Parlay Entertainment Inc.
TSX VENTURE : PEI

Parlay Entertainment Inc.

March 05, 2007 20:14 ET

Parlay Entertainment Announces YOY Revenue Increase of 52%

Global leader in Internet bingo software increases YOY cash reserves by 146% ending the year with US$3.1 million.

OAKVILLE, ONTARIO--(CCNMatthews - March 5, 2007) -

All amounts of United States Dollars

Parlay Entertainment Inc. (TSX VENTURE:PEI), the world's leading supplier of Internet bingo solutions, today announced its results for the three and twelve-month periods ended December 31, 2006.

"2006 was the best year in Parlay's corporate history," said Mr. Scott F. White, President and CEO. "We achieved or exceeded all of the key objectives set for 2006. Historic levels of revenue, earnings and cash generated were realized primarily by our growth in Europe and the United Kingdom. While being first movers in the UK, and participating in the explosive growth of Internet bingo in anticipation of UK regulation in 2007, we also saw licensees and partners in continental Europe test and softly enter Internet bingo. We expect additional explosive penetration from these and other jurisdictions in 2007 and beyond, which will continue to increase the size of the Internet bingo marketplace."

"It goes without saying that other markets experienced challenges resulting from the recent passage of legislation in the United States which has reduced the e-commerce choices available to our licensees," continued Mr. White. "Although some customers have been negatively impacted by these events, we also see substantial first mover opportunity to service other Internet bingo business models in North America, which we are presently incubating for adoption later in 2007. Some of the opportunities we will target will include key suppliers, governments and Native Americans, which are not impacted by recent legislative changes in the United States."

"In addition to these North American-facing opportunities," commented Mr. White, "Parlay's licensees in Europe, the UK and Latin America, will continue to contribute increasing percentages of our royalty revenue. We are delighted with our record performance in 2006. We increased total revenues 52% year over year and established a new corporate record for both total revenue and net income. Our net income increased 88% year over year, which demonstrates the scalability of our business model. We still believe that we are at the very early stages of bingo's emergence on the Internet. Because Internet bingo is a game played primarily for entertainment and community participation there are opportunities available to suppliers such as Parlay that are not well understood by traditional Internet gaming software suppliers. We understand that Internet bingo has excellent revenue generating components which are outside the traditional Internet gambling arena. All of these new opportunities are perfectly legal in most jurisdictions."

Highlights for fiscal 2006 include:

- New corporate record for revenue at $9,028,079, up 52% from the prior record for 2005.

- New corporate record for royalty revenue at $7,813,982, up 43% from the prior record for 2005.

- New corporate record for net income at $1,238,846 or $0.09 per share, fully diluted, up from $710,153 recorded in 2001.

- EBITDA(1) increased to $2,192,804 from $869,425 in 2005 and EBITDA(1) margin increased to 24% from 15% in 2005.

- Established a new corporate record for cash at $3.1 million, up 146% from December 31, 2005.


Results for the fourth quarter of fiscal 2006 include:

- Total revenue at $2,164,053, up 22% from Q4 2005.

- Royalty revenue at $1,999,434, up 23% from Q4 2005.

- Royalty revenue sequential increase of $61,680 or 3% from Q3 2006.

- Net income at $32,591 or $0.00 per share, fully diluted, down from $195,710 in Q4 2005.

- EBITDA(1) decreased to $110,459, from $163,502 in Q4 2005 and EBITDA(1) margin decreased to 5% from 9% in Q4 2005.

Achievements for fiscal 2006 include:

- Existing bingo network, St. Minver Limited, launches additional network partners with 32 in place at December 31, 2006, including Butlins and Littlewoods bingo. St. Minver launches Swedish language offering transacting in Kronor.

- Existing bingo network, The Gaming Network Limited, adds additional network partners to their network with 15 in place at December 31, 2006, including the recently announced launch of Paddy Power's bingo offering.

- Unibet International Limited, one of the largest privately-owned gambling operators in the European market with 1,340,000 customers in over 100 countries, launched Unibet Bingo.

- Parlay licensee Euro Gaming Limited, owner of Bingos.co.uk, was named Bingo Operator of the Year at the annual eGaming Awards.

