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

Parlay Entertainment Inc.

November 07, 2005 14:00 ET

Parlay Entertainment Announces Record Financial Results for Q3 2005; Continues Revenue Growth and Maintains Profitable Operations

OAKVILLE, ONTARIO--(CCNMatthews - Nov. 7, 2005) -

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 record results for the three and nine-month periods ended September 30, 2005.

Highlights for the third quarter of fiscal 2005 include:

- New corporate record for revenue at $1,574,497, up 19% from the prior record for Q1 2005 and up 60% from Q3 2004;

- New corporate record for royalty revenue at $1,483,726, up 22% from the prior record and on a sequential basis and up 76% from Q3 2004;

- New corporate record for net income of $262,583 or $0.02 per share, fully diluted, up 14% from the prior record from Q1 2002, up 175% on a sequential basis and up from the net loss of $28,609 recorded in Q3 2004;

- EBITDA(1) increased to $326,418 from $(171) in Q3 2004 and EBITDA(1) margin increased to 21% from 0% in Q3 2004;

- Cash balances increased to $1,176,892, up 66% from December 31, 2004 and up 174% from September 30, 2004.

Highlights for the first three quarters of fiscal 2005 include:

- New corporate record for revenue at $4,174,622, up 49% from the prior record from 2003 and up 50% from the first three quarters of 2004;

- New corporate record for royalty revenue at $3,839,028, up 55% from the prior record for the first three quarters of 2004;

- Net income of $461,823 or $0.03 per share, fully diluted, up from the net loss of $278,892 recorded in the first three quarters of 2004;

- EBITDA(1) increased to $705,923 from $(215,831) in the first three quarters of 2004 and EBITDA(1) margin increased to 17% from (8)% in the first three quarters of 2004.

Achievements for the third quarter include:

- Existing licensee, St. Minver, launches two new brands to their network, one of which is a Spanish language site offering wagering in Euros which is targeting the Spanish market place;

- The Gaming Network Limited launches its first network offering with bingoboogie.co.uk;

- Existing licensees bingopalace, bingonanza, astrobingo and bingoknights launch UK facing 90-number bingo sites;

- New licensee Caliente launches ebingocaliente, a Spanish language site targeting the Mexican marketplace;

- New license agreement executed with Irish Rehab Lotteries;

- Appointment of Mr. Brian W. Barr as a new independent director to the board and independent member of the audit and compensation committees of Parlay's board;

- Sub-lease arrangement entered into to address Parlay's increasing space requirements through mid 2007.

"We continue to be delighted by our progress", said Scott F. White, President and CEO. "Our increased revenue reflects the growing acceptance of bingo as an on-line offering especially in new markets such as the U.K. Within the last nine months, our geographical revenue sources have broadened and now approximately 40% of our revenue is sourced from UK based activity. At the same time, as certain new licensees start to offer bingo to Spanish speaking countries, we expect further opportunities to diversify our geographical revenue sources. In assessing our prospects for 2006," Mr. White continued, "we expect to see increasing activity in the U.K. and in certain other geographical areas. The new license agreement with Irish Rehab Lotteries will further add to our presence in the offering of bingo as a fundraiser for philanthropic causes. Finally," concluded Mr. White, "we are delighted to have arranged for new premises in Oakville to provide us with the additional space required to support our growing development efforts. We hope to be re-located by December 31, 2005."

Parlay generates revenue from software licensing, installation fees and e-digital and support services. Consolidated revenues increased to $1.6 million in Q3 2005 from $1.0 million in Q3 2004 or 60% 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 Q3 2005 were $1.3 million, up from $1.0 million in Q3 2004. The increase represented the impact of higher compensation costs and higher sales and marketing costs.

Parlay was able to record a non-recurring reversal of a previously recorded income tax provision of $0.1 million in Q3 following the finalization of certain tax compliance filings.

Net income for the quarter was $0.3 million, or $0.02 per diluted share, compared to a net loss of $0.0 million, or $(0.00) per diluted share in Q3 2004.

Parlay remains debt free with an increasing cash position. Parlay's cash balance at September 30, 2005 was $1.2 million.

Consolidated revenues increased to $4.2 million for the first three quarters of 2005 compared to $2.8 million in the first three-quarters of 2004 or 50% year over year.

