Half Yearly Report

10 September 2014

Optimal Payments Plc

Interim Results for the six months ended 30 June 2014

Strong first half results. Significant opportunities going forward

LONDON, MONTREAL and NEW YORK (Sept 10, 2014) -- Optimal Payments Plc (LSE AIM: OPAY) ("Optimal Payments", the "Group" or the "Company"), a leading online payments provider, today announces results for the six months ended 30 June 2014.

Highlights

· Material increases in revenue and profitability:

o EBITDA(1) up 54% to $39.0m (H1 2013: $25.3m).

o Revenues up 34% to $159.1m (H1 2013: $118.4m).

o Net Profit up 91% to $27.4m (H1 2013: $14.4m).

o Gross margin improved to 55% (H1 2013: 53%).

o Highly successful World Cup - estimated EBITDA uplift of $2.5m and revenue impact of $5m as a direct result.

· Continued significant improvement in NETELLER Stored Value ("SV") business:

o Revenues up 46% to $41.4m (H1 2013: $28.3m) driven by an increase in member signups, conversions and average spend per user (ARPU).

o Shirt sponsorship of Crystal Palace FC announced giving extensive international exposure to the NETELLER brand.

· Strong organic growth from NETBANX Straight Through Processing ("STP") business:

o Revenues up 31% to $117.4m (H1 2013: $89.9m) with continued strong growth in Asia.

· Significant progress on key strategic initiatives:

o Acquisition of US online payment processing companies Meritus and GMA for $225m completed in July 2014.

o NETELLER and Net+ products launched in the US in March 2014 with good adoption by gaming merchants in the three states which have regulated online gambling. Larger US states considering regulating in 2015 including California and Pennsylvania.

o Principal Membership with Visa Europe and MasterCard Europe granted in Q1 enabling Optimal Payments to offer acquiring services to merchants in the European Union from Q4 2014 and to benefit from competitive rates and increased market opportunity;

· Balance sheet strengthened with total Group cash (net of merchant cash) of $121.6m at 30 June 2014 (31 December 2013: $93.8m).

o Remaining shareholder loans cleared in January 2014. As a result of the Meritus/GMA acquisitions new debt of $150m was taken on in July 2014.

o Free cash at 30 June 2014 of approximately $56.1m(2). (31 December 2013: $38.0m). This balance was reduced by $31.5m as part consideration and acquisitions costs of Meritus/GMA in July 2014.

· Board changes were made on 30 July with Dennis Jones appointed as Non-Executive Chairman with Andrew Dark and Ian Jenks appointed as Non-Executive Directors of the Board.

(1) EBITDA is defined as results of operating activities before depreciation and amortisation and exceptional non-recurring items which are defined as items of income and expense of such size, nature or incidence, that in the view of management their disclosure is relevant to explain the performance of the Group.

(2) Free cash is cash less merchant cash less tied up in running the business as working capital. This includes Restricted NETELLER Member and Merchant cash, security deposits with certain acquiring banks and cash in transit at 30 June 2014, leaving free cash of approximately $56.1m at that date (31 December 2013: $38.0m).

Commenting on the results, Joel Leonoff, President & CEO, said:

"We are delighted with our first half results which show strong revenue and EBITDA growth from NETELLER and NETBANX. The acquisitions of Meritus and GMA in July satisfy our previously stated objectives to strengthen our presence in the US market and provides Optimal Payments with a springboard for strong North American growth. The attainment of Principal Membership status with Visa and MasterCard in Europe should help fortify our NETBANX business throughout Europe based on more competitive rates and a stronger offering. Our European version of NETELLER continues to demonstrate impressive growth while our US NETELLER release is gaining traction and is extremely well positioned to leverage off new US markets regulating and re-opening the doors for US based online gaming."

For further information contact:

Analyst meeting and further information

Optimal Payments will hold a briefing for analysts and investors at the offices of Canaccord Genuity, 88 Wood Street, London, EC2V 7QR at 9.30 am (UK) today.

