- Introducing a standardized licensing fee structure to enhance market competitiveness and the sustainability of revenues;

- Implementing a tax-efficient corporate structure to enhance shareholder value; and,

- Strengthening the company's board of directors and senior management team.

Financial Results

DCEG generates revenue from software licensing, installation fees and customer support services. Revenue for the 12 months ended December 31, 2002 was $3.5 million, down slightly from $3.8 million in fiscal 2001.

During the year, Parlay significantly increased its customer base, from nine to 17 licensees, and the number of gaming systems licensed, from eight to 27. As a result of this broader revenue base, Parlay's largest customer accounted for 27% of licensing revenue in 2002, compared with 66% the previous year. The reduced year-over-year aggregate revenue reflects the impact of a standardized licensing fee structure implemented across the licensee base early in 2002 to enhance market competitiveness and secure long-term contracts with certain customers. The additional revenue generated from new customer sites launched in 2002 substantially offset the impact of the royalty rate reductions under the new fee structure.

Expenses in 2002, excluding non-recurring charges, were $3.3 million, compared with $2.6 million in 2001. The majority of the increase was due to higher personnel costs required to meet the needs of a growing customer base.

Total expenses also included non-recurring charges of approximately $550,000 for costs associated with corporate restructuring and contractual and legal settlements. The after-tax amount of these charges is approximately $332,000. In addition, the company recorded an income tax adjustment of $260,000 in the third quarter, resulting in total non-recurring expenses of $592,000 in fiscal 2002.

Accordingly, net income before non-recurring items would have been $78,000, or $0.01 per diluted share, compared with $710,000, or $0.06 per diluted share in 2001. Including these non-recurring charges, the company reported a net loss of $514,000, or $0.05 per diluted share in 2002.

DCEG remains debt free with a stable cash position. During the year, 467,000 common shares were repurchased as part of DCEG's focus on enhancing shareholder value.

Positioned For Growth

DCEG is the value and technological leader in online bingo software, and has a growing presence in the online casino and lottery markets. In 2003, efforts will be focused on widening that lead as top-tier land-based operators increasingly move to extend their brands on the Internet, and as established cyber gaming operators look to broaden player appeal by expanding into growing verticals such as bingo and lottery.

Over the past year, DCEG has made a number of key changes to its operating and management structures, which position the company for a return to both top and bottom line growth in 2003 and beyond.

During 2002, DCEG transferred intellectual property rights to its Barbadian affiliate, Parlay Entertainment Limited. As a result, the company expects it will realize significant tax benefits to enhance shareholder value going forward. DCEG also strengthened its board and management team with the addition of three independent directors, Michael D. Lipton, Robert C. Olsen and Anthony De Werth, and the appointment of David Outhwaite as Chief Executive Officer and David Callander as Chief Financial Officer, all of whom bring broad reaching business and industry experience to the company.

In 2003, DCEG intends to leverage its strengths through a renewed focus on providing the highest level of service to its customers, by continuing to supply a comprehensive suite of flexible leading-edge industry-standard gaming products, and by taking advantage of opportunities to grow its business in the domestic charity gaming market and internationally with tier-one customers.

"Our status as a pure software development company that doesn't participate directly in the revenue of gaming sites give us access to all regulatory environments around the globe," Mr. Outhwaite added. "With strong leadership and a renewed focus on international growth by delivering superior products and customer support, DCEG is well positioned to return the benefits of its new corporate structure to its shareholders."

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