Parlay Entertainment Announces Record Financial Results for Q2 2006

12 August 2006

All amounts in United States Dollars

Parlay Entertainment Inc. (TSX VENTURE: PEI), the world's leading supplier of Internet bingo solutions, today announced record results for the three and six-month periods ended June 30, 2006.

Highlights for the second quarter of fiscal 2006 include:

- New corporate record for revenue at $2,203,140, up 9% from the prior record for Q1 2006 and up 72% from Q2 2005.

- Seventh sequential new corporate record for royalty revenue at $2,007,908, up 7% from the prior record for Q1 2006 and up 65% from Q2 2005.

- New corporate record for net income at $412,663 or $0.03 per share, fully diluted, up from $95,379 in Q2 2005.

- EBITDA(1) increased to $704,750, up from $143,009 in Q2 2005 and EBITDA(1) margin increased to 32% from 11% in Q2 2005.

Highlights for the first six months of fiscal 2006 include:

- New corporate record for revenue at $4,216,358, up 62% from the prior record for 2005.

- New corporate record for royalty revenue at $3,876,794, up 65% from the prior record for 2005.

- New corporate record for net income at $704,324 or $0.05 per share, fully diluted, up from $199,240 recorded in 2005.

- EBITDA(1) increased to $1,217,322 from $379,505 in 2005 and EBITDA(1) margin increased to 29% from 15% in 2005.

- Established a new corporate record for cash at $2.1 million, up 63% from December 31, 2005.

Achievements for the first half of 2006 include:

- Existing bingo network, St. Minver Limited, launches additional network partners with 18 in place at June 30, 2006, including Butlins and Littlewoods bingo.

- Existing bingo network, The Gaming Network Limited, adds additional network partners to their network with 12 in place at June 30, 2006, including the recently announced launch of Paddy Power's bingo offering.

- Release of Parlay 4, the latest version of Parlay's award-winning online bingo product. The release includes many additions and enhancements to Parlay's software suite, which is already the most popular Internet bingo technology in the world.

- Appointment of James S. Mutter as a new independent member of the board of directors.

"While we are pleased with our record financial results for Q2 2006, as they were in line with our budget and our expectations, we acknowledge that the World Cup held back additional royalty growth from existing customers. We also observed that the World Cup delayed two new customer launches, which impacted on additional royalty revenue from these new sources," said Scott F. White, President and CEO.

"Our business continues to expand," continued Mr. White, "with our award winning technology now licensed by 41 direct licensees and used by some 30 network partners. Some of these new licensees, and new network partners, will add to royalty, installation, support and professional services revenue commencing in Q3 2006. As a result of our revenue growth, we added nine new staff in Q2 2006. Our staffing levels will increase marginally in the short term to give us the capacity to fulfill our obligation to develop and deliver leading edge software. With our cash position climbing to more than $2.1 million at the end of Q2, we now have adequate cash to consider investments in new business opportunities, new technologies and people, which we expect will generate a return in late 2006. We continue to be very excited with Parlay's prospects and the prospects of online bingo in general."

Parlay generates revenue from software licensing, installation fees and support services. Consolidated revenues increased to $2.2 million in Q2 2006 from $1.3 million in Q2 2005 or 72% 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 Q2 2006 were $1.5 million, up from $1.2 million in Q2 2005. The increase represented the impact of higher compensation costs and higher costs to support licensees offset by the absence of certain non-recurring costs from Q2 2005.

Net income for the quarter was $0.4 million, or $0.03 per diluted share, compared to $0.1 million, or $0.01 per diluted share in Q2 2005.

Consolidated revenues increased to $4.2 million in the first half of 2006 from $2.6 million in the first half of 2005 or 62% period over period. The results represent continuing growth across Parlay's portfolio of licensees and the impact of new licensees and network partners during the first half of 2006.

Expenses in the first half of 2006 were $3.1 million, up from $2.3 million in the first half of 2005. The increase represented the impact of higher compensation costs and higher costs to support licensees offset by the absence of certain non-recurring costs from the first half of 2005.

