WorldGate Releases Second Quarter 2006 Results

Management Comments:

The second quarter was a transition period during which wesuccessfully laid the foundation for the future growth of the Ojo.This quarter was marked by the achievement of three major objectivesthe Company had established at the start of the quarter. The firstobjective we accomplished was the transitioning of the Company to takedirect responsibility and control for the advertising, marketing, anddistribution of its products. By securing continuing and incrementaldistribution agreements with distributors, resellers andtelecommunications service providers covering the United States,Europe, Israel, Russia, the Asia Pacific region, Japan and LatinAmerica we are establishing a foundation for meaningful, global salesgoing forward. The second objective we accomplished was the pricerepositioning of the product by reducing the price of Ojo andimproving the product offering to our retail and service operatorcustomers. Finally, our third objective to ensure we had funding tosupport our development, sales and distribution efforts in order toleverage our video phone leadership role has been accomplished by theconcurrent announcement today that the Company has secured up to $11million of additional funds from Cornell Capital Partners.

Highlights of the first two areas of accomplishment are notedbelow. Please refer to our earlier press release today regarding theadditional financing we have obtained.

Marketing and Distribution Transition

The Company has seamlessly added direct responsibility and controlfor the advertising, marketing, and distribution of its products.
-- Transitioned all retailers associated with our former
distributor.

-- Concluded several significant new customer deals:

-- Announcement of a multi-year resale and supply agreement
with British Telecom providing for their purchase of
WorldGate's Ojo(TM) Shadow personal video phones for
resale to their customers. The acceptance of Ojo by a
service provider with BT's credibility has added to the
interest level of many other service providers.

-- Announcement of a multi-year agreement with Aequus
Technologies Corp., a provider of communication solutions
for individuals with disabilities, to use the Ojo Personal
Video Phone to supply Video Relay Services (VRS) across
the United States to individuals who are deaf or hard of
hearing.

-- Announcement of a resale and supply agreement with Alta
Vista Management, Inc. for Ojo Shadow personal video phone
and the Ojo video phone service for Panama, Columbia and
Costa Rica.

-- Announcement of a resale and supply agreement with Express
Telecom, a Russian telecommunications provider, providing
for Express Telecom's purchase of WorldGate's Ojo Shadow
personal video phones for resale to customers in Russia.

-- Announcement of a resale and supply agreement with Israel
Communications, a leading marketer of digital
communications products in Israel, providing for the
purchase of WorldGate's Ojo(TM) Shadow personal video
phones and the Ojo service for resale to customers in
Israel.

-- Announcement of an agreement with Novatec Corporation, a
Japan-based provider of network solutions, to distribute
and resell WorldGate's line of Ojo video phones in Japan.

-- Announcement of a resale and supply agreement with
GlobalTouch Telecom, the leading provider of proprietary,
vertically-integrated VoIP platforms, for the purchase of
WorldGate's Ojo and Ojo(TM) Shadow personal video phones.
This agreement has significant favorable implications for
Ojo penetration into VoIP provider's offerings.

-- The Company expects the placement of its Ojo video phone in as
many as 15 cable and network TV shows this fall, many of which
will include Ojo calls as part of the script.

Product Repositioning

-- Ojo(TM) Shadow was introduced into the marketplace, a lower cost version of our personal video phone currently having a manufacturers' suggested retail price (MSRP) of $399 and a street price of $299. The Company also reduced the MSRP of the original Ojo to $499 with a street price of $399. The Shadow has created more product excitement and interest for service operators, retailers and consumers.

-- Announcement that Ojo Personal Video Phones are now capable of handling VoIP services, which facilitates the coupling of Ojo with VoIP services and provides the VoIP providers with a more attractive selling proposition.

Financial Summary:

Revenues for the three months ended June 30, 2006 were $186,000.This revenue excludes several thousand units which total over $1.2million that were shipped to customers, but for which revenue couldnot be recognized in the second quarter based on various accountingrevenue recognition standards. These shipments are, however, expectedto be recorded as revenue beginning in the third quarter. Revenues forthe three months ended June 30, 2005 were $1.4 million reflecting aninventory build by our former exclusive distributor in anticipation ofproduct rollout. The cost of goods for the three months ended June 30,2006 includes $466,000 primarily related to adjustments for lowerinventory market valuations. No such adjustment was made for the threemonths ended June 30, 2005. Reserves for consumer rebates, productrework, and aggressive forward product pricing further reduced marginsin the three months ended June 30, 2006.