- Release of Parlay 4.2, the latest version of Parlay's award-winning online bingo product.

- Appointment of Mr. Steve Cook as European Managing Director to enhance Parlay's presence in the UK and European marketplaces.

- Development and successful achievement of a Company-wide performance-based compensation program.

- Expekt.com launches its European facing bingo site to complement its existing on-line gaming offerings.

Parlay generates revenue from software licensing, installation fees and support services. Consolidated revenues increased to $2.2 million in Q4 2006 from $1.8 million in Q4 2005 or 22% quarter over quarter. The results represent continuing growth across Parlay's portfolio of licensees and the impact of new licensees and network partners during the quarter.

Expenses in Q4 2006 were $2.1 million, up from $1.6 million in Q4 2005. The increase represented the impact of higher compensation costs, higher G & A expenses and higher costs to support licensees offset by the absence of certain non-recurring costs from Q4 2005.

Net income for the quarter was $0.03 million, or $0.00 per diluted share, compared to $0.2 million, or $0.01 per diluted share in Q4 2005.

Consolidated revenues increased to $9.0 million in 2006 from $5.9 million in 2005 or 52% year over year. The results represent continuing growth across Parlay's portfolio of licensees and the impact of new licensees and network partners in 2006.

Expenses in 2006 were $7.0 million, up from $5.1 million in 2005. The increase represented the impact of higher compensation costs, higher G & A expenses and higher costs to support licensees together with the costs associated with the proposed business combination with Chartwell Technology Inc. offset by the absence of certain non-recurring costs from 2005.

Net income for 2006 was $1.2 million, or $0.09 per diluted share, compared to $0.7 million, or $0.05 per diluted share in 2005.

Parlay remains debt free and Parlay's cash balance at December 31, 2006 was $3.1 million.

In 2006, the Company submitted claims for Scientific Research & Experimental Development income tax incentives, including the cost of fixed assets involved in such activities. The after tax benefit to the Company for these incentives, to a maximum of approximately $250,000, is subject to review and approval by the Canada Revenue Agency and, accordingly, the benefit will only be recorded once the Company receives the acceptance of the claims.

"We have announced synergistic partnerships in 2006, such as our partnership with Orbis," concluded Mr. White. "We are developing additional partnerships with suppliers to the Internet and land-based bingo markets, which we hope to announce in the coming months. Most importantly, we observe that the realization of our expectations and goals in 2006 has been driven by the efforts of our great team at Parlay, who have grown with our business to become world authorities in online bingo. We are delighted with their efforts and we acknowledge their dedication to the growth of Internet bingo and the enhancement of value for our shareholders."



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

in whole U.S. dollars
---------------------
(Audited) (Audited)
December 31, December 31,
ASSETS 2006 2005
------------ ------------

Current assets:
Cash $ 3,129,216 $ 1,272,510
Accounts receivable:
Trade, less allowance of approximately
$118,000 ($297,000 - 2005) 1,307,402 1,066,166
Other 7,943 47,306
Income taxes recoverable - 228,077
Prepaid expenses, deposits and other assets 138,211 94,261
------------ ------------
Total current assets 4,582,772 2,708,320

Equipment - net 278,211 210,540
Future income tax asset 40,000 40,000
------------ ------------

$ 4,900,983 $ 2,958,860
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable and accrued liabilities $ 751,026 $ 533,877
Income taxes payable 592,976 379,789
Deferred revenue 225,801 262,775
------------ ------------

Total current liabilities 1,569,803 1,176,441
------------ ------------
------------ ------------

Shareholders' equity:
Common shares, an unlimited number of
shares authorized, 13,153,015 shares issued
and outstanding (12,728,265 - 2005) 1,436,459 1,206,876
Contributed surplus 1,898,268 1,734,391
Retained earnings (accumulated deficit) (3,547) (1,158,848)
------------ ------------
3,331,180 1,782,419
------------ ------------

$ 4,900,983 $ 2,958,860
------------ ------------
------------ ------------

\
PARLAY ENTERTAINMENT INC.
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY
(in whole U.S dollars)
(Audited)
Retained
Earnings
Common Stock Contributed (Accumulated
Shares Amount Surplus Deficit) Total
--------------------------------------------------------------
Balance
December
31,
2004 11,475,500 $ 927,292 $ 1,599,000 $ (1,816,381) $ 709,911

