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Parlay Entertainment Announces Results for Q4 and Fiscal 2009

Thu, 04/22/2010 - 11:30am
The Associated Press

http://www.parlaygroup.com/ () —

All amounts in Canadian Dollars

Parlay Entertainment Inc. (TSX VENTURE: PEI), the world's leading supplier of Internet and TV bingo software solutions, today announced its results for the three and twelve-month periods ended December 31, 2009.

"2009 was a transitional year for Parlay with significant challenges but also the emergence of numerous opportunities. As a result of our divestiture in 2008, we commenced developing a strategy to replace recurring revenue which was lost as a result of that transaction" said Scott White, Parlay's Chief Executive Officer. "Given the significant consolidation in the online bingo sector, and the fact that some of our customers were part of that consolidation, timing was such that our business model could be expanded allowing us to move into the business of operating gaming platforms. Throughout 2009 we invested significant financial and human capital resources in the development of our Alderney and North American gaming platforms, which operate under the brand Parlay Games Services. Although these platforms are accelerating in terms of growth today, we generated very little return from this significant investment in 2009, resulting in a substantial loss and cash burn."

"With 2009 as our reformulation year," concluded Mr. White "we are pleased to report that we have in excess of 40 networked partner sites, which are either launched or launching within PGS. We have numerous prospective partner arrangements in various stages of development. With the market changing again because of additional consolidation, we are now in a unique position to offer services to various customers who are searching for new solutions in the bingo vertical. With a revised cost structure and a robust and envied technology platform, it will be our intention to supplement our traditional software licensing model throughout 2010 with the growth of PGS throughout the world. As we have outlined previously, our offering will be flexible and unique, fostering customer access into multiple software technologies offering multiple software vendors, both gaming and non-gaming products and multiple languages and currencies"

Parlay generates revenue from software licensing, installation and implementation fees and support services. Consolidated revenues were $0.8 million in Q4 2009 compared to $1.2 million in Q4 2008.

Expenses in Q4 2009 were $1.4 million, unchanged from $1.4 million in Q4 2008. Increased foreign exchange losses offset reduced compensation expenses.

A beneficial tax adjustment increased the tax recovery recorded in Q4 2009 by $0.4 million.

Net loss for the quarter was $0.06 million, or $(0.01) per diluted share, compared to net loss of $0.06 million, or $(0.00) per diluted share, in Q4 2008.

Consolidated revenues were $3.4 million for 2009 compared to $8.5 million in 2008. 2008 consolidated revenues included the proceeds from the divestiture which were non-recurring software license fees of $2.9 million.

Expenses in 2009 were $5.6 million, down from $7.7 million in 2008. The decrease represented reduced compensation expenses together with the absence of certain non-recurring expenses from 2008.

A beneficial tax adjustment increased the tax recovery recorded in 2009 by $0.4 million.

Net loss for 2009 was $1.4 million, or ($0.11) per diluted share, compared to a net income of $0.5 million, or $0.04 per diluted share, in 2008.

