Optimal Group Announces Second Quarter 2009 Results

• Press Release
• Source: Optimal Group Inc.
• On 8:01 am EDT, Friday August 7, 2009

MONTREAL, Aug. 7, 2009 (GLOBE NEWSWIRE) -- Optimal Group Inc. (Nasdaq:OPMR - News) today announced its financial results for the second quarter ended June 30, 2009. All references are in U.S. dollars.

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Symbol	Price	Change
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{"s" : "opmr","k" : "c10,l10,p20,t10","o" : "","j" : ""}

Revenues for the second quarter ended June 30, 2009 were $6.5 million compared to $15.5 million for the second quarter ended June 30, 2008.

Net loss in the second quarter ended June 30, 2009 was $14.6 million or $(0.57) per share compared to a net loss of $48.4 million or $(1.87) per share in the second quarter ended June 30, 2008.

The level of revenues and net loss in the second quarter is directly attributable to the seasonally low level of revenues generated by WowWee in an industry that is seasonal by nature and where a significant portion of sell-in, revenues and corresponding cash flow are typically generated in the second half of the year. The year-over-year decrease in revenues in the second quarter is attributed primarily to the unfavourable retail environment and the desire by retailers to reduce inventories as well as changes in our distribution model whereby a larger proportion of sales are made directly to consumers and retailers (as opposed to third party distributors), who in turn are issuing purchase orders only later in the buying season. More generally, the first half of the year is the period of lowest shipments and revenues for WowWee and the industry in which it operates and, therefore, will result in weak financial results due to fixed and variable costs that are incurred.

At June 30, 2009, the Company had cash and cash equivalents of $23.9 million or $0.93 per issued and outstanding share; working capital of $19.9 million; and shareholders' equity of $68.0 million, or $2.64 per issued and outstanding share.

Optimal expects revenues to remain under pressure in 2009 as a result of continuing retail softness driven by a continued pull-back in consumers' willingness to spend and retailers' desire to reduce inventories, weakening foreign exchange in international markets, and the sale of fewer entertainment-related products.

About Optimal Group

Optimal Group Inc. has operated and, through various subsidiaries, has actively managed a variety of businesses.

Optimal Group Inc. currently operates:

The WowWee group of companies, with operations in Hong Kong, Carlsbad, California, Brussels, Belgium and Montreal, Quebec. WowWee Group Limited, based in Hong Kong, is a leading designer, developer, marketer and distributor of technology-based consumer robotic, toy and entertainment products.

For more information about Optimal, please visit the Company's website at www.optimalgrp.com.

The Optimal Group logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6467

Cautionary Statements Regarding Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Words such as "expects", "intends", "anticipates", "plans", "believes", "seeks", "estimates", or variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements include, but are not limited to, statements about our current expectations with respect to our future growth strategies, results, opportunities and prospects, competitive position and industry environment. These forward-looking statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities, or those of the markets we serve, to differ materially from those expressed in, or implied by, these forward-looking statements, including:

 * existing and future governmental regulations and disputes with
   governmental authorities;
 * general economic, legal and business conditions in the markets we
   serve;
 * our ability to continue to satisfy Nasdaq's conditions for
   continued listing of our common shares on The NASDAQ Global Market;
 * consumer confidence in the security of financial information
   transmitted via the Internet;
 * levels of consumer and merchant fraud, disputes between consumers
   and merchants and merchant insolvency;
 * liability for merchant chargebacks;
 * our ability to safeguard against breaches of privacy and security
   when processing electronic transactions and use of our payments
 * systems for illegal purposes;
 * the imposition of and our compliance with rules and practice
   procedures implemented by credit card associations;
 * our ability to protect our intellectual property;
 * our relationships with our suppliers and the banking associations
   that we rely upon to process our electronic transactions;
 * disruptions in the function of our electronic payments systems and
   technological defects;
 * our ability to complete, integrate and benefit from acquisitions,
   divestitures, joint ventures and strategic alliances;
 * our ability to retain key personnel;
 * currency exchange rate fluctuations;
 * while we believe that our cash and cash equivalents will be
   adequate to meet our operating needs for at least the next 12
   months, our existing cash and cash equivalents could prove to be
   inadequate to meet our funding requirements;
 * our ability to successfully implement our strategies for our WowWee
   business;
 * changing consumer preferences for electronics and play products;
 * the seasonality of retail sales;
 * concentration among our major retail customers for the products of
   our WowWee business;
 * economic, social and political conditions in China, where WowWee's
   products are manufactured;
 * the price and supply of raw materials used to manufacture WowWee's
   products;
 * product liability claims and product recalls;
 * increased competition;
 * litigation; and
 * the factors described under Item 1A "Risk Factors" in our Annual
   Report on Form 10-K for the year ended December 31, 2008.