Alternatively a conference call facility will be available at: +44 20 3427 1916 (Participant code 5887015#). The presentation slides and a webcast of the presentation will be available as a replay on the Group's website at: http://www.optimalpayments.com/investor-relations/results-reports-presentations.

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About Optimal Payments Plc

Optimal Payments is a global provider of online payment solutions, trusted by businesses and consumers in over 200 countries and territories to move and manage billions of dollars each year. Merchants use the NETBANX® platform and services to simplify how they accept credit and debit card, direct-from-bank, and alternative and local payments; and the NETELLER® service to increase revenues and capture new customers. Consumers use the multilingual and multicurrency NETELLER and Net+® Card stored value offering to make secure and convenient payments. Optimal Payments Plc is quoted on the London Stock Exchange's AIM, with a ticker symbol of OPAY. Subsidiary company Optimal Payments Ltd is authorised and regulated as an e-money issuer by the UK's Financial Conduct Authority (FRN: 900015).

For more information on Optimal Payments visit www.optimalpayments.com or subscribe at:

http://www.optimalpayments.com/media/email-alerts

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CEO'S REVIEW

Introduction

The first half of 2014 has seen further success with continued growth in revenue and EBITDA combined with major progress on our stated strategic objectives including launching NETELLER in the US, achieving Principal Membership, which will allow NETBANX to offer more competitive acquiring services in the European Union from Q4 2014 and most significantly, the acquisitions of US online payment processing companies Meritus and GMA in July 2014.

Our interim Financial Statements to 30 June 2014 below show a continuation of the strong revenue growth we experienced in 2013, and this resulted in significantly improved EBITDA of $39.0m in the first half, up 54% from $25.3m in the equivalent period in 2013. Revenues for the period are up 34% to $159.1m (2013: $118.4m) when compared to the same period in 2013. Strength in all areas, including the continued growth in our NETELLER stored value business as well as further strong growth in NETBANX, particularly in Asia, have been driven by the continued expansion of online and mobile payments worldwide and the competitive success of all of our products. We also benefited from the World Cup in June during which our products performed strongly and which we estimate added revenues of approximately $5m and EBITDA of $2.5m to our first half results based on historical performance trends. We again saw strong growth from our largest merchant to whom we provide NETELLER, Net+ and NETBANX services worldwide. We continue to strengthen this merchant relationship through a highly personalised service at all levels of the organisation.

The business is highly cash generative and was effectively debt free at 30 June 2014 as the remaining shareholder loans were cleared in January 2014. This enabled us to complete the acquisition of two US online payments companies, Meritus and GMA, which closed after the half year end on 23 July 2014 for a combined cost of $225m payable in cash and shares. This was partly financed by new bank debt of $150m. As stated at the time of the closing, the acquisitions enhance our NETBANX business, establishing a significant presence and merchant base in the US while diluting our major merchant customer concentration.

The regulatory environment has continued to evolve during 2014 and, while this did not materially impact our revenues in the first half, some regulatory related uncertainty persists.

Financial summary

Increased revenues and a modestly increased cost base resulted in strong financial performance in the first half of 2014, with EBITDA up by 54% to $39.0m (H1 2013: $25.3m).

Revenues increased by34% to $159.1m (H1 2013: $118.4m) with NETELLER continuing the strong growth trend that began in the second half of 2012. We have now seen month on month underlying growth for 24 months in NETELLER. Similarly, NETBANX volumes and revenues have shown good growth, particularly in Asia.

The overall gross margin percentage improved to 55% (2013: 53%) as the NETELLER gross margin again improved, from 83% to 87% in H1.