Net income for the first half of 2006 was $0.7 million, or $0.05 per diluted share, compared to $0.2 million, or $0.02 per diluted share in the first half of 2005.

Parlay remains debt free and Parlay's cash balance at June 30, 2006 was $2.1 million.

In addition, prior to June 30, 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, of approximately $250,000, for these incentives 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.

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 2006 2005 -------------- ------------ Current assets: Cash $ 2,078,021 $ 1,272,510 Accounts receivable: Trade, less allowance of approximately $235,000 1,568,284 1,066,166 ($297,000 - 2005) Other 17,782 47,306 Income taxes recoverable - 228,077 Prepaid expenses, deposits and other assets 117,063 94,261 -------------- ------------ Total current assets 3,781,150 2,708,320

Equipment - net 253,042 210,540 Future income tax asset 40,000 40,000 -------------- ------------ $ 4,074,192 $ 2,958,860 -------------- ------------ -------------- ------------ LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities: Accounts payable and accrued liabilities $ 666,286 $ 533,877 Income taxes payable 393,869 379,789 Deferred revenue 223,173 262,775 -------------- ------------ Total current liabilities 1,283,328 1,176,441 -------------- ------------ Shareholders' equity: Common shares, an unlimited number of shares authorized, 13,174,515 shares issued and outstanding (12,728,265 - 2005) 1,421,489 1,206,876 Contributed surplus 1,823,899 1,734,391 Retained earnings (accumulated deficit) (454,524) (1,158,848) -------------- ------------ 2,790,864 1,782,419 -------------- ------------ $ 4,074,192 $ 2,958,860 -------------- ------------ -------------- ------------

PARLAY ENTERTAINMENT INC. CONSOLIDATED STATEMENTS OF INCOME 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 2006 2005 2006 2005 --------------- ------------- ------------ ------------

Revenues: Royalties $ 2,007,908 $ 1,218,328 $ 3,876,794 $ 2,355,302 Installation fees 42,806 34,292 91,431 159,133 Support services 152,426 25,166 248,133 85,690 --------------- ------------- ------------ ------------ 2,203,140 1,277,786 4,216,358 2,600,125 --------------- ------------- ------------ ------------

Expenses: Sales, marketing and services to licensees 347,734 235,686 512,192 481,483 Research, software development and support services 899,520 490,126 1,864,084 942,532 General and administrative 251,136 230,162 622,760 515,472 Amortization 31,074 16,532 55,314 31,401 TSX Venture Exchange Listing - 68,380 - 170,710 --------------- ------------- ------------ ------------ 1,529,464 1,040,886 3,054,350 2,141,598 License agreement termination write-off - 110,423 - 110,423 --------------- ------------- ------------ ------------ 1,529,464 1,151,309 3,054,350 2,252,021 --------------- ------------- ------------ ------------

Income before income taxes 673,676 126,477 1,162,008 348,104 --------------- ------------- ------------ ------------

Income tax provision (recovery) Current 261,013 51,098 457,684 168,864 Future - (20,000) - (20,000) --------------- ------------- ------------ ------------ 261,013 31,098 457,684 148,864 --------------- ------------- ------------ ------------

Net income for the period 412,663 95,379 704,324 199,240

Retained earnings (accumulated deficit), beginning of period (867,187) (1,712,520) (1,158,848) (1,816,381) --------------- ------------- ------------ ------------

Retained earnings (accumulated deficit), end of period $ (454,524) $ (1,617,141) $ (454,524) $ (1,617,141) --------------- ------------- ------------ ------------ --------------- ------------- ------------ ------------

Net income per share: Basic $ 0.03 $ 0.01 $ 0.05 $ 0.02 --------------- --------------------------- ------------ --------------- --------------------------- ------------ Diluted $ 0.03 $ 0.01 $ 0.05 $ 0.02

