Cryptologic WagerLogic Casinonews

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16.10.2006

CRYPTOLOGIC MARRIES POKER AND BLACKJACK - FOR A UNIQUE GAMING EXPERIENCE

Hold'Em Blackjack™ combines simplicity of blackjack, intensity of poker - available only from CryptoLogic

October 16, 2006 (Toronto, ON) - CryptoLogic Inc., a leading software developer to the global Internet gaming industry, today unveiled Hold'Em Blackjack, a brand new game that combines the simplicity of blackjack with the intensity of poker.

Hold'Em Blackjack was created exclusively for licensees of WagerLogic Limited, CryptoLogic's licensing subsidiary, by Andy Goetsch, CryptoLogic's VP of Poker Software Development and a world-class poker player in his own right. Goetsch and his team have breathed new life into the traditional game of 21 by giving players the betting and bluffing excitement of Texas Hold'Em Poker along with the straightforward play of casino blackjack.

"Hold'Em Blackjack is just the latest example of CryptoLogic's unique brand of innovation and intelligence, which consistently wins the heart of the online player," said Lewis Rose, CryptoLogic's President and CEO. "For CryptoLogic, it's a simple yet exciting concept - powerfully executed. For players, it's a whole new entertainment experience. And for the world's blue-chip gaming brands, Hold'Em Blackjack is another way to keep players coming back for more."

Unlike traditional blackjack, Hold'Em Blackjack's "player vs. player" format means the prize pot is determined by player bets, which ensures that a player wins every hand. The game consists of three rounds of betting, bluffing and skill. With Hold'Em Blackjack, the best hand is not always the winning hand.

"Hold'em Blackjack pits players against each other, rather than the House, taking blackjack to a whole new level," said Andy Goetsch, VP, Poker Software Development for CryptoLogic. "Because blackjack is a familiar game to play, the learning curve for Hold'em Blackjack is very fast. After just a couple of hands almost anyone can be an expert."

Offered exclusively through WagerLogic, Hold'Em Blackjack was recently launched at williamhillpoker.com, interpoker.com, sunpoker.com, pokerplex.com, ukbettingpoker.co.uk, littlewoodspoker.com, and classicpoker.com. CryptoLogic's latest innovation is already creating buzz throughout the international e-gaming community.

"The initial response has been tremendous," noted AJ Slivinski, WagerLogic's Managing Director. "Based on the feedback we've received, Hold'Em Blackjack is already becoming a player favourite."

Hold'Em Blackjack online satellite tournaments provide players with the opportunity to compete for US$6,100 prize packages, each including a seat in the exclusive 200-player live event at the 2006 Caribbean Poker Classic (CPC) in St. Kitts between November 24 and December 3. WagerLogic's licensees have added US$50,000 to the prize pool, creating a total prize package of a quarter-million dollars for the CPC's Hold'Em Blackjack tournament.

CryptoLogic-developed software powers one of the top five revenue-generating poker sites on the Internet, shared by some of the world's top Internet gaming brands, including a soon-to-be launched Playboy site. For more information on Hold'Em Blackjack, including a tutorial, strategy tips and high resolution images, visit www.holdemblackjack.com.

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23.10.2006

CRYPTOLOGIC SOFTWARE A SAFE BET FOR BETSAFE

Leading Scandinavian gaming site becomes CryptoLogic's newest customer

October 23, 2006 (Toronto, ON) - CryptoLogic Inc., a leading software developer to the global Internet gaming industry, today announced an exclusive three-year contract with Betsafe, one of the fastest-growing poker sites in Scandinavia. The agreement, made through CryptoLogic's wholly-owned subsidiary WagerLogic Limited, will introduce CryptoLogic's proven poker software to Betsafe players later this year.

"For poker licensees, size matters. Thanks to a five-year focus on international markets, CryptoLogic's software now powers the world's largest shared poker network that excludes US players," said Lewis Rose, CryptoLogic's President and CEO. "Our size advantage, plus our adherence to strict regulatory standards will give Betsafe-and its players-a profitable, safe home online. Betsafe's established, rapidly growing player base and reputation for safe, secure gaming fit perfectly with CryptoLogic's focus on the world's blue-chip gaming brands."