There may be additional risks and uncertainties and other factors that we do not currently view as material or that are not necessarily known. The forward-looking statements made in this document are only made as of the date of this document.

Except as required by applicable securities laws, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changes in circumstances or any other reason after the date of this press release.

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements to encourage companies to provide prospective information about their companies without fear of litigation. We are relying on the "safe harbor" provisions of the Private Securities Litigation Reform Act in connection with the forward-looking statements included in this press release.

Condensed Consolidated Balance Sheets, Condensed Statements of Operations and Comprehensive Loss and Condensed Statements of Cash Flows follow:

 OPTIMAL GROUP INC.
 Condensed Consolidated Balance Sheets

 June 30, 2009 and December 31, 2008
 (expressed in thousands of U.S. dollars)

 ---------------------------------------------------------------------
                                               June 30,   December 31,
                                                   2009         2008
 ---------------------------------------------------------------------
                                              (Unaudited)    (Audited)

 Assets

 Current assets:
   Cash and cash equivalents                 $    23,871  $    32,849
   Short-term investments                             --        6,296
   Accounts and other receivables (net of
    allowance for doubtful accounts of $470;
    2008 - $758)                                   8,374       24,169
   Current portion of balance of sale
    receivable                                     2,221           --
   Inventories                                    22,716       19,364
   Prepaid expenses and deposits                   1,321        1,817
   Current assets related to discontinued
    operations                                     1,366        4,358
   -------------------------------------------------------------------
                                                  59,869       88,853

 Balance of sale receivable                        8,000           --
 Property and equipment                            4,099        4,219
 Intangible assets                                35,937       45,109
 Long-term assets related to discontinued
  operations                                      19,183       30,837

 ---------------------------------------------------------------------
                                             $   127,088  $   169,018
 ---------------------------------------------------------------------

 Liabilities and Shareholders' Equity

 Current liabilities:
   Bank indebtedness                         $    10,029  $    11,547
   Accounts payable and accrued liabilities       23,546       34,518
   Accounts payable and accrued liabilities
    related to discontinued operations             4,443        6,403
   Current portion of long-term debt                 877        1,010
   Income taxes payable                              198        1,370
   Deferred income taxes                             838          838
   -------------------------------------------------------------------
                                                  39,931       55,686

 Deferred income taxes                             6,420        6,965
 Long-term debt                                    1,928        2,005
 Long-term liabilities related to
  discontinued operations                         10,819       10,871

 Shareholders' equity:
   Share capital                                 252,488      252,488
   Warrants                                        2,696        2,696
   Additional paid-in capital                     65,678       64,173
   Deficit                                      (249,855)    (222,849)
   Accumulated other comprehensive loss           (3,017)      (3,017)
   -------------------------------------------------------------------
                                                  67,990       93,491

 Contingencies and guarantees

 ---------------------------------------------------------------------
                                             $   127,088  $   169,018
 ---------------------------------------------------------------------


 OPTIMAL GROUP INC.
 Condensed Consolidated Statements of Operations and Comprehensive
 Loss
 (Unaudited)

 Three and six months ended June 30, 2009 and 2008
 (expressed in thousands of U.S. dollars, except per share amounts)

 ---------------------------------------------------------------------
                      Three months ended          Six months ended
                            June 30,                  June 30,
                   ---------------------------------------------------
                       2009         2008         2009         2008
 ---------------------------------------------------------------------

 Revenues          $     6,538  $    15,486  $     8,667  $    20,386
 Other revenues            807        9,469        1,670       19,328

 Expenses:
   Cost of sales         6,357       10,750        7,819       14,460
   Selling, general
    and administra-
    tive                 8,645        8,245       17,305       14,561
   Stock-based
    compensation
    pertaining to
    selling,
    general and
    administrative          48        1,863        1,505        2,378
   Research and
    development            768          657        1,427        1,275
   Operating leases        284          237          561          474
   Amortization          3,347        3,751        6,710        7,368
   Transaction
    processing
    costs                   --        8,660           --       17,462
   Impairment loss       4,000           --        4,000           --

 ---------------------------------------------------------------------
 Loss from
  continuing
  operations before
  undernoted item      (16,104)      (9,208)     (28,990)     (18,264)