Issuance of
common
shares 62,765 36,834 - - 36,834

Issuance of
stock
options - - 135,391 - 135,391

Exercise of
Stock
options 1,190,000 242,750 - - 242,750

Net income -
2005 - - - 657,533 657,533
--------------------------------------------------------------

Balance
December
31,
2005 12,728,265 1,206,876 1,734,391 (1,158,848) 1,782,419

Issuance of
stock
options - - 163,877 - 163,877

Exercise of
stock
options
and
warrants 596,250 248,313 - - 248,313

Repurchase
and
cancell-
ation
of common
shares (171,500) (18,730) - (83,545) (102,275)

Net income -
2006 - - - 1,238,846 1,238,846
--------------------------------------------------------------
Balance
December
31, 2006 13,153,015 $ 1,436,459 $ 1,898,268 $ (3,547) $ 3,331,180
--------------------------------------------------------------
--------------------------------------------------------------


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

Three-Months Ended Twelve-Months Ended
------------------- --------------------
December 31 December 31
------------ -------------
2006 2005 2006 2005
----------- ------------ ----------- --------------
----------- ------------ ----------- --------------
(Unaudited) (Unaudited) (Audited) (Audited)
Revenues:
Royalties $ 1,999,434 $ 1,628,060 $ 7,813,982 $ 5,467,088
Installation fees 45,935 60,971 186,419 251,983
Software license fee - - 480,000 -
Support services 118,684 84,879 547,678 229,461
----------- ------------ ------------ -------------
2,164,053 1,773,910 9,028,079 5,948,532
----------- ------------ ------------ -------------

Expenses:
Sales, marketing
and services
to licensees 301,383 276,413 1,046,428 1,014,962
Research, software
development and
support
services 1,216,929 682,031 4,123,850 2,275,611
General and
administrative 535,282 371,674 1,497,710 1,227,111
Amortization 38,192 20,113 132,220 68,382
Net Chartwell
business
combination expenses - - 167,287 -
TSX Venture Exchange
Listing - - - 170,710
----------- ------------ ------------ --------------
2,091,786 1,350,231 6,967,495 4,756,776
License agreement
termination
write-off - (50,000) - 60,423
Severance
arrangement for
former officer - 330,290 - 330,290
----------- ------------ ------------ -------------
2,091,786 1,630,521 6,967,495 5,147,489
----------- ------------ ------------ -------------
Income before income
taxes 72,267 143,389 2,060,584 801,043
----------- ------------ ------------ -------------

Income tax provision
(recovery)
Current 39,676 67,860 821,738 377,696
Current -
re-domestication - (120,181) - (214,186)
Future - - - (20,000)
----------- ------------ ------------ --------------
39,676 (52,321) 821,738 143,510
----------- ------------ ------------ --------------
Net income for the
period 32,591 195,710 1,238,846 657,533

Retained earnings
(accumulated
deficit),
beginning of period 47,407 (1,354,558) (1,158,848) (1,816,381)
Repurchase and
cancellation
of common shares (83,545) - (83,545) -
----------- ------------ ------------ --------------

Retained earnings
(accumulated
deficit),
end of period $ (3,547) $(1,158,848) $ (3,547) $ (1,158,848)
----------- ------------ ------------ --------------
----------- ------------ ------------ --------------
Net income per
share:
Basic $ 0.00 $ 0.02 $ 0.09 $ 0.05
----------- ------------ ------------ --------------
----------- ------------ ------------ --------------
Diluted $ 0.00 $ 0.01 $ 0.09 $ 0.05
----------- ------------ ------------ --------------
----------- ------------ ------------ --------------
Weighted average
number of
common
shares outstanding:
Basic 13,234,015 12,683,088 13,108,348 12,081,056
----------- ------------ ------------ --------------
----------- ------------ ------------ --------------
Diluted 14,064,245 14,227,433 14,272,700 13,370,759
----------- ------------ ------------ --------------
----------- ------------ ------------ --------------