Fixed costs were up $11.5m on H1 2013, mainly in salaries, software and NETELLER marketing costs. Salary costs increased by approximately $4.1m as we increased our headcount by approximately 100 heads to 555 full-time employees at 30 June 2014. NETBANX headcount increased mainly in technology as we continue to invest in our STP platform and product base. The continued growth in NETELLER meant we added staff in our call centre and risk operations to handle the higher number of NETELLER member applications and enquiries, which have doubled since June 2012. We also added some technology staff to further enhance the NETELLER product offering. The NETELLER loyalty programme and cashback costs included in 'Marketing and Promotions' were also up, by $3m, to support an increase of $13.1m (47%) in NETELLER revenues. Technology and Software costs increased by $4m as we invested in both platforms and our outsourced third party costs for our Asia operations increased as that business grew in the period.

Cash, net of merchant cash, increased to $121.6m (31 December 2013: $93.8m) and the business was effectively debt free at 30 June 2014 as the remaining loans were cleared in January 2014. Robust cash generation from operations is expected to continue, enhanced by the recent acquisitions of Meritus and GMA. These acquisitions were partly funded by a new bank debt facility of $150m which started in July, repayable over three years. Free cash (cash net of working capital) increased to approximately $56.1m(2) at 30 June 2014 (31 December 2013: $38.0m). This balance was reduced by $31.5m following the acquisitions in July.

NETELLER Stored Value ("SV")

The Group's NETELLER SV business (comprising the NETELLER and Net+ prepaid card stored value offering) continued the strong growth that started in the second half of 2012, which helped drive H1 revenues to $41.4m (H1 2013: $28.3 m), a 46% improvement. An improved cashback based VIP member loyalty program, a strengthened sales team, an enhanced affiliate program, and numerous additions to deposit options for members worldwide have contributed to increased market share, primarily in the European gaming market where NETELLER remains one of the two major providers of stored value offerings. Key lead indicators such as number of member signups and member conversion rates continue to improve.

NETELLER gross margins improved again from the second half of 2013 to 87% due to changes in pricing for member deposits and the continued growth in sports betting where members tend to move their money more frequently than casino and poker players to seek out the best odds, which drives increased merchant revenues at minimal incremental cost.

NETELLER SV costs increased in H1 to support the 46% increase in revenues, mainly increased headcount in our call centre and risk teams as the number of daily member signups has doubled over the last two years. We have also seen an increase in VIP loyalty programme costs which has helped see our VIP revenues grow continually over the last 24 months. These are included in the 'Marketing and Promotions' expense line.

In July, we announced a two-year agreement for NETELLER to become the official shirt and ground sponsor of Crystal Palace Football Club for the 2014-15 and 2015-16 seasons. NETELLER processes in over 200 countries and territories and the English Premier League is seen worldwide and provides the perfect opportunity to raise the awareness of the NETELLER brand internationally. NETELLER is implementing targeted marketing campaigns tied to the Crystal Palace sponsorship directed at increasing NETELLER signups and increasing growth.

Our Issuing business has made good progress in the first half of 2014 with the continued organic growth of our award winning Net+ programme with transaction value of $178m in the first half (H1 2013: $141m) and new business picking up strongly as our white label and prepaid card issuing initiatives begin to gain traction. Prepaid cards and mobile payments are gaining increasing consumer acceptance and the business is well placed to take advantage of this buoyant marketplace.

In March, we announced the launch of our new NETELLER and NET+ prepaid card stored value solution for the US market. The NETELLER brand, which is a dominant payment provider to the European markets and still widely recognised and trusted in the US, places us in a very strong position to gain market share in this emerging regulated US gaming market and, although revenues are not yet significant, we have seen wide acceptance and adoption by merchants in the three states where gaming has been licenced - New Jersey, Nevada and Delaware. Larger and more populous US states, including California and Pennsylvania, are considering licensing online gaming in 2015 and beyond.

We are excited about the opportunities for future growth as the US market expands on a state by state basis and have invested significant resources in 2014 including establishing a US office and acquiring significant US operations through our California based acquisitions. The major revenue impact of these developments depends upon the regulatory landscape in particular timing of the re-opening of individual states for online gaming.

