Aspinalls Online to Outsource Casino Operations to Golden Palace

3 April 2002

Aspinalls Online plc announced after markets yesterday that its wholly owned subsidiary,Aspinalls Online Limited, signed a Memorandum of Understanding ("MOU") with Golden Palace Limited planning to outsource the management of the Company's online casino operations, Caribbean Cyber Casino (C3i) and Aspinalls.com, in exchange for a revenue share agreement. The revenue would be from all players accessing the Aspinalls.com casino website. These operations are currently conducted by Aspinall's subsidiaries.

The outsourcing arrangement follows a board's review of the Group's financing and strategic options announced last January. The formal agreements, expected to be signed by April 5, 2002, are expected to run for an initial period of 30 months. Aspinalls Online will receive revenues from Golden Palace based on net gaming revenue attributable to players on the Aspinalls.com site.

The arrangement also grants Golden Palace the exclusive right, under license, to promote the Aspinalls name within the online gaming environment. Golden Palace operates the online casino Golden Palace.com and is licensed in Antigua and the Mohawk Territory of Kahnawake in Canada. It was established in 1997.

Aspinalls incurred substantial losses in establishing and operating its own on-line gaming business. It said that the directors believe that the future value of its investment in the on-line gaming industry will be better served through an outsourcing arrangement, rather than as an independent operator. They entered in to this MOU with the "view to securing future value in its investment in on-line gaming".

On completion of the formal agreements and full transfer of the operation of the websites to Golden Palace, the Company will wind down its existing on-line business. This action will reduce the cash available to the Company to approximately £600,000, but the anticipated release by the Company's operating subsidiaries of gaming deposits and reserves should increase available cash to approximately £1,000,000 over the next few months, the company reported.

The AIM-quoted company, which is chaired by Damian Aspinall, the son of the late John Aspinall, announced the news of the outsourcing arrangement after the stock market close in London yesterday.

The Durlacher AIM Bulletin, an investors guide to companies on the Alternative Investment Market, reported on Aspinall's announcement. "Aspinalls Online was originally a fully-listed property company. Aspinall and Anton Bilton took control of the company and originally intended to turn into a biotech investment company but they decided to go into something they understood - gambling.

"Aspinall was involved in starting up GVI, to which Aspinalls Online lent £1.75m in February 2001. GVI then acquired C3i, an online casino business, prior to being taken over. That business was said to have made a profit of £3.5m on turnover of £10.9m in 2000.

"Aspinalls Online acquired GVI in June 2001 in return for 224m shares valued at 15p each. It also raised a further £5m at 15p a share and half of this was used to pay off GVI loan stock. The shares have slumped to 0.95p since June of last year and there are now eight times the number of shares in issue that there were before the acquisition of GVI.

Durlacher reported that "integrating C3i's online sites with Aspinalls.com was more difficult than envisaged. Another AIM-quoted company, IQ-Ludorum, provides the software for the sites. Its revenue model is based on the volumes going through the site. It is unclear whether Golden Palace will continue to use its software."

The investment guide said that "the Bermuda-registered GVI had net liabilities so, including the costs of the transaction, the goodwill on the acquisition totalled £38.1m. All of this will be written off in the results for the year to December 2001 because the directors believe that it has "negligible value". A new publish date, for the year end figures scheduled for March 14, has not been scheduled.

Before acquiring GVI, Aspinalls Online had cash of £2m. At the end of December there was still £2.4m in the bank. The company estimates that after the costs of running down its operations, and when gaming deposits are released in a few months' time, it should have £1m left.