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

Three-Months Ended Twelve-Months Ended
------------------ -------------------
December 31 December 31
----------- -----------
2006 2005 2006 2005
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Audited) Audited)
Cash flows from
Operating activities:
Net income for the period $ 32,591 $ 195,710 $ 1,238,846 $ 657,533
Adjustments to
Reconcile net
income to
net cash provided
by operating
activities:
Stock option and share
expense 31,012 54,069 163,877 172,225
Amortization 38,192 20,113 132,220 68,382
Loss on disposal of
equipment - 1,010 2,158 1,010
License agreement
termination
write-off (recovery) - (50,000) - 60,423
Future income tax
(recovery) - - - (20,000)
Changes in non-cash
working
capital items:
Accounts receivable 74,445 (126,189) (201,873) (509,467)
Prepaid expenses,
Deposits and
other assets 50,975 (23,447) (43,950) (17,739)
Accounts payable and
accrued
liabilities 80,509 71,225 160,264 147,931
Income taxes
recoverable /
payable (58,268) 67,803 441,264 (123,933)
Deferred revenue 22,147 16,281 (36,974) 13,141
----------- ----------- ------------ ----------
Net cash provided by
operating
activities 271,603 226,575 1,855,832 449,506
----------- ----------- ------------ ----------

Cash flows from investing
activities:
Purchases of equipmen (26,301) (122,392) (202,049) (200,459)
Increase in accounts
payable
and accrued
liabilities related to
purchases of equipment 8,798 69,735 21,014 69,735
----------- ----------- ------------ ----------
Cash used for purchases of
equipment (17,503) (52,657) (181,035) (130,724)
Proceeds on disposal of
equipment - 2,081 - 2,081
----------- ----------- ------------- ---------
Net cash (used in)
investing
activities (17,503) (50,576) (181,035) (128,643)
----------- ----------- ------------- ---------

Cash flows from financing
activities:
Repurchase of common shares (102,275) - (102,275) -
Increase in accounts
Payable and
accrued liabilities
related to repurchase
of common shares 35,871 - 35,871 -
----------- ----------- ------------ ----------
Cash used for repurchase
of common shares (66,404) - (66,404) -
Proceeds from issuance of
common shares - 39,800 248,313 242,750
----------- ----------- ----------- -----------
Net cash provided by
(used in) financing
activities (66,404) 39,800 181,909 242,750
----------- ----------- ----------- -----------
Net increase in cash 187,696 215,799 1,856,706 563,613
Cash, beginning of period 2,941,520 1,056,711 1,272,510 708,897
----------- ----------- ----------- -----------
Cash, end of period $3,129,216 $ 1,272,510 $ 3,129,216 $1,272,510
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Supplemental cash flow
activities:
Income taxes paid /
(received) $ 96,944 $ - $ 375,999 $ 287,386
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
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 Twelve-Months Ended
------------------- --------------------
December 31, December 31,
------------ ------------
2006 2005 2006 2005
----------- ------------ -------------- ------------

Net income $ 32,591 $ 195,710 $ 1,238,846 $ 657,533
Interest - - - -
Taxes 39,676 (52,321) 821,738 143,510
Amortization 38,192 20,113 132,220 68,382
----------- ------------ -------------- ------------
EBITDA $ 110,459 $ 163,502 $ 2,192,804 $ 869,425
----------- ------------ -------------- ------------
----------- ------------ -------------- ------------

Revenue $ 2,164,053 $ 1,773,910 $ 9,028,079 $ 5,948,532
----------- ------------ -------------- ------------
----------- ------------ -------------- ------------
% 5% 9% 24% 15%
----------- ------------ -------------- ------------
----------- ------------ -------------- ------------


About Parlay Entertainment

Parlay Entertainment Inc. is the world's leading developer and 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. Parlay bingo is available in both 75-number and 90-number versions and is complemented by a full suite of lottery and casino games. Our multi-player, multi-platform technology is used to power more online bingo sites than any other software provider in the world. Some of the world's best known brands use Parlay Bingo solutions, including Virgin, Yahoo!, MSN and Littlewoods Gaming. Parlay is headquartered in Oakville, Canada with offices in Bridgetown, Barbados, and Valletta, Malta.

(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

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.

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

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