NETBANX Straight Through Processing ("STP")

The Group's NETBANX STP business also showed strong organic growth, particularly in Asia, with first half revenues up 31% ($27.5m) to $117.4m (H1 2013: $89.9m). The growth was due to increasing demand from existing gaming and non-gaming customers, including our largest merchant, as well as from new customers won during the first half of the year. Customer retention remains high as NETBANX provides a wide range of payment and fraud prevention services through a single customer integration as well as access to more than a dozen acquiring banks worldwide.

The gross margin in NETBANX was stable at 43% (2013: 43%) a strong performance given the increase in revenues, with the bulk of the direct processing costs being fees to acquiring banks and other intermediate processors. The underlying platform is scalable, and can accommodate a large number of new customers. We plan to continue investing in our NETBANX STP platform to deliver ongoing enhancements during the second half of 2014 to provide improved functionality and stability.

In January, we announced that we had secured Principal Membership with Visa Europe and MasterCard Europe, enabling us to offer competitive acquiring services to merchants in the European Union commencing in Q4 2014. This is a significant achievement for the Group as it increases the addressable market for our NETBANX offering enabling us to compete on a level playing field with banks that also benefit from interchange pricing from Visa and MasterCard. We expect to be more competitive in the lower risk processing markets where to date we have mainly focused on moderate to high risk markets. Our lower cost base should result in a more balanced mix of merchants in our portfolio. We incurred some set up costs in the first half 2014 which will continue for the rest of 2014 and we expect the full benefits of Principal Membership to start to be realised from late 2014. This business model, together with investment in an expanded sales team, underpins our confidence that NETBANX can continue to win business in all territories.

Board changes

A number of Board changes were made on 30 July 2014 as Jonathan Comerford (Interim Chairman) and John Bateson (Non-Executive Director) stepped down following the sale of all of the shares in the Company that were held by IIU Nominees Limited in January 2014. Dennis Jones was appointed as Non-Executive Chairman with Andrew Dark and Ian Jenks appointed as Non-Executive Directors. Dennis brings a wealth of payments experience including senior roles at RBS. Andrew was CEO of DataCash during its period of rapid growth and has spent a career in the payments industry. Ian brings a wealth of international board level experience in both public and private, high growth, technology focused companies. 

Recognition

The Group's considerable achievements have been acknowledged in 2014 with a number of awards.

Keith Butcher was presented with the Grant Thornton Quoted Company Award for 'Finance Director of the Year' in January and Joel Leonoff was awarded 'CEO of the Year' at the UK Stock Market Awards in March.

Optimal Payments was awarded the 'Payments Solution Provider Company of the Year Award' at the International Gaming Awards in January and the 'Best Payment System for Affiliates Award' at the iGB Affiliate Awards in February, demonstrating the excellent service which Optimal Payments delivers to its customers in both the gaming payments market and the affiliates industry globally.

At the Prepaid365 awards in June, NETELLER won Best General Spend Prepaid Card, Best Gaming Prepaid Card and Best Privacy Prepaid Card.

Current trading and outlook

Trading since 30 June 2014 has continued to be robust, boosted by the acquisition of Meritus and GMA in July 2014, and as a result the Board believes that full year results will now come in ahead of its expectations. I look forward to providing a further trading update on our 2014 performance in January.

Joel Leonoff

President & CEO

10 September 2014

Disclaimer

Certain statements made in this announcement are forward-looking statements. These forward-looking statements are not historical facts but rather are based on the Company's current expectations, estimates and projections about its industry, its beliefs and assumptions. Words such as 'anticipates,' 'expects,' 'intends,' 'plans,' 'believes,' 'seeks,' 'estimates,' and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors, some of which are beyond the Company's control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. The Company cautions shareholders and prospective shareholders not to place undue reliance on these forward-looking statements, which reflect the view of the Company only as of the date of this announcement. The forward-looking statements made in this announcement relate only to events as of the date on which the statements are made. The Company will not undertake any obligation to release publicly any revisions or updates to these forward-looking statements to reflect events, circumstances or unanticipated events occurring after the date of this announcement except as required by law or by any appropriate regulatory authority.