CryptoLogic's reputation and market-leading strength in Betsafe's core European markets were key factors in Betsafe's decision.

"When we decided to expand our poker room, we knew we wanted a trusted software provider with a reputation for liquidity, stability, quality and integrity. CryptoLogic offered all this - and more," said Andre Lavold, Betsafe's CEO. "CryptoLogic's suite of innovative, exclusive games will bring new excitement to our poker players across Europe and beyond."

Through WagerLogic, Betsafe's players have access to the world's largest shared poker network that excludes the US market, enabling them to find a game at the level and stake they want, in the currency they want, when they want. Players can also take advantage of some of the Internet's most popular online games. These include the new Hold'Em BlackjackTM, a game created exclusively for CryptoLogic licensees, which combines the intensity of poker with the simplicity of blackjack.

"The addition of Betsafe to our select roster of blue-chip licensees enhances our focus on Europe," said A.J. Slivinski, WagerLogic's Managing Director. "We're very excited to provide our software and services to Betsafe, and look forward to a long relationship."

Betsafe.com joins licensees including williamhillpoker.com, interpoker.com, sunpoker.com, pokerplex.com, classicpoker.com, ukbettingpoker.co.uk, littlewoodspoker.com, and a soon-to-be launched Playboy site. CryptoLogic's strategy to strengthen its leadership in Internet poker involves investing in strong partnerships with trusted, brand name licensees, and in product development and system scalability.

About CryptoLogic® (www.cryptologic.com)
Focused on integrity and innovation, CryptoLogic Inc. is a world-leading, blue-chip public developer and supplier of Internet gaming software. CryptoLogic's leadership in regulatory compliance makes it one of the very few companies with gaming software that is certified to strict standards similar to land-based gaming. WagerLogic Limited, a wholly-owned subsidiary of CryptoLogic, is responsible for the licensing of the company's gaming software and services to a blue-chip customer base around the world. For information on WagerLogic®, visit www.wagerlogic.com.

CryptoLogic's common shares trade on the Toronto Stock Exchange (symbol: CRY), on the NASDAQ Global Select Market (symbol: CRYP), and on the Main Market of the London Stock Exchange (symbol: CRP).

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26.10.2006

CRYPTOLOGIC'S NEW POKER TOURNAMENT LEADER BOARD A 'WINDFALL' FOR PLAYERS

Tournament rankings give licensees' players new chances to win, and bragging rights

October 26, 2006 (Toronto, ON) - CryptoLogic Inc., a leading software developer to the global Internet gaming industry, has unveiled poker tournament leader board software that provides licensees new opportunities to create exciting events and gives their players new chances to win-and brag! Licensees of WagerLogic Limited, CryptoLogic's wholly-owned subsidiary, launched the leader board October 21 in connection with their Autumn Windfall promotion.

"Our software now powers the world's largest shared poker network that excludes US players," said Lewis Rose, CryptoLogic's President and CEO. "Innovations like the tournament leader board and Hold'Em Blackjack, announced last week, meets the needs and desires of online players throughout the world."

The Autumn Windfall promotion, which ends on November 19th, gives players a chance to win more than $300,000 in money-added tournaments and leader board prizes. The most successful player from the three daily tournaments will be crowned 'King of Poker', collect the top leader board prize-and the prestige. The 150 highest ranked players on the leader board will earn money.

"With only three daily tournaments contributing to the leader board, the Autumn Windfall promotion gives even casual players a real shot at winning," noted AJ Slivinski, WagerLogic's Managing Director. "No other unified leader board software puts all poker players on such even footing."

The Autumn Windfall and future leader board events are available at WagerLogic's licensees' sites, including williamhillpoker.com, interpoker.com, sunpoker.com, pokerplex.com, classicpoker.com, ukbettingpoker.co.uk, littlewoodspoker.com. Soon, leader board events will also be available from CryptoLogic's newest licensees, Playboy and Betsafe.

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01.11.2006

CRYPTOLOGIC MAINTAINS QUARTERLY DIVIDEND AT US$0.12 PER SHARE

November 1, 2006 (Toronto, ON) - CryptoLogic Inc., a leading software developer to the global Internet gaming market, announced today that its Board of Directors has declared the company's quarterly dividend of US$0.12 per common share, which is unchanged from the previous two quarters. The dividend represents an increased payout rate of future earnings, which are expected to be affected in the near term as the company's licensees no longer accept bets from US players.