 Other income              342          243          587          689

 ---------------------------------------------------------------------
 Loss from
  continuing
  operations before
  income taxes
  (recovery)           (15,762)      (8,965)     (28,403)     (17,575)

 Income taxes
  (recovery)              (763)       1,467         (636)         903

 ---------------------------------------------------------------------
 Net loss from
  continuing
  operations           (14,999)     (10,432)     (27,767)     (18,478)

 Net earnings
  (loss) from
  discontinued
  operations, net
  of income taxes          428      (37,962)         761      (37,962)

 ---------------------------------------------------------------------
 Net loss and
  comprehensive
  loss             $   (14,571) $   (48,394) $   (27,006) $   (56,440)
 ---------------------------------------------------------------------

 Weighted average
  number of shares:
   Basic and
    diluted         25,742,233   25,852,211   25,742,223   25,910,169
 ---------------------------------------------------------------------
 (Loss) earnings
  per share:
   Continuing
    operations:
     Basic and
      diluted            (0.59)       (0.40)       (1.08)       (0.71)
   Discontinued
    operations:
     Basic and
      diluted             0.02        (1.47)        0.03        (1.47)
   Net:
     Basic and
      diluted            (0.57)       (1.87)       (1.05)       (2.18)

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

 OPTIMAL GROUP INC.
 Condensed Consolidated Statements of Cash Flows
 (Unaudited)

 Three and six months ended June 30, 2009 and 2008
 (expressed in thousands of U.S. dollars)

 ---------------------------------------------------------------------
                       Three months ended        Six months ended
                             June 30,                 June 30,
                   ------------------------- -------------------------
                       2009         2008         2009         2008
 ---------------------------------------------------------------------

 Cash flows (used
  in) from
  operating
  activities:
   Net loss        $   (14,571) $   (48,394) $   (27,006) $   (56,440)
   (Add) deduct
    (loss) earnings
    from discontin-
    ued operations         428      (37,962)         761      (37,962)
   -------------------------------------------------------------------
   Net loss from
    continuing
    operations         (14,999)     (10,432)     (27,767)     (18,478)

   Adjustments for
    items not
    affecting cash:
     Amortization        3,347        3,751        6,710        7,368
     Deferred
      income taxes        (334)      11,730         (545)      10,824
     Impairment of
      intangibles        4,000           --        4,000           --
     Stock-based
      compensation          48        1,863        1,505        2,378
     Foreign
      exchange               4          (15)        (342)          69
   Net change in
    operating
    assets and
    liabilities         (4,504)       2,941          512        1,574
   Operating cash
    flows from
    (used in)
    discontinued
    operations           2,619       (6,662)       2,013       (6,530)
   -------------------------------------------------------------------
                        (9,819)       3,176      (13,914)      (2,795)

 Cash flows from
  (used in)
  financing
  activities:
   Increase
    (decrease) in
    bank indebted-
    ness                 2,658           --       (1,447)          --
   Repayment of
    long-term debt        (188)          --         (228)          --
   Repurchase of
    Class "A"
    shares                  --         (148)          --         (471)
   -------------------------------------------------------------------
                         2,470         (148)      (1,675)        (471)

 Cash flows (used
  in) from
  investing
  activities:
   Purchase of
    property,
    equipment and
    intangible
    assets                (681)      (1,930)      (1,132)      (3,163)
   Net proceeds
    from maturity
    of short-term
    investments             --        4,318        6,296       10,094
   Proceeds from
    disposition of
    payment
    processing
    businesses              --           --        1,035           --
   Proceeds from
    balance of sale
    receivable             145           --          251           --
   Transaction
    costs related
    to business
    acquisitions
    and disposals          (68)          --         (126)          --
   Investing cash
    flows (used in)
    from
    discontinued
    operations              --         (133)          --          151
   -------------------------------------------------------------------
                          (604)       2,255        6,324        7,082

 Effect of exchange
  rate changes on
  cash and cash
  equivalents
  during the period        506           15          287           (9)

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

 Net decrease in
  cash and cash
  equivalents           (7,447)       5,298       (8,978)       3,807

 Cash and cash
  equivalents,
  beginning of
  period                31,318       45,702       32,849       47,193

 ---------------------------------------------------------------------
 Cash and cash
  equivalents, end
  of period        $    23,871  $    51,000  $    23,871  $    51,000
 ---------------------------------------------------------------------

Optimal Group Inc.
Brad McKenna, Vice-President, Administration
(514) 738-8885
bradir@optimalgrp.com