Parlay Entertainment Inc.
PINK SHEETS : PRYNF
TSX VENTURE : PEI

Parlay Entertainment Inc.

August 11, 2005 07:30 ET

Parlay Entertainment Announces Financial Results for Q2 2005

OAKVILLE, ONTARIO--(CCNMatthews - Aug. 11, 2005) -

Continues revenue growth and maintains profitable operations

All amounts in United States Dollars

Parlay Entertainment Inc. (TSX VENTURE:PEI)(PINK SHEETS:PRYNF), the world's leading supplier of Internet Bingo solutions, today announced its results for the three and six-month periods ended June 30, 2005.

Highlights for the second quarter of fiscal 2005 include:

- New corporate record for royalty revenue at $1,218,328, up 7% from the prior record and up 53% from Q2 2004;

- Net income of $95,379 or $0.01 per share, fully diluted;

- Cash balances increased to $906,805 from $455,948 at March 31, 2005.

Highlights for the first half of fiscal 2005 include:

- New corporate record for revenue at $2,600,125, up 26% from the prior record from 2002 and up 45% from the first half of 2004;

- New corporate record for royalty revenue at $2,355,302 up 44% from the prior record and from the first half of 2004;

- Net income of $199,240 or $0.02 per share, fully diluted.

Achievements for the second quarter include:

- Listing on TSX Venture Exchange granted on June 17, 2005;

- New licensee, St. Minver, signs up Yahoo! UK & Ireland, Virgin Bingo and Gala Bingo;

- Existing licensee, bingos.co.uk, signs up AOL UK;

- New license agreement executed with New Media Lottery Services, Inc.

"We are delighted by our progress through the second quarter of 2005", said Scott F. White, President and CEO. "Our new client wins reflect our dominance as the software supplier for the rapidly growing UK online bingo marketplace. With the UK government introducing new online gaming legislation during the quarter, the regulatory environment is set and the quality of the brands entering the UK bingo marketplace is exemplary. We believe that the online bingo market in the UK will experience significant growth over the next few quarters and we will maintain our position as the software provider of choice as new brands recognize the opportunities. For the balance of 2005, we will maintain our focus on these markets," Mr. White continued, "and we anticipate yet further growth in both the number and quality of licensees, as well as the associated revenue opportunities. However, we are also aware of opportunities in other geographical areas and we will maintain our pursuit of these opportunities. For instance, our recently announced license agreement with Caliente will provide us with revenue opportunities in Spanish speaking communities. Finally", noted Mr. White, "we are delighted to have achieved our goal of obtaining a listing on the TSX Venture Exchange to attract new shareholders to Parlay and to increase the value to our existing shareholders".

Parlay generates revenue from software licensing, installation fees and e-digital and support services. Consolidated revenues increased to $1.3 million in Q2 2005 from $0.9 million in Q2 2004 or 43% quarter over quarter. This growth represents continuing growth across Parlay's portfolio of licensees and the impact of new licensees during the quarter. In particular, Parlay is continuing to see growth in activity from its licensees offering 90-number bingo to the UK marketplace.

Expenses in Q2 2005 were $1.2 million, up from $1.0 million in Q2 2004. The increase represented the impact of the termination by a licensee of their license agreement and costs incurred on the TSX Venture Exchange listing application process. These non-recurring costs aggregated to $0.2 million.

Net income for the quarter was $0.1 million, or $0.01 per diluted share, compared to a net loss of $0.1 million, or $(0.01) per diluted share in Q2 2004.

Parlay remains debt free with an increasing cash position. Parlay's cash balance at June 30, 2005 was $0.9 million.

Consolidated revenues increased to $2.6 million for the first half of 2005 compared to $1.8 million in the first half of 2004 or 45% year over year.

Expenses in the first half of 2005 were $2.3 million, up from $2.1 million in the first half of 2004. The increase represented the impact of the termination by a licensee of their license agreement and costs incurred on the TSX Venture Exchange listing application process. These non-recurring costs aggregated to $0.2 million.

Net income for the first half of the year was $0.2 million, or $0.02 per diluted share, compared to a net loss of $0.3 million, or $(0.02) per diluted share in the first half of 2004.