Accompanying notes form part of these condensed consolidated interim financial statements

Accompanying notes form part of these condensed consolidated interim financial statements

The directors consider that all results derive from continuing operations

Accompanying notes form part of these condensed consolidated interim financial statements

Accompanying notes form part of these condensed consolidated interim financial statements

1. BASIS OF PREPARATION

These condensed consolidated interim financial statements of Optimal Payments PLC ("the Company") and its subsidiaries (together referred to as "the Group") have been prepared on the going concern basis. The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.

The principal operating currency of the Group is US dollars and accordingly the financial statements have been prepared in US dollars. The interim results for the period ended 30 June 2014 are unaudited and do not constitute statutory accounts within the meaning of the Companies Acts 1931 to 2004. The statutory accounts of Optimal Payments Plc for the year ended 31 December 2013 contain an unqualified audit report. Copies can be obtained from the Registered Office of the Company, Audax House, Finch Road, Douglas, Isle of Man, IM1 2PT.

2. STATEMENT OF COMPLIANCE

The condensed consolidated interim financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting". They do not include all of the information required for the full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2013. However, selected explanatory notes are included to explain events and transactions that are significant to gain an understanding of the Group's financial position and performance since the last annual consolidated financial statements. The accounting policies and methods of computation used in the condensed interim consolidated financial statements are consistent with the most recent annual financial statements.

These condensed consolidated interim financial statements were approved by the Board of Directors on 9 September 2014.

3. RESTRICTED NETELLER MERCHANT CASH

The Group maintains bank accounts with the Group's principal bankers which are segregated from operating funds and which contain funds held on behalf of Merchants, representing pooled Merchant funds. Balances in the segregated accounts are maintained at a sufficient level to fully offset amounts owing to the Group's Merchants. A legal right of offset exists between the balances owing to the Merchants and the cash balances segregated in the client accounts. As such, only the net balance of surplus cash is disclosed on the Statement of Financial Position as Restricted NETELLER Merchant Cash.

The Group had the following balances:

4. RESTRICTED NETELLER MEMBER CASH

In compliance with the Financial Conduct Authority (FCA) rules and regulations, the Group holds Qualifying Liquid Assets at least equal to the amounts owing to Members. These amounts are maintained in accounts which are segregated from operating funds.

All Qualifying Liquid assets are held in Optimal Payments Limited, which is an FCA regulated entity.

The Group had the following balances:

5. OPERATING SEGMENTS

The Group has two operating segments as disclosed below. For each of the segments, the Group's CEO reviews internal management reports on at least a quarterly basis. The following summary describes the operations in each of the Group's reportable segments.

NETELLER: fees are generated on transactions between Members and Merchants using the NETELLER service and Net+ prepaid cards.

NETBANX: fees are generated through the NETBANX and NETBANX Asia straight-through processing platforms where customers send money directly to Merchants.

Information regarding the results of each reportable segment is included below.

Segmented reporting for the six months ended 30 June 2014:

Segmented reporting for the six months ended 30 June 2013:

Processing costs and bad debts are the only two costs which vary directly with revenue, and accordingly have been shown separately as variable costs. For the six months ended 30 June 2014, variable costs for NETELLER and NETBANX were 13% (2013: 16%) and 57% (2013: 57%) of revenue respectively.

Net assets have not been presented in the segmented information since significant assets and resources throughout the Group serve both reporting segments and would not reasonably be allocable between the two.

Major Merchants

The Group has one Merchant who represented 47% of total fee revenue for the six months ended 30 June 2014 (2013: 39%) across all reportable segments and geographies. The majority of this revenue comes from Asia.

6. PROPERTY, PLANT & EQUIPMENT

There were $2,905,328 of additions to property, plant & equipment for the six months ended 30 June 2014 (2013: $4,198,201) related to the expansion of the Group's facilities and data processing equipment. A loss of $6,632 was realised in the period (2013: $445,696) relating to the disposal of obsolete data processing equipment.