Parlay remains debt free and Parlay's cash balance at December 31, 2009 was $1.1 million. Corporate income tax refunds received (and to be received) in 2010 are estimated at $1.2 million. PARLAY ENTERTAINMENT INC. CONSOLIDATED BALANCE SHEETS (incorporated under the laws of the province of Ontario) in whole Canadian dollars (Audited) (Audited) December 31, December 31, ASSETS 2009 2008 ------------------------- Current assets: Cash $ 1,057,345 $ 3,226,615 Security deposit 84,590 - Accounts receivable: Trade, less allowance of approximately $61,000 597,802 820,974 ($108,000 -2008) GST receivable 26,611 18,185 Income taxes recoverable 1,211,233 - Prepaid expenses, deposits and other assets 214,573 184,075 Future income taxes - 225,972 -------------------------Total current assets 3,192,154 4,475,821 Equipment - net 129,671 95,492 Future income taxes, net of valuation allowance - 60,000 ------------------------- $ 3,321,825 $ 4,631,313 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 535,735 $ 555,492 Income taxes payable -59,819 Deferred revenue 390,093 280,364 -------------------------Total current liabilities 925,828 895,675 -------------------------Shareholders' equity: Common shares, an unlimited number of shares authorized, 12,649,265 shares issued and outstanding (12,585,765 -2008) 1,737,831 1,667,013 Contributed surplus 2,761,792 2,664,274 Accumulated other comprehensive income (loss) (356,615) (356,615) Retained earnings (accumulated deficit) (1,747,011) (239,034) ------------------------- 2,395,997 3,735,638 ------------------------- $ 3,321,825 $ 4,631,313 ------------------------- PARLAY ENTERTAINMENT INC. CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND RETAINED EARNINGS (ACCUMULATED DEFICIT) (in whole Canadian dollars, except for per share amounts) Three-Months Ended Twelve- Months Ended December 31 December 31 -------------------------------------------------- 2009 2008 2009 2008 -------------------------------------------------- (Unaudited) (Unaudited) (Audited) (Audited) Revenues: Royalties $ 510,538 $ 871,661 $ 2,552,304 $ 4,696,576 Installation and implementation fees 28,523 39,357 99,333 245,030 Software license fees 121,135 90,092 121,135 2,922,089 Support services 123,011 240,511 581,425 673,974 -------------------------------------------------- 783,207 1,241,621 3,354,197 8,537,669 -------------------------------------------------- Expenses: Sales, marketing and services to licensees 181,329 186,904 557,894 819,290 Research, software development and support services 850,816 921,607 3,429,082 4,221,373 General and administrative 274,703 427,042 1,273,747 1,648,360 Amortization 22,656 22,556 94,626 128,989 Foreign exchange (gain) loss 36,269 (171,145) 187,067 178,503 Restructuring - - 99,664 113,550 Transaction fees - - - 557,053 -------------------------------------------------- 1,365,773 1,386,964 5,642,080 7,667,118 -------------------------------------------------- Income (loss) before income taxes (582,566) (145,343) (2,287,883) 870,551 -------------------------------------------------- Income tax provision (recovery) Current (579,000) 27,151 (985,000) 469,401 Future 60,000 (112,011) 60,000 (96,759) -------------------------------------------------- (519,000) (84,860) (925,000) 372,642 -------------------------------------------------- Net income (loss) for the period $ (63,566) $ (60,483) $ (1,362,883) $ 497,909 Net income (loss) per share: Basic $ (0.01) $ (0 .00) $ (0.11) $ 0.04 -------------------------------------------------- Diluted $ (0.01) $ (0 .00) $ (0.11) $ 0.04 Weighted average number of common shares outstanding: Basic 12,515,932 12,673,098 12,346,432 13,034,557 --------------------------------------------------Diluted 12,515,932 12,673,098 12,346,432 13,372,949 -------------------------------------------------- PARLAY ENTERTAINMENT INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in whole Canadian dollars) Three -Months Ended Twelve -Months Ended --------------------------------------------------December 31 December 3 1 2009 2008 2009 2008 -------------------------------------------------- (Unaudited) (Unaudited) (Audited) (Audited) Net income (loss) for the period $ (63,566) $ (60,483) $ (1,362,883) $ 497,909 Changes in unrealized gains (losses) on translating the comparative consolidated financial statements of the Company for the nine- month period ended September 30, 2008 from the $U.S . to the Canadian dollar following the adoption of the Canadian dollar as the functional and reporting currency on October 1, 2008 (net of income taxes of nil). - - - 242,215 --------------------------------------------------Comprehensive income (loss) for the period $ (63,566) $ (60,483) $ (1,362,883) $ 740,124 -------------------------------------------------- PARLAY ENTERTAINMENT INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (in whole Canadian dollars) (Audited) Common Stock Contributed Shares Amount Surplus ------------------------------------ Balance December 31, 2007 13,012,265 $ 1,698,344 $ 2,413,286 Issuance of stock options - -250,988 Exercise of stock options 282,500 53,688 - Repurchase and cancellation of common shares (709,000) (85,019) - Other com prehensive income - 2008 - - - Net income - 2008 - - ------------------------------------- Balance December 31, 2008 12,585,765 1,667,013 2,664,274 Issuance of stock options - - 97,518 Exercise of stock options 527,500 129,469 - Repurchase and cancellation of common shares (464,000) (58,651) - Net loss - 2009 - - - ------------------------------------ Balance December 31, 2009 12,649,265 $ 1,737,831 $ 2,761,792 ------------------------------------ PARLAY ENTERTAINMENT INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (in whole Canadian dollars) (Audited) Accumulated Retained Other Earnings Comprehensive (Accumulated Income (Loss) Deficit) Total ------------------------------------------ Balance December 31, 2007 $ (598,830) $ (403,490) $ 3,109,310 Issuance of stock options - - 250,988 Exercise of stock options - - 53,688 Repurchase and cancellation of common shares - (333,453) (418,472) Other com prehensive income - 2008 242,215 - 242,215 Net income - 2008 -497,909 497,909 ------------------------------------------ Balance December 31, 2008 (356,615) (239,034) 3,735,638 Issuance of stock options - - 97,518 Exercise of stock options - - 129,469 Repurchase and cancellation of common shares - (145,094) (203,745) Net loss -2009 - (1,362,883) (1,362,883) ------------------------------------------ Balance December 31, 2009 $ (356,615) $ (1,747,011) $ 2,395,997 ------------------------------------------ PARLAY ENTERTAINMENT INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in whole Canadian dollars) Three-Months Ended Twelve- Months Ended -------------------------------------------------- December 31 December 31 2009 2008 2009 2008 -------------------------------------------------- (Unaudited) (Unaudited) (Audited) (Audited) Cash flows from operating activities: Net income (loss) for the period $ (63,566) $ (60,483) $ (1,362,883) $ 497,909 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Stock-based compensation expense 39,862 46,346 97,518 250,988 Amortization 22,929 22,556 94,899 128,989 Future income tax provision (recovery) 60,000 (112,011) 60,000 (96,759) Changes in non -cash working capital items: Security deposit - - (90,015) - Accounts receivable 360,331 228,751 207,383 701,351 Prepaid expenses, deposits and other assets 9,864 (23,359) (35,123) (55,457) Accounts payable and accrued liabilities 105,090 102,680 (15,588) (450,691) Income taxes recoverable / payable (579,000) 82 (1,045,080) 606,175 Deferred revenue (40,200) (191,378) 112,353 (7,711) -------------------------------------------------- Net cash provided by (used in) operating activities (84,690) 13,184 (1,976,536) 1,574,794 -------------------------------------------------- Cash flows from investing activities: Purchases of equipment (4,556) (6,890) (128,733) (13,541) Increase in accounts payable and accrued liabilities related to purchases of equipment 827 - 3,230 --------------------------------------------------- Net cash (used in) investing activities (3,729) (6,890) (125,503) (13,541) -------------------------------------------------- Cash flows from financing activities: Repurchase of common shares - (170,655) (203,745) (418,472) Proceeds from issuance of common shares 101,222 - 129,469 53,688 --------------------------------------------------Net cash provided by (used in) financing activities 101,222 (170,655) (74,276) (364,784) -------------------------------------------------- Effect of changes in foreign currency exchange rates on cash (462) 38,754 7,045 219,771 --------------------------------------------------Net increase (decrease) in cash 12,341 (125,607) (2,169,270) 1,416,240 Cash, beginning of period 1,045,004 3,352,222 3,226,615 1,810,375 -------------------------------------------------- Cash, end of period $ 1,057,345 $ 3,226,615 $ 1,057,345 $ 3,226,615 Supplemental cash flow activities: Income taxes paid $ - $ - $ 399,831 $ - --------------------------------------------------Income taxes (received) $ - $ - $ (339,300) $ (184,254) -------------------------------------------------- Interest paid (received) $ 315 $ (6,229) $ (20,316) $ (39,169) --------------------------------------------------