At a board meeting held on August 10, 2005, prior to approving Parlay's financial reporting for the six-month period ended June 30, 2005, the board accepted the resignation of Mr. Michael Aymong from the board of directors. "I regret to announce Mr. Aymong's resignation as a Director" said Mr. Anthony De Werth, Chairman. "Mr. Aymong joined our Board of Directors in October of 2004 and has added valuable input over the last 10 months. Unfortunately, due a hectic travel schedule, business commitments at Windy Point Capital, where he is Executive Chairman, and other business obligations it has become necessary that he take this step. We thank Mike greatly for his counsel during his time on our Board." Mr. Perry Malone, who presently serves as a director of the Company, has been appointed to the audit committee of Parlay to fill the vacancy created by Mr. Aymong's departure. The Company is presently engaged in discussions with several qualified independent director candidates who are interested in serving on the Company's board of directors and the Company expects to have further news regarding director appointments during the next three months.



PARLAY ENTERTAINMENT INC.
CONSOLIDATED BALANCE SHEETS
(incorporated under the laws of the province of Ontario)

in whole U.S. dollars
--------------------------------
(Unaudited) (Audited)
June 30, December 31,
ASSETS 2005 2004
--------------------------------

Current assets:
Cash and cash equivalents $ 906,805 $ 708,897
Accounts receivable:
Trade, less allowance of
approximately $236,000
($269,000 - 2004) 793,499 701,963
Other 21,822 13,130
Prepaid expenses, deposits
and other assets 62,745 76,522
--------------------------------
Total current assets 1,784,871 1,500,512

Equipment - net 108,410 81,554
Future income tax asset 40,000 20,000
--------------------------------

$ 1,933,281 $ 1,602,066
--------------------------------
--------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable and
accrued liabilities $ 270,141 $ 316,211
Income taxes payable 157,123 275,645
Deferred revenue 317,462 300,299
--------------------------------
Total current liabilities 744,726 892,155
--------------------------------

Shareholders' equity:
Common shares, 50,000,000
shares authorized, 12,515,500
shares issued and outstanding
(11,475,500 - 2004) 1,121,042 927,292
Contributed surplus 1,684,654 1,599,000
Retained earnings
(accumulated deficit) (1,617,141) (1,816,381)
--------------------------------
1,188,555 709,911
--------------------------------

$ 1,933,281 $ 1,602,066
--------------------------------
--------------------------------


PARLAY ENTERTAINMENT INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
RETAINED EARNINGS (ACCUMULATED DEFICIT)
(in whole U.S. dollars, except for per share amounts)
(Unaudited)

Three-Months Ended Six-Months Ended
-----------------------------------------------
June 30 June 30
-----------------------------------------------
2005 2004 2005 2004
-----------------------------------------------

Revenues:
Royalties $ 1,218,328 $ 794,431 $ 2,355,302 $ 1,636,501
Installation fees 34,292 39,435 159,133 55,622
e-digital and
support services 25,166 61,650 85,690 99,550
-----------------------------------------------
1,277,786 895,516 2,600,125 1,791,673
-----------------------------------------------

Expenses:
Sales, marketing and
services to licensees 235,686 198,382 481,483 357,058
Research, software
development and
support services 490,126 450,105 942,532 946,437
General and
administrative 230,162 289,667 515,472 635,521
Amortization 16,532 21,513 31,401 44,538
TSX Venture Exchange
Listing 68,380 - 170,710 -
-----------------------------------------------
1,040,886 959,667 2,141,598 1,983,554
Restructuring
provision - 3,000 - 8,000
License agreement
termination
write-offs 110,423 - 110,423 60,317
-----------------------------------------------
1,151,309 962,667 2,252,021 2,051,871
-----------------------------------------------

Income (loss) before
income taxes 126,477 (67,151) 348,104 (260,198)
-----------------------------------------------

Income tax provision
(recovery)
Current 51,098 25,170 168,864 10,132
Future (20,000) (20,047) (20,000) (20,047)
-----------------------------------------------
31,098 5,123 148,864 (9,915)
-----------------------------------------------

Net income (loss) for
the period 95,379 (72,274) 199,240 (250,283)


Retained earnings
(accumulated deficit),
beginning of period (1,712,520) (1,400,608) (1,816,381) (1,222,599)

Retained earnings
(accumulated deficit),
end of period $(1,617,141)$(1,472,882)$(1,617,141)$(1,472,882)
-----------------------------------------------
-----------------------------------------------

Net income (loss)
per share:
Basic $ 0.01 $ (0.01) $ 0.02 $ (0.02)
-----------------------------------------------
-----------------------------------------------

Diluted $ 0.01 $ (0.01) $ 0.02 $ (0.02)
-----------------------------------------------
-----------------------------------------------