In the six months ended 30 June 2014, $98,901 of investment tax credits (ITCs) received were recorded against depreciation and amortisation expense since the assets giving rise to the ITCs were fully amortised.

7. INTANGIBLE ASSETS

$2,463,493 was incurred on the ongoing development of the Group's online payment processing platforms (2013: $1,689,190).

The Board have determined that there has not been any indication of impairment in the six month period ended 30 June 2014 given the continued strong performance of the Group's payments processing platforms.

8. TRADE AND OTHER PAYABLES

The Group had the following balances:

NETBANX Merchant processing liabilities arise from the operations of the NETBANX division totaling $76,622,612 (31 December 2013: $76,792,100). In addition, included in cash and cash equivalents is an equivalent transient cash balance that relates to Merchant transactions processed via the straight-through processing operations. The operations do not fall within the EU definition of "e-money" nor does a legal right of offset exist between this cash and the corresponding NETBANX Merchant liabilities.

9. SHAREHOLDER LOANS

In January 2014, Aurum Nominees Ltd. and IIU Nominees Ltd. gave notice to the Company that they each wished to convert the loans amounting to $9,517,046 (including accrued interest) into ordinary shares pursuant to the loan agreements. As a result, in January 2014, the Company issued 4,348,503 and 4,330,406 Ordinary Shares to Aurum Nominees Ltd. and IIU Nominees Ltd. respectively.

10. SHARE BASED PAYMENTS

The Company adopted the unapproved share option plan pursuant to a resolution passed on 7 April 2004 and amended by the Board on 15 September 2008. The 2008 amendment included the addition of a new 'approved' plan for UK based employees. Under the 'approved' and 'unapproved' plans ("ESOS"), the Board of Directors of the Company may grant share options to eligible employees including directors of Group companies to subscribe for ordinary shares of the Company.

No consideration is payable on the grant of an option. Options may generally be exercised to the extent that they have vested. Options vest according to the relevant schedule over the grant period following the date of grant. The exercise price is determined by the Board of Directors of the Company, and shall not be less than the average quoted market price of the Company shares on the three days prior to the date of grant. Subject to the discretion of the Board share options are forfeited if the employee leaves the Group before the options vest. The ESOS options granted in December 2011 vest on the third anniversary of the date of grant and lapse a further six months after vesting.

Changes in the number of ESOS options outstanding are detailed in the table below:

Equity-settled share option plan

The ESOS options outstanding at the end of the period had a weighted average remaining contractual life of 1.81 years (31 December 2013: 2.31 years).

The inputs into the model are as follows:

Expected volatility was determined by calculating the historical volatility of the Company's share price from the time of issue to the date of grant.

Long Term Incentive Plan

The Company adopted the Long Term Incentive Plan ("LTIP") which took effect from 1 January 2010. These LTIP options vest in one tranche based on future performance related to EBITDA targets determined each year and subject to continued employment over the remaining vesting period. Vested options lapse on the tenth anniversary of the date of grant.

Changes in the number of LTIP options outstanding are detailed in the table below:

The LTIP options outstanding at the end of the period had an exercise price of £0.0001 and a weighted average remaining contractual life of 8.5 years (31 December 2013: 8.5 years).

The weighted average share price of LTIP options exercised in the six month period ended 30 June 2014 based on the date of exercise was £3.94 (31 December 2013: £2.35).

Due to the nominal exercise price of the LTIP options and that option holders are entitled to receive a benefit by reference to the value of dividends that would have been paid on vested shares during the vesting period, the options granted under the 2014 LTIPs were valued based on the share price at the date of grant (£3.83 per share) (31 December 2013: £1.19 per share).

For the six month ended 30 June 2014, the Group recognised total expenses of $2,756,833 (2013: $2,196,805) related to the equity-settled share-based payments transactions.

