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Betbull continues to grow

8 Dec 2006

LONDON, England – (PRESS RELEASE) -- Highlights of this Release

- Betbull with continued growth during the 9 months to 30th September 2006, recording a Turnover of EUR 63.80 m and Net Gaming Revenue of EUR 10.80 m (unaudited figures). A healthy cash position of EUR 7.30 m was maintained (unaudited figure) with positive free cash flow attained in QIII.

- Repositioning as a retail betting operator successfully completed. Online offerings to support retail business now only of minor importance.

- Expansion into Spain successfully commenced. Joint Venture agreement with leading leisure and gaming group Orenes successfully completed. Licence application for retail betting units in Italy launched

- Legal situation in Germany still opaque and posing substantial risks to sports betting units there. Italian betting market liberalized and Spain on its way.

- Fund raising being evaluated to finance the further development of Spanish and Italian opportunities.

1. Unaudited Figures QI-QIII 2006

Betbull achieved a record Turnover of EUR 63.80 m yielding a Net Gaming Revenue (after commissions) of EUR 10.80 m in the period QI-QIII 2006. Turnover is up by 60% and Net Gaming Revenue up by 83% compared to the same period in 2005.

Overall Betbull produced an EBITDA of EUR (0.58) m and made a loss after tax of EUR 1.81 m. This includes EUR 0.33 m options and warrant related charges. While the German retail betting business is producing a positive EBITDA the group's losses are mainly a result of start-up costs in Spain, restructuring costs in Gibraltar, legal and tax advisory costs as well as costs of business development in other European countries. The online offerings together are breaking even on an EBITDA-level.

Free Cash Flow in the period QI-QIII was EUR (1.55) m leaving Betbull with a healthy Cash Position of EUR 7.30 m as of end of QIII. Overall, Betbull produced EUR 0.17 m Free Cash Flow in QIII.

2. Outlook

October's Turnover of EUR 10.76 m is one of the highest monthly turnovers achieved to date and underlines the potential in European retail betting markets, even under difficult regulatory circumstances.

3. Update on Betbull Company Strategy

Betbull has successfully completed its repositioning from a pure online gaming operator to a retail betting operator with a complementary online offering. 88 % of Turnover and 96 % of Net Gaming Revenue was produced by the company's retail betting outlets.

Also, Betbull expects its future growth to come predominantly from retail betting. The online offerings, and as well as telephone betting will be maintained as complementary offerings to retail customers

Betbull's objective is to establish itself as a leading pan-European retail betting player. The Directors believe that a pan-European scale has the following advantages: Firstly, a pan-European offering would facilitate the development of the brand due to pan-European attention for leagues, tournaments, and events. Secondly, the existing infrastructure for bookmaking and risk management as well as the group's online and telephone offering would be more effectively utilised if fed by business across Europe. Thirdly, a pan-European offering would lead to a better balance of books and would steady the trading margins as a result of increasing volumes and a more diverse mix of bets. Finally, it would allow a wider product offering at higher marginal profit contributions.

Betbull's business is currently based on bookmaking licences in the UK, Austria, Malta, Germany (Federal States; horses only), and Spain (Andalucia; horses only).

Betbull has designed its systems and technology for a roll out throughout Europe. Retail and backend systems have been developed to support regional differences whilst risk management remains centralised across all platforms in real time. Retail "Live Betting" has been successfully launched and integrated into EPOS (Electronic Point Of Sale) and screen systems.

Betbull follows the operator business model successfully proven for decades in the UK as opposed to a franchise business model. In the Director's view the locations constitute the value as licences, customer base and control are tied into them. While franchise models have shown to be successful in consumer retail they are difficult to apply to financial services due to difficulties and risks associated with non-compliant franchisees. However, this does not preclude Betbull from working with agents where it makes sense due to the regulatory or competitive situation.

Betbull's current geographical coverage currently includes Germany and Spain with plans to move into Italy in 2007.

In Germany the group owns and operates 47 shops and accepts bets from 27 free agents. This includes licenced horse racing shops as well as sports betting agencies. The shops are predominantly located in Hessen and Nordrhein-Westphalen.