Weighted average
number of common
shares outstanding:
Basic 12,172,167 10,863,333 11,823,833 10,867,167
-----------------------------------------------
-----------------------------------------------

Diluted 13,527,156 10,863,333 13,002,726 10,867,167
-----------------------------------------------
-----------------------------------------------


PARLAY ENTERTAINMENT INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in whole U.S. dollars)
(Unaudited)

Three-Months Ended Six-Months Ended
-----------------------------------------------
June 30 June 30
-----------------------------------------------
2005 2004 2005 2004
-----------------------------------------------

Cash flows from
operating activities:
Net income (loss) for
the period $ 95,379 $ (72,274) $ 199,240 $ (250,283)
Adjustments to
reconcile net income
(loss) to net cash
(used in) operating
activities:
Stock option and
share expense 8,489 107,742 106,404 212,331
Amortization 16,532 21,513 31,401 44,538
Restructuring
provision - 3,000 - 8,000
License agreement
termination
write-offs 110,423 - 110,423 60,317
Future income tax
(recovery) (20,000) (20,047) (20,000) (20,047)
Changes in non-cash
working capital items:
Accounts receivable (61,465) (71,887) (210,651) (155,000)
Prepaid expenses,
deposits and other
assets 30,929 8,332 13,777 (6,650)
Accounts payable and
accrued liabilities 13,449 20,330 (46,070) (90,301)
Restructuring reserve
payments - (3,376) - (55,726)
Income taxes
recoverable /
payable 51,098 25,170 (118,522) 66,988
Deferred revenue 83,085 23,254 17,163 94,567
-----------------------------------------------
Net cash provided by
(used in) operating
activities 327,919 41,757 83,165 (91,266)
-----------------------------------------------

Cash flows from
investing activities:

Purchases of equipment (50,062) (8,091) (58,257) (8,091)
Proceeds on disposal
of equipment - - - 1,509
-----------------------------------------------
Net cash provided by
(used in) investing
activities (50,062) (8,091) (58,257) (6,582)
-----------------------------------------------

Cash flows from
financing activities:

Proceeds from
issuance of common
shares 173,000 - 173,000 -
Repurchase of common
shares - (4,000) - (4,000)
-----------------------------------------------
Net cash provided by
(used in) investing
activities 173,000 (4,000) 173,000 (4,000)
-----------------------------------------------

Net increase
(decrease) in cash 450,857 29,666 197,908 (101,848)

Cash and cash
equivalents,
beginning of
period 455,948 237,046 708,897 368,560
-----------------------------------------------

Cash and cash
equivalents, end
of period $ 906,805 $ 266,712 $ 906,805 $ 266,712
-----------------------------------------------
-----------------------------------------------

Cash and cash
equivalents consist
of the following:

Cash $ 906,805 $ 194,474 $ 906,805 $ 194,474
Cash equivalents - 72,238 - 72,238
-----------------------------------------------
$ 906,805 $ 266,712 $ 906,805 $ 266,712
-----------------------------------------------
-----------------------------------------------

Supplemental cash
flow activities:

Income taxes paid /
(received) $ - $ - $ 287,386 $ (56,856)
-----------------------------------------------
-----------------------------------------------
Interest paid $ - $ - $ - $ -
-----------------------------------------------
-----------------------------------------------


About Parlay Entertainment

Parlay Entertainment Inc. is the world's leading developer and dominant licensor of Internet Bingo solutions. As the inventor and patent holder of Internet Bingo(1), Parlay is the first company in the world to develop and deploy a commercial Internet Bingo product, offering a best-in-class suite that features 75-number and 90-number Bingo, Lottery and Casino entertainment software. With its unmatched depth of industry experience and a comprehensive range of products and services, Parlay offers business solutions to fit every need. Parlay has a seven year proven track record built on the success of our clients: in the past 12 months, more than 2.2 million paying players enjoyed the experience of playing Parlay games on our licensees' gaming websites. Parlay is headquartered in Oakville, Canada with offices in Bridgetown, Barbados, and Valletta, Malta.

For more information on Parlay solutions and services, please visit our website at www.parlaygroup.com.

This document may contain statements about expected future events and/or financial and operating results of Parlay Entertainment Inc. that are forward-looking. By their nature, forward-looking statements require the Company to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that predictions and other forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements.

(1) United States Patent No. 6,585,590 "Method and system for operating a bingo game on the internet", with other Patent applications pending in other countries.

The TSX Venture Exchange does not accept any responsibility for the adequacy or accuracy of this release.

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