CryptoLogic has demonstrated a track record of strong revenue generation, consistent earnings and positive cash flow. The decision to increase the dividend payout rate reflects CryptoLogic's ongoing confidence in its business.

The dividend will be paid on December 15, 2006 to shareholders of record as at December 8, 2006. The ex-dividend date will be December 6, 2006.

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03.11.2006

CryptoLogic Increases Third Quarter Revenue 32% and EPS 47%

November 3, 2006 (Toronto, ON) – CryptoLogic Inc., a leading software developer to the global Internet gaming industry, reported financial results for the third quarter and nine months ended September 30, 2006, including a 32% increase in quarterly revenue to $27.7 million, and a 47% increase in earnings per diluted share to $0.53. With record year-to-date financial results and $129 million in cash,
CryptoLogic will continue to invest aggressively in the growth of its business.

“CryptoLogic’s excellent results for the third quarter and the first nine months of 2006 reflect our strategy of innovation and our strong diversified revenue base,” said Lewis Rose, CryptoLogic’s President and CEO. “We have already recorded higher earnings in the nine months to date in 2006 than we did for all of 2005.”



On October 13, the United States Government passed the Unlawful Internet Gambling Enforcement Act into law, effectively banning online gaming in the US. CryptoLogic had already taken action by ensuring that all of its licensees had stopped accepting bets from US players. While this will significantly reduce the company’s revenue and earnings in the short-term, CryptoLogic is poised to be a leader in a new online gaming world that excludes the US market.

“Since 2001, CryptoLogic has been preparing for this eventuality by shifting its business to continental Europe and the UK. We have achieved record year-to-date revenue and earnings and we now power the world’s largest poker network that excludes US players,” Rose added. “Our company’s diversification, strong balance sheet, thriving European customers and potential new business in emerging markets enable us to face the future with confidence.”

Since passage of the US law, CryptoLogic has announced the following developments to strengthen the company:

· Signed an exclusive new poker licensee (Betsafe);
· Unveiled two new exclusive games (Hold’em BlackjackTM and Cubis);
· Introduced an innovative new Poker Tournament Leader Board; and
· Announced that it is maintaining its quarterly cash dividend of US$0.12.


In addition, since the last quarterly report, CryptoLogic has:

· Enhanced its poker network platform to triple poker room capacity and increase uptime;
· Enhanced its contact centre technology and systems to dramatically improve customer service and operating efficiency;
· Renewed its normal course issuer bid.


Financial Performance Ahead of Estimates
Total Revenue. CryptoLogic grew total revenues to $27.7 million, 32% ahead of Q3 2005 and ahead of the company’s estimate of $26.5 to $27.0 million, due to solid organic growth in Internet poker and Internet casino fees.


EBITDA(1). The company grew EBITDA(1) to $7.6 million, 27% higher than Q3 2005. EBITDA(1) margin in the quarter was 27%, slightly below 28% in Q3 2005. The decrease was due to $1.6 million in reorganization costs incurred in Q3 2006 associated with the proposed establishment of CryptoLogic’s new executive headquarters in Ireland. Excluding the charge, EBITDA(1) would have been $9.2 million and EBITDA(1) margin would have been 33%.

Earnings and Earnings per Diluted Share. CryptoLogic grew earnings to $7.2 million, 41% higher than Q3 2005, and grew diluted earnings per share to $0.53, 47% ahead of Q3 2005 and above the company’s estimate of $0.48 to $0.51. The company attributes the better-than-expected results to greater-thananticipated revenue in the quarter and lower general and administrative costs in the quarter, due primarily to a recovery of $0.8 million in previously-paid sales taxes. Excluding the charge for the proposed Irish headquarters, Q3 earnings would have been $8.9 million and diluted EPS $0.64 (up 73% and 78%, from Q3 2005).