Expenses in the first three quarters of 2005 were $3.5 million, up from $3.1 million in the first three quarters of 2004. The increase represented the impact of higher compensation costs and higher sales and marketing costs together with costs incurred on the TSX Venture Exchange listing application process. The non-recurring and non-cash costs incurred in the first three quarters of 2005 aggregated to $0.4 million.

Net income for the first three quarters of the year was $0.5 million, or $0.03 per diluted share, compared to a net loss of $0.3 million, or $(0.03) per diluted share in the first three quarters of 2004.

On November 1, 2005 Mr. Ted Colivas, who has served as Parlay's Director of Strategic Planning since October 1, 2003, ceased to act as an officer of Parlay and is to pursue other interests. "Ted was one of the founders of Parlay," said Mr. Tony De Werth, Chair of the Board of Directors of Parlay, "and his contribution to our Company has been significant. We acknowledge his past efforts and we wish him the best in his future endeavours. He will continue to serve on the board of directors of Parlay."



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

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

Current assets:
Cash and cash equivalents $ 1,176,892 $ 708,897
Accounts receivable:
Trade, less allowance of
approximately $257,000 1,002,036 701,963
($269,000 - 2004)
Other 19,190 13,130
Income taxes recoverable 107,896 -
Prepaid expenses, deposits and
other assets 70,814 76,522
------------- ------------
Total current assets 2,376,828 1,500,512

Equipment - net 111,352 81,554
Future income tax asset 40,000 20,000
------------- ------------

$ 2,528,180 $ 1,602,066
------------- ------------
------------- ------------

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable and accrued
liabilities $ 392,917 $ 316,211
Income taxes payable 311,986 275,645
Deferred revenue 330,437 300,299
------------- ------------
Total current liabilities 1,035,340 892,155
------------- ------------

Shareholders' equity:
Common shares, 50,000,000 shares
authorized, 12,620,500 shares issued
and outstanding (11,475,500 - 2004) 1,150,992 927,292
Contributed surplus 1,696,406 1,599,000
Retained earnings (accumulated
deficit) (1,354,558) (1,816,381)
------------- ------------
1,492,840 709,911
------------- ------------

$ 2,528,180 $ 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 Nine-Months Ended
------------------ ------------------
September 30 September 30
------------ -------------
2005 2004 2005 2004
------------ ------------ ------------ -------------
Revenues:
Royalties $ 1,483,726 $ 842,216 $ 3,839,028 $ 2,478,717
Installation fees 31,879 37,393 191,012 93,015
e-digital and
support services 58,892 80,993 144,582 180,543
Other income - 25,000 - 25,000
------------ ------------ ------------ -------------
1,574,497 985,602 4,174,622 2,777,275
------------ ------------ ------------ -------------

Expenses:
Sales, marketing
and services to
licensees 257,066 132,668 738,549 489,726
Research, software
development and
support services 651,048 485,409 1,593,580 1,431,846
General and
administrative 339,965 367,696 855,437 1,003,217
Amortization 16,868 21,195 48,269 65,733
TSX Venture
Exchange Listing - - 170,710 -
------------ ------------ ------------ -------------
1,264,947 1,006,968 3,406,545 2,990,522
Restructuring
provision - - - 8,000
License agreement
termination
write-offs - - 110,423 60,317
------------ ------------ ------------ -------------
1,264,947 1,006,968 3,516,968 3,058,839
------------ ------------ ------------ -------------

Income (loss)
before income
taxes 309,550 (21,366) 657,654 (281,564)
------------ ------------ ------------ -------------

Income tax
provision
(recovery)
Current 140,972 7,243 309,836 17,375
Current -
re-domestication (94,005) - (94,005) -
Future - - (20,000) (20,047)
------------ ------------ ------------ -------------
46,967 7,243 195,831 (2,672)
------------ ------------ ------------ -------------

Net income (loss)
for the period 262,583 (28,609) 461,823 (278,892)

Retained earnings
(accumulated
deficit), beginning
of period (1,617,141) (1,472,882) (1,816,381) (1,222,599)
------------ ------------ ------------ -------------