Expenses for the three months ended June 30, 2006 were $4.1million compared to $3.1 million for the three months ended June 30,2005. The expenses in the second quarter 2006 included non cashcharges of $225,000 from the Company's adoption of the fair valuerecognition provisions of Statement of Financial Accounting Standards("SFAS") No. 123 (Revised 2004), "Share-Based Payment," ("SFAS123(R)"), using the modified-prospective-transition method. Prior toJanuary 1, 2006, the Company did not recognize stock-basedcompensation cost in its statement of operations. In addition,expenses in the second quarter reflect $606,000 of penalties relatedto the non registration of shares previously placed with privateinvestors. As of June 1, 2006 the registration statement coveringthese shares became effective and the penalty ceased.

For the three months ended June 30, 2006, the net loss availableto common shareholders was $5.1 million compared to a net lossavailable to common shareholders of $0.5 million for the three monthperiod ended June 30, 2005. The three months ended June 30, 2005included a non cash gain of $2.5 million associated with the change infair value of warrants and conversion options of the private placementfunding we received in June 2004 whereas the three months ended June30, 2006 included a non cash loss of $0.5 million for these sameelements. In addition, as previously noted, the three months endedJune 30 ,2006 included non cash charges of $225,000 from the Company'sadoption of the fair value recognition provisions of SFAS No. 123 and$606,000 of penalties related to the non registration of sharespreviously placed with private investors.

Per share loss was $0.13 available to common shareholders for thethree months ended June 30, 2006 compared to income per share of $0.02available to common shareholders for the three month period ended June30, 2005. This increase in per share loss primarily reflects thechange in the fair value of warrants and conversion options aspreviously noted related to the private placement funding we receivedin June 2004, the adoption of the fair value recognition provisions ofSFAS No. 123 and penalties related to the non registration of sharespreviously placed with private investors.

Cash amounted to $7.2 million as of June 30, 2006, compared to$7.5 million at June 30, 2005.

"We are excited about the continued high level of interest in ourOjo Video phone and that the interest keeps snowballing with everydeal we announce," said Hal Krisbergh, Chairman and CEO of theCompany. Krisbergh continued, "These deals with service operators andother distributors of our products are not only evidence of theacceptance of Ojo worldwide, but also signify that the age of videotelephony has now arrived. We are extremely excited that Ojo'squality, in terms of technology and design, is a driver for videotelephony market growth, and that WorldGate is well positioned, from afirst mover perspective, to lead the charge of personal videotelephony and participate is this market growth. The funding we havejust received further positions our Company for this growth, fromresearch and development to global sales and marketing."

Conference Call:

The Company has scheduled a conference call on Tuesday, August 15,2006 at 8:30 AM Eastern time to discuss the status of its Ojo Videophone and second quarter financial results. The conference calltelephone number is (800) 289-0508. The conference ID is 2624833. Areplay of the conference call will be available for one week after thecall on the WorldGate website at www.wgate.com
Financial Tables:
-----------------

Three Months Ended June 30,
---------------------------
2006 2005
---- ----
Total Revenues $186 $1,399
Cost of Revenues 739 1,266
------------- -------------
Gross Margins (553) 133
------------- -------------

Engineering and Development 1,540 1,243
Sales and Marketing 548 640
General and Administrative 1,846 1,017
Depreciation and Amortization 184 171
------------- -------------
Total Operating Expenses 4,118 3,071
------------- -------------

Loss from operations (4,671) (2,938)
Change in fair value of warrants and
conversion option (520) 2,466
Other Income, Net 100 106
------------- -------------
Net Loss (5,091) (366)
Accretion on preferred stock, dividends and
deemed dividends (40) (139)
------------- -------------
Net Loss available to common stockholders $(5,131) $(505)

Net Loss per common share
Basic $(0.13) $(0.01)
Fully Diluted $(0.13) $(0.01)
Net Loss available to common stockholders
per common share
Basic $(0.13) $(0.02)
Fully Diluted $(0.13) $(0.02)
Weighted average common shares outstanding
Basic 39,625,256 33,546,229
Fully Diluted 39,625,256 33,546,229