Balance Sheet and Cash Flow. CryptoLogic’s financial strength continued to be reflected in its strong balance sheet and operating cash flow. At September 30, 2006, total cash grew to $129.2 million (comprising cash and cash equivalents, short term investments, and security deposits), or $9.37 per diluted share (December 31, 2005: $99.1 million, or $7.05 per diluted share). The company continues to be debt-free. CryptoLogic’s working capital at September 30, 2006 rose to $97.2 million, or $7.05 per diluted share (December 31, 2005: $73.6 million, or $5.23 per diluted share). Cash flow from operating activities was $5.7 million in Q3 2006 (Q3 2005: $14.2 million). Cash flow from operations in Q3 2005
was higher than in Q3 2006 despite lower earnings because of favourable fluctuations in non-cash operating assets occurring in that quarter in the ordinary course of business.

Record Nine-month Results
CryptoLogic reported record results for the nine months ended September 30, 2006, reflecting substantial organic growth in licensees’ online gaming activities over the comparable period in 2005:

· Revenue: $85.0 million, or 39% higher;
· EBITDA(1): $25.7 million, or 48% higher;
· EBITDA(1) excluding restructuring costs: $28.3 million, or 63% higher;
· EBITDA(1) margin: 30% vs. 28%;
· Earnings: $23.1 million, or 57% higher;
· Earnings excluding restructuring costs: $25.7 million, or 75% higher;
· Earnings per diluted share: $1.68, or 62% higher;
· Earnings per diluted share, excluding restructuring costs: $1.87, or 80% higher;
· Cash flow from operating activities: $35.4 million, or 51% higher.


Strategic Milestones
Since CryptoLogic’s last quarterly results announcement, the company has significantly advanced all of its key business strategies: customer, geographic and product diversification, and product innovation. The company also made progress through major corporate initiatives.


Customer Diversification. CryptoLogic continued to maximize and diversify its growth opportunities across a select portfolio of successful customers with the announcement of an exclusive three-year contract with Betsafe, one of the fastest-growing poker sites in one of the world’s fastest-growing poker markets—Scandinavia. Having signed both Betsafe and Playboy, the company has achieved its goal of adding two new licensees in 2006, and continues discussions with other new prospects.


Geographic Diversification. During Q3, the company maintained its diversification across jurisdictions with strong opportunities for growth and profitability. More than 70% of licensees’ revenue continued to be generated from markets outside the US. The UK and continental Europe together accounted for over 60% of total revenue in the quarter. Since the passage of prohibition legislation in the US after quarterend, WagerLogic’s licensees no longer take bets from US players. Today, 100% of licensees’ revenue comes from markets outside the US.

During Q3, CryptoLogic also established its first Asian presence in Singapore and hired a Managing Director for the region. While the company’s short-term focus is on Europe, CryptoLogic sees Asia as the next major online gaming market. There are approximately four billion people in Asia, or 10 times the population of North America, and gaming has been part of Asian culture for thousands of years.


Product Diversification and Innovation. In Q3, CryptoLogic continued its focus on the most promising online gaming product markets: casino and poker. During Q3, Internet casino fees represented 59% of revenue, while Internet poker fees contributed 30%. In Q3 and more recently, CryptoLogic furthered its reputation as the industry’s innovation leader with the announcement of exciting new initiatives:

· Two new exclusive games—the first ever slot version of Cubis®, an award-winning, visually stunning, hugely popular three-dimensional puzzle game, and Hold’Em BlackjackTM, a brand new internally-developed poker game that combines the simplicity of blackjack with the intensity of Texas Hold’Em poker;
· Poker Tournament Leader Board. An innovative feature that provides poker licensees new opportunities to create exciting events and gives their players new chances to win;
· Distributed poker. The new poker platform triples poker room capacity, increases uptime and lets licensees locate the room and/or introduce new games with little or no disruption;
· Enhancements to CryptoLogic’s contact centre technology and systems have dramatically
improved customer service and operating efficiency.


Corporate Initiatives. To be close to its customers and the heart of has announced its intention to establish its executive headquarters shareholder and regulatory approvals. The company is moving aspects of it are taking longer than expected. The company no meeting in December and will provide an update in due course.

Additionally, the company has declared a dividend of US$0.12 per share, which is unchanged from the previous two quarters. The dividend represents an increased payout rate of future earnings, which are expected to be affected in the near term as the company’s licensees no longer accept bets from US players. CryptoLogic has demonstrated a track record of strong revenue generation, consistent earnings
and positive cash flow. The decision to increase the dividend payout rate reflects CryptoLogic's ongoing confidence in its business.