(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, 2009 2008 2009 2008 -------------------------------------------------- Net incom e (loss) $ (63,566) $ (60,483) $ (1,362,883) $ 497,909 Interest 315 (6,229) (20,316) (39,169) Taxes (519,000) (84,860) (925,000) 372,642 Amortization 22,656 22,556 94,626 128,989 -------------------------------------------------- EBITDA $ (559,595) $ (129,016) $ (2,213,573) $ 960,371 ---------------------------------------------------------------------------------------------------- Revenue $ 783,207 $ 1,241,621 $ 3,354,197 $ 8,537,669 ---------------------------------------------------------------------------------------------------- % -71% -10% -66% 11% ----------------------------------------------------------------------------------------------------

About Parlay Entertainment

Parlay Entertainment Inc. is one of the pioneers and technology leaders in the online gaming industry. As the inventor and holder of Internet bingo2 patents, Parlay was the first company in the world to develop and deploy a commercial Internet bingo product. Parlay offers its customers a number of technology solutions which include the commercial deployment of its award winning software along with value-added Parlay Game Services managed solutions in Alderney and North America. PGS includes hosting services, shared games and, in the case of PGS Alderney, pooled liquidity across the European marketplace. Some of the world's best known brands use Parlay solutions. Parlay's head offices are located in Oakville, Canada. Parlay is licensed or certified to conduct business in Alderney, the United Kingdom, Isle of Man and Malta.

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