11. EBITDA

EBITDA is defined as results of operating activities before depreciation and amortisation and exceptional non-recurring items which are defined as items of income and expense of such size, nature or incidence, that in the view of management their disclosure is relevant to explain the performance of the Group for the period.

EBITDA is not a financial measure calculated in accordance with IFRS as adopted by the EU. The presentation on these financial measures may not be comparable to similarly titled measures reported by other companies due to the differences in the ways the measures are calculated.

12. SHARE CAPITAL

Holders of the ordinary shares are entitled to receive dividends and other distributions, to attend and vote at any general meeting, and to participate in all returns of capital on winding up or otherwise.

Holders of the deferred shares are not entitled to vote at any annual general meeting of the Company and are only entitled to receive the amount paid up on the shares after the holders of the ordinary shares have received the sum of £1,000,000 for each ordinary share held by them and shall have no other right to participate in assets of the Company.

13. POST-BALANCE SHEET EVENTS

Business Combination

On July 23, 2014, the Group acquired all of the partnership interests of California based payment processing entity TK Global Partners LP ("Meritus") (doing business as 'Meritus Payment Solutions') for consideration of $210 million consisting of $150 million in cash and $60 million of Optimal Payments shares (issued in equal tranches over four years commencing on the first anniversary of the closing date).

On the same day, the Group also acquired the trade and assets of Global Merchant Advisors, Inc. ("GMA"), a US-based online payments company for up to $15 million in cash, $10 million of which was paid on closing and the balance of $5 million will be paid in cash on the first anniversary of the closing if certain earning targets are met.

The acquisitions will significantly accelerate Optimal Payments' expansion into the rapidly expanding US ecommerce market by providing it with a diversified merchant client base of approximately 6,000 small and medium businesses; a highly agile multi-channel sales force operating in complimentary and new vertical markets; and partnerships with leading US acquiring banks.

The acquisitions will also allow Optimal Payments to offer Meritus' and GMA clients access to its global network and the ability to more easily sell products and services online virtually anywhere in the world. Similarly, Optimal Payments' international clients will gain greater access to the US market.

The acquisitions include intellectual property, customer contracts and supplier and customer lists and the

Group is currently in the process of determining the fair value of the assets acquired.

Bank of Montreal has provided the Group and certain of its subsidiaries with secured credit facilities for the purpose of financing a portion of the Acquisitions, as well as their ongoing working capital requirements. These credit facilities consist of a $100 million term loan facility and a $50 million revolving loan facility, each maturing on the third anniversary of the closing of the Acquisitions. Each of the Group's material subsidiaries has guaranteed the credit facilities although the guarantees from each of Optimal Payments Limited and Optimal Payments Merchant Services Limited are limited in nature. The borrowers and the unlimited guarantors have granted a lien on substantially all of their assets as security for the credit facilities. The Group will need to respect certain financial covenants that will be tested quarterly on a consolidated basis.

The Group incurred acquisition related costs of $1,521,355 up to 30 June 2014 which were expensed in the period relating to these transactions.

Grants under the Group's Long Term Incentive Plan

On 9 July 2014, the Remuneration Committee determined to grant awards over a total of 3,000,000 ordinary shares of 0.01 pence each in the Company (the "Ordinary Shares") to eligible executives, under the rules of the LTIP (the "Awards").

The Awards are structured as options with an option price per share equal to the nominal value of the Ordinary Shares, currently 0.01 pence. No consideration was paid for the grant of the Awards. The Awards will become exercisable after 1 October 2016, subject to the continued employment of the participant and the satisfaction of performance conditions set by the Remuneration Committee of the Company. To the extent that all or any part of the Awards becomes exercisable, they shall remain exercisable until the tenth anniversary of the date of the Grant.

The Awards included a grant of awards made on 9 July 2014 to Joel Leonoff, Chief Executive and an Executive Director of the Company, over 2,000,000 Ordinary Shares at a price of 0.01 pence per Ordinary Share. Following the grant of the Awards, Mr Leonoff has the following interests in the Company's share capital:

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