The company also renewed its normal course issuer bid, authorizing share repurchases of up to 10% of the public float in a year.


Strategy Update and Outlook
While licensees’ exit from the US market will affect financial results in the short term, the company remains optimistic about the future of online gaming and the company’s position as one of the leaders within it. CryptoLogic is in excellent financial position to build on the global strategy that has led to record results in both 2005 and 2006. In particular, the Company will:

1. Continue its game innovation strategy. The company is fully committed to several innovative casino and poker projects, both underway and planned, and is confident they will contribute to building licensees’ revenue as similar projects have done before.
2. Aggressively pursue new poker opportunities, like Betsafe, that will enhance the liquidity of licensees’ poker network—already the world’s largest that excludes US players.
3. Tightly control and optimize expenditures by a thorough review of discretionary costs, operating expenses and capital expenditures. The company is not planning significant changes to its cost structure as the company will use current resources to execute current projects and take advantage of significant revenue-enhancing opportunities in Europe, Asia and other major international markets.
4. Aggressively pursue strategic, accretive acquisition opportunities to accelerate the advancement of the company’s strategies. Acquisition opportunities have multiplied since passage of the new US law, and the company will continue to evaluate new and existing prospects.
5. Expand in Asia. CryptoLogic will continue to build its European leadership position and over time will expand its Asian presence to become a leader in this large, emerging market.

For Q4 2006, CryptoLogic estimates that revenue will be $19.0-$20.0 million and earnings will be $1.5- $2.0 million, or $0.11-$0.15 per diluted share, after special pre-tax restructuring costs of $1.4 million ($0.21 to $0.25 per diluted share before such costs). These Q4 estimates reflect the departure of Betfair from the licensees’ poker network but do not include the addition of Betsafe, which is expected to launch late in Q4. The company expects to begin earning revenue from Playboy beginning in Q1 2007.

2006 Third Quarter Analyst Call
A conference call is scheduled today for 8:30 a.m. Eastern time (1:30 p.m. GMT). Interested parties should call either 416-695-5259, 1-877-888-4210 (North America) or the international toll free number at (Country Code) 800-4222-8835. Replay will be available through November 10, 2006 by calling 416-695-5275 or 1-888-509-0081, passcode 633340#.



MANAGEMENT’S DISCUSSION AND ANALYSIS

CryptoLogic Inc. and our subsidiaries are referred collectively
as “CryptoLogic”, “the Company”, “we”, “us” and “our” throughout Management’s Discussion and Analysis (“MD&A”), unless otherwise specified. The following MD&A should be read in conjunction with the unaudited consolidated interim financial statements of CryptoLogic, including the notes thereto, for the three and nine months ended September 30, 2006, and the audited consolidated financial statements and the MD&A for the year ended December 31, 2005 as set out in our 2005 Annual Report. Except where otherwise indicated, the reader may assume that economic and industry factors are substantially unchanged from the 2005 year-end MD&A. This MD&A is dated November 3, 2006. Additional information relating to CryptoLogic, including our Annual Information Form, is available on SEDAR at www.sedar.com or EDGAR at www.sec.gov.


All currency amounts are in US dollars, unless otherwise indicated.

BUSINESS OVERVIEW

CryptoLogic is a world-leading publicly-traded online gaming software developer and supplier serving the global Internet gaming market. WagerLogic Limited (“WagerLogic”), a wholly-owned subsidiary of CryptoLogic, provides software licensing, e-cash management, marketing support and customer support services for our Internet gaming software to an internationally-recognized blue-chip client base (“licensees” or “customers”) around the world who operate under government authority where their Internet businesses are domiciled.


UNLAWFUL INTERNET GAMBLING ENFORCEMENT ACT

On September 29, the United States Congress approved the Unlawful Internet Gambling Enforcement Act (UIGEA), which prohibits financial transaction processing in the US online gaming market. Accordingly, WagerLogic’s licensees stopped taking wagers from US-based players immediately. The Act was made
law on October 13 and had no effect on Q3 2006 financial results.

As approximately 30% of licensees’ revenue has typically come from US players, CryptoLogic believes that the UIGEA will have a significant short-term negative impact on future financial results. Additionally, the UIGEA