Six Months Ended June 30,
-------------------------
2006 2005
---- ----
Total Revenues $696 $1,577
Cost of Revenues 1,181 1,390
------------ ------------
Gross Margins (485) 187
------------ ------------

Engineering and Development 2,994 2,462
Sales and Marketing 1,201 1,018
General and Administrative 4,369 1,951
Depreciation and Amortization 363 342
------------ ------------
Total Operating Expenses 8,927 5,773
------------ ------------

Loss from operations (9,412) (5,586)
Change in fair value of warrants and
conversion option (339) 7,642
Gain on contract termination 1,792 0
Other Income, Net 233 172
------------ ------------
Net Income (Loss) (7,726) 2,228
Accretion on preferred stock, dividends and
deemed dividends (108) (635)
------------ ------------
Net Income (Loss) available to common
stockholders $(7,834) $1,593

Net (Loss) Income per common share
Basic $(0.20) $0.07
Fully Diluted $(0.20) $0.06
Net (Loss) Income available to common
stockholders per common share
Basic $(0.20) $0.05
Fully Diluted $(0.20) $0.04
Weighted average common shares outstanding
Basic 39,610,667 32,569,598
Fully Diluted 39,610,667 36,495,858

WorldGate Communications - Consolidated Balance Sheet Data
(in thousands)

June 30, 2006 December 31, 2005
------------- -----------------
Cash and Cash Equivalents $7,232 $16,277
Trade and Other Receivables 880 159
Inventory 1,958 2,878
Total Assets 12,063 21,229
Total Liabilities 5,031 7,133
Redeemable Preferred Stock 148 379
Total Stockholders' Deficiency 6,884 13,717

ABOUT WORLDGATE COMMUNICATIONS INC.

WorldGate Communications, Inc. designs, manufactures, anddistributes personal video phones. WorldGate's products will bemarketed to consumers through cable, DSL, VoIP and satellite serviceproviders as well as through retail stores worldwide under the Ojobrand name. Ojo personal video phones offer high quality, real-time,two-way video communications with video messaging and an optionalcordless handset. Ojo is easy to install, and is as easy to operate asa regular telephone; since it plugs into a broadband connection, no PCis required, and it uses the existing phone number. Ojo (PVP 1000)also makes conventional (or VoIP) voice-only phone calls using theexisting household telephone service. Ojo's iconic and functionaldesign features an eye-level screen and camera, a self-viewer, afull-duplex speakerphone, photo-based caller ID and phonebook andone-touch controls for video and voice privacy. Ojo video phone isdesigned to conform to industry standard protocols (SIP) and utilizesenhancements to the latest technology for voice and video compression(H.264) to achieve superior quality at data rates as low as 100 Kbps.WorldGate has been awarded a patent for its distinctive design and hasother patents pending for its specialized technology. This uniquecombination of functional design, advanced technology and use ofbroadband networks provides real-time video communication experiencesthat bring families and friends closer together, and for the firsttime provides consumers with a high-quality, affordable video phone.More information on WorldGate and the Ojo video phone can be accessedat www.wgate.com.

WorldGate is traded on Nasdaq under the symbol WGAT. WorldGate andOjo are trademarks of WorldGate Service Inc.

This press release may contain forward-looking statements that aremade pursuant to the safe-harbor provisions of the Private SecuritiesLitigation Reform Act of 1995. Expressions of future goals and similarexpressions including, without limitation, expressions using theterminology "may", "will", "believes", "plans", "expects","anticipates", "predicts", "forecasts", and expressions whichotherwise reflect something other than historical fact are intended toidentify forward-looking statements. These forward-looking statementsinvolve a number of risks and uncertainties, including the timelydevelopment and market acceptance of products and technologies, theability to fund operations or raise additional capital if needed andthe other factors described in the Company's filings with theSecurities and Exchange Commission. The actual results may differmaterially from any forward-looking statements due to such risks anduncertainties. No obligation is undertaken to revise or update anyforward-looking statements in order to reflect events or circumstancesthat may arise after the date of this release