--------------- --------------------------- ------------ --------------- --------------------------- ------------

Weighted average number of common shares outstanding: Basic 13,144,932 12,172,167 12,985,348 11,823,833 --------------- ------------- ------------ ------------ --------------- ------------- ------------ ------------ Diluted 14,516,228 13,527,156 14,364,904 13,002,726 --------------- ------------- ------------ ------------ --------------- ------------- ------------ ------------

PARLAY ENTERTAINMENT INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in whole U.S. dollars) (Unaudited) Three-Months Ended Six-Months Ended June 30 June 30 2006 2005 2006 2005 ----------- --------- ---------- --------

Cash flows from operating activities: Net income for the period $ 412,663 $ 95,379 $ 704,324 $ 199,240 Adjustments to reconcile net income to net cash provided by operating activities: Stock option and share expense 42,446 8,489 89,508 106,404 Amortization 31,074 16,532 55,314 31,401 Loss on disposal of fixed assets 2,158 - 2,158 - License agreement termination write-off - 110,423 - 110,423 Future income tax (recovery) - (20,000) - (20,000) Changes in non-cash working capital items: Accounts receivable (179,849) (47,873) (472,594) (191,116) Prepaid expenses, deposits and other assets 39,257 30,929 (22,802) 13,777 Accounts payable and accrued liabilities 170,867 13,449 128,118 (46,070) Income taxes recoverable / payable 452,770 51,098 242,157 (118,522) Deferred revenue (14,250) 69,493 (39,602) (2,372) ----------- --------- ---------- -------- Net cash provided by operating activities 957,136 327,919 686,581 83,165 ----------- --------- ---------- --------

Cash flows from investing activities: Purchases of equipment (57,146) (50,062) (99,974) (58,257) Increase (decrease) in accounts payable and accrued liabilities related to purchases of equipment (11,257) - 4,291 - ----------- --------- ---------- -------- Net cash (used in) investing activities (68,403) (50,062) (95,683) (58,257) ----------- --------- ---------- --------

Cash flows from financing activities: Proceeds from issuance of common shares 159,529 173,000 214,613 173,000 ----------- --------- ---------- -------- Net cash provided by investing activities 159,529 173,000 214,613 173,000 ----------- --------- ---------- --------

Net increase in cash 1,048,262 450,857 805,511 197,908

Cash, beginning of period 1,029,759 455,948 1,272,510 708,897 ----------- --------- ---------- --------

Cash, end of period $2,078,021 $ 906,805 $ 2,078,021 $ 906,805 ----------- --------- ---------- -------- ----------- --------- ---------- -------- Supplemental cash flow activities: Income taxes paid / (received) $ (193,257)$ - $ 213,972 $ 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 Six -Months Ended June 30, June 30 2006 2005 2006 2005 ------------ ------------- ------------ ---------

Net income $ 412,663 $ 95,379 $ 704,324 $ 199,240 Interest - - - - Taxes 261,013 31,098 457,684 148,864 Amortization 31,074 16,532 55,314 31,401 ------------ ------------- ------------ --------- EBITDA $ 704,750 $ 143,009 $ 1,217,322 $ 379,505 ------------ ------------- ------------ --------- ------------ ------------- ------------ --------- Revenue $ 2,203,140 $ 1,277,786 $ 4,216,358 $2,600,125 ------------ ------------- ------------ --------- ------------ ------------- ------------ --------- % 32% 11% 29% 15% ------------ ------------- ------------ ----------

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. 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 has an eight year proven track record built on the success of our clients: In 2005, more than 2.8 players wagered nearly $2 billion USD on gaming sites that use Parlay software. 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.

Contacts: Parlay Entertainment Inc. Scott White President & CEO +1 (905) 337-6505 swhite@parlaygroup.com

Parlay Entertainment Inc. David Callander CFO +1 (905) 337-6516 dcallander@parlaygroup.com www.parlaygroup.com

SOURCE: Parlay Entertainment Inc.

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