Retained earnings
(accumulated
deficit), end
of period $ (1,354,558)$ (1,501,491)$ (1,354,558)$ (1,501,491)
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------

Net income (loss)
per share:
Basic $ 0.02 $ (0.00) $ 0.04 $ (0.03)
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------

Diluted $ 0.02 $ (0.00) $ 0.03 $ (0.03)
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------

Weighted average
number of common
shares
outstanding:
Basic 12,595,500 10,883,833 12,081,056 10,872,722
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------

Diluted 14,165,470 10,883,833 13,370,759 10,872,722
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------



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

Three-Months Ended Nine-Months Ended
------------------ ------------------
September 30 September 30
------------ -------------
2005 2004 2005 2004
------------ ------------ ------------ -------------
Cash flows from
operating
activities:
Net income (loss)
for the period $ 262,583 $ (28,609) $ 461,823 $ (278,892)
Adjustments to
reconcile net
income (loss) to
net cash provided
by operating
activities:
Stock option and
share expense 11,752 71,142 118,156 283,473
Amortization 16,868 21,195 48,269 65,733
Restructuring
provision - - - 8,000
License agreement
termination
write-offs - - 110,423 60,317
Future income
tax (recovery) - - (20,000) (20,047)
Changes in non-cash
working capital
items:
Accounts
receivable (205,905) 41,249 (416,556) (113,751)
Prepaid expenses,
deposits and
other assets (8,069) (1,927) 5,708 (8,577)
Accounts payable
and accrued
liabilities 122,776 (759) 76,706 (91,060)
Restructuring
reserve payments - (483) - (56,209)
Income taxes
recoverable /
payable 46,967 81,413 (71,555) 148,401
Deferred revenue 12,975 (8,975) 30,138 85,592
------------ ------------ ------------ -------------
Net cash provided
by operating
activities 259,947 174,246 343,112 82,980
------------ ------------ ------------ -------------

Cash flows from
investing
activities:
Purchases of
equipment (19,810) (11,110) (78,067) (19,201)
Proceeds on
disposal of
equipment - - - 1,509
------------ ------------ ------------ -------------
Net cash (used in)
investing
activities (19,810) (11,110) (78,067) (17,692)
------------ ------------ ------------ -------------

Cash flows from
financing
activities:
Proceeds from
issuance of
common shares 29,950 - 202,950 -
Repurchase of
common shares - - - (4,000)
------------ ------------ ------------ -------------
Net cash provided
by (used in)
investing
activities 29,950 - 202,950 (4,000)
------------ ------------ ------------ -------------

Net increase in
cash 270,087 163,136 467,995 61,288

Cash and cash
equivalents,
beginning of
period 906,805 266,712 708,897 368,560
------------ ------------ ------------ -------------

Cash and cash
equivalents,
end of period $ 1,176,892 $ 429,848 $ 1,176,892 $ 429,848
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------

Cash and cash
equivalents
consist of the
following:
Cash $ 1,176,892 $ 356,916 $ 1,176,892 $ 356,916
Cash equivalents - 72,932 - 72,932
------------ ------------ ------------ -------------
$ 1,176,892 $ 429,848 $ 1,176,892 $ 429,848
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------

Supplemental cash
flow activities:
Income taxes paid
/ (received) $ - $ - $ 287,386 $ (56,856)
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Interest paid $ - $ - $ - $ -
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------


(1) Management believes that EBITDA (earnings before interest, income taxes and amortization) is a useful supplemental measure of performance. However, EBITDA is not a recognized earnings measure under generally accepted accounting principles ("GAAP") and does not have a standardized meaning. Therefore, EBITDA may not be comparable to similar measures presented by other companies.



EBITDA is reconciled to net income as follows:

Three-Months Ended Nine-Months Ended
------------------ -----------------
September 30 September 30
------------ ------------
2005 2004 2005 2004
------------ ------------ ------------ ------------

Net income $ 262,583 $ (28,609) $ 461,823 $ (278,892)
Interest - - - -
Taxes 46,967 7,243 195,831 (2,672)
Amortization 16,868 21,195 48,269 65,733
------------ ------------ ------------ ------------
EBITDA $ 326,418 $ (171) $ 705,923 $ (215,831)
------------ ------------ ------------ ------------


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(2), 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.

(2) 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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