In Andalucia, Spain, the group owns and operates two outlets (recently opened) with further outlets in the pipeline. These units provide a key indicator of trading requirements and expectancies for the larger scale roll out of retail betting outlets across the autonomous communities of Spain as liberalization unfolds, giving Betbull an important lead in the race for supremacy in this exciting new market.

The first shops out of the Joint Venture Agreement signed with Orenes are expected to be opened in the autonomous community of Madrid, whose new licencing laws are expected to be announced by 30th November 2006.

Orenes is a leading Spanish leisure and gaming operator with excellent political standing and a highly respected institution. It has the scale and skills to rapidly develop a retail betting operation across Spain together with Betbull as liberalization occurs. Orenes has post tax earnings for the year 2005 of approximately EUR 50 m.

In Italy Betbull, through a subsidiary, has bid for four licences in Milan and Como. In the Director's view this provides an excellent market entry point for Betbull while the company is in the process of identifying suitable retail or leisure partners.

Other regulated European countries are also being searched for opportunities and potential partners or acquisition targets.

4. Update on regulatory and legal situation in German, Spain, and Italy

The legal situation in Germany remains opaque. Betbull has already reported in depth about the German Constitutional Court ruling on sports betting and the EU-treaty violation proceedings against Germany for its incoherent approach to gaming in general. Nevertheless the Prime Ministers of the German Federal States have opted for keeping the monopoly and have aggressively attacked sports betting operators and agents. In their next general meeting scheduled for 13 December 2006, they intend to agree on a state lotteries treaty ("Lotteriestaatsvertrag") which would reinforce the state monopoly and would provide for a prohibition of all private operators. In order for the state treaty to become law, it would have to be ratified by the parliaments of the German Federal States ("Bundeslander") by the end of 2007.

Meanwhile the German Anti-Trust Authority ("Bundeskartellamt") has declared the co-operation of the German State-Lotteries a violation of German and European anti-trust regulation and jurisdiction. This ruling was upheld by a court. The recent concerted move of most of the State-Lotteries to shut down their online-offerings has been interpreted by the Anti-Trust Authority as a violation of their ruling. According to legal experts and advisors of Betbull this could grind the legislative process, that would also cover sports betting, to a halt.

So far there have been various and even contradictory rulings from lower and higher administrative courts with regards to immediate closure of sports betting shops. These cases hinge on the precedent of European law (freedom of services) over German law. All sports betting outlets in Germany, including Betbull's, could be affected. Experts estimate that 1/3 of the sport betting shops in Germany have been closed already. Overall, eleven of Betbull's sport betting shops (predominately in the Federal States of Nordrhein-Westphalen and Bayern) have been closed.

Further clarification of the situation is expected from the Placanica ruling of the European Court of Justice due within months. The attorney general suggested to stop penalization of agents of EU-bookmakers and to recognize the validity of licences issued within one EU-member state, in all other EU-member states.

In Spain plans to regulate and liberalize the sports betting market are already revealed in the autonomous communities of Madrid, Catalunia, and El Pais Basco. The regulatory approaches will be implemented on a regional basis. A nationwide policy on gaming is not expected.

Betbull and Orenes are committed by reason of their Joint Venture Agreement to apply for licences throughout Spain, where legislation allows.

In Italy a tender of sport betting and horse race betting licences following NAK 38 of the "Decreto Bersani" has been conducted.

Subject to formal confirmation of award of licences, Betbull intends to open flagship retail sports betting outlets with complimentary horse betting facilities in Milan and Como, giving the company a valuable insight into the Italian retail betting market offering the possibility for further rapid expansion.

5.Capital increase and issue of new shares

Betbull has sent out notice of an Extraordinary General Meeting to be held on 15 December. A resolution will be proposed at this meeting to authorise the Board of Directors to issue up to 2,000,000 new shares on a non-pre-emptive basis. This power will provide the Directors with the flexibility to raise finance to pursue new opportunities. The Directors are currently considering effecting a placing of up to 1,000,000 new shares in order to further develop the Spanish and Italian businesses.

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