Revenues for the first quarter ended March 31, 2008 consisted of revenues from both the Optimal Payments segment and the WowWee segment (acquired on November 7, 2007). The WowWee segment operates in an industry that is seasonal by nature and where a significant portion of revenues and corresponding cash flow are typically generated in the second half of the year.

Revenues for the first quarter ended March 31, 2008 were $31.3 million (which includes approximately $4.9 million related to the WowWee segment; due to seasonality, the first quarter is typically the weakest quarter of the year for this segment) compared to $30.1 million for the first quarter ended March 31, 2007.

Net loss in the first quarter ended March 31, 2008 was $8.0 million or $0.32 per share compared to a net loss of $5.7 million or $0.24 per share in the first quarter ended March 31, 2007. The level of net loss in the first quarter is directly attributable to the seasonally low level of revenue generated by the WowWee segment. Generally, the first quarter is the period of lowest shipments and revenues in the WowWee segment and the industry in which it operates and, therefore, will result in weak financial results due to fixed costs that are incurred.

EBITDA for the quarter ended March 31, 2008 was a loss of $2.7 million or $0.11 per share compared to EBITDA of $2.8 million or $0.12 per diluted share for the comparable period in 2007.

EBITDA is a non-GAAP (generally accepted accounting principles) financial measure calculated as earnings before investment income, taxes, depreciation and amortization and excludes the impact of impairment loss, non-controlling interest, stock-based compensation, discontinued operations and legal settlements. A reconciliation of Optimal's EBITDA is included in Annex A.

Optimal's consolidated balance sheet remains strong. At March 31, 2008, the Company had cash and cash equivalents, short-term investments (including amounts held in reserve) and settlement assets net of customer reserves and security deposits, of $42.3 million or $1.64 per issued and outstanding share; working capital, excluding cash and short-term investments held as reserves, of $11.9 million; and shareholders' equity of $193.9 million, or $7.49 per issued and outstanding share. The Company continues to evaluate potential acquisition opportunities and expects to grow the WowWee segment by executing on internal growth initiatives and by actively pursuing complementary acquisitions.

Stock Buyback

On November 6, 2007, Optimal announced its intention to renew its stock buyback program. In accordance with applicable Canadian tender offer rules, the Company may authorize the purchase of not more than 5% of its outstanding shares on a basis that is exempt from the legal requirement to make a formal offer to all shareholders. Accordingly, the number of shares that may be purchased for cancellation under the Company's buyback program over a 12-month period is limited to 1,300,000 shares, or approximately 5% of the 26,036,548 shares outstanding as at November 14, 2007.

Since November 21, 2007, the Company has purchased and cancelled 157,060 shares under its stock buyback program, including 103,660 shares purchased and cancelled during the first quarter 2008. All purchases under the buyback program have been made subject to the "safe harbor" daily volume limitations prescribed by applicable United States federal securities laws.

Preliminary Outlook for 2008

For 2008, the Company currently anticipates consolidated revenues in the range of $230-250 million with consolidated EBITDA in the range of $10-12 million. However, the Company remains cautious in the face of a weak economy, challenging retail environment and the difficulties affecting companies that manufacture in China. Due to the seasonality of the WowWee segment and the industry in which it operates, these anticipated results should be viewed as preliminary. Management anticipates that greater clarity relating to its operations and financial results will occur as the year progresses.

For its WowWee segment, based on current trends (and given the seasonal nature of the business), the Company anticipates year over year revenue growth for 2008 of approximately 25-30% with revenue in the range of $130-140 million. As at April 30, 2008, orders for product in the WowWee segment were approximately 25% ahead of the same date last year. Also, the Company continues to significantly invest to execute upon its growth strategies for the WowWee segment which may compress operating margins for 2008.

During the first quarter of 2008, the Company continued to implement its strategies for the WowWee segment. It continues to make significant investments in its sales and distribution, as well as marketing and promotion. The Company is also actively building out its online presence, enhancing the consumer's ability to experience and explore the Company's products through the Internet. As well, the Company is pursuing a program of developing and distributing products based on licensed properties. For 2008, the WowWee segment has developed the broadest and most dynamic product offerings in its history. These products have begun to be shipped in the second quarter of 2008.

For its Optimal Payments segment, the Company anticipates 2008 revenues to be essentially flat to slightly decreased year over year and in the range of $100-110 million. This can be attributed to lower merchant volumes from normal attrition and discontinuing business with unprofitable merchant accounts.

Optimal Payments continues to streamline its operations and to pursue a strategy of organic growth for its business to better leverage its existing capacity and infrastructure. In doing so, it has eliminated unprofitable business lines with the goal of generating consistent and ongoing cash flow and maximizing efficiency. While Optimal Group continues to operate in the payments segment, the Company has from time to time received expressions of interest from certain third parties interested in acquiring the payments business and has allowed investigation and review to be conducted.

Key assumptions and sensitivities

For the purposes of projecting our 2008 EBITDA, we have made the following principal assumptions: in assessing the anticipated year over year revenue growth for the WowWee segment, we have assumed the accuracy of the 2007 revenues for the period ended November 6, 2007, as reported to us by the vendors of the business; customers of the WowWee segment will fulfill their anticipated purchases and the levels of sales discounts will be consistent with levels experienced by the vendors of the business over recent quarters, as reported to us; the cost of producing the WowWee segment's products in China will not increase more than currently anticipated; attrition in the Optimal Payments segment will be consistent with levels of attrition experienced over recent quarters; bad debt expense in the Optimal Payments segment will be consistent with bad debt experience over recent quarters; and we will not suffer the loss, due to insolvency or otherwise, of any customer that accounts for a significant portion of the revenues of either of the WowWee or Optimal Payments segments. Although we believe that the assumptions underlying our statement as to projected 2008 EBITDA are reasonable, any of those assumptions could prove to be inaccurate and, therefore, there can be no assurance that such projection will prove to be accurate.

Our statement as to projected 2008 EBITDA is forward looking, and does not take into account the potential impact of any future divestitures, acquisitions, mergers or other business combinations. Furthermore, our actual 2008 EBITDA is subject to the risks and uncertainties summarized below under "Cautionary Statements Regarding Forward-Looking Statements" and could differ materially from our projection. As well, the non-GAAP financial results of Optimal's results of operations are not meant to be considered superior to or a substitute for Optimal's results of operations prepared in accordance with GAAP.

Legal Matters

Following announcements by the U.S. Attorney's Office in the Southern District of New York relating to its investigation of the U.S. Internet gambling industry, the Company, in March 2007, initiated discussions with the U.S. Attorney's Office and is in the process of responding to a voluntary request for information issued by the U.S. Attorney's Office.

From time to time, Optimal Payments receives requests from law enforcement officials for information relating to the processing of transactions for specific merchants. At present, Optimal Payments is responding to such a request issued by the U.S. Attorney's Office in the Eastern District of New York in relation to the criminal prosecution of the operator of an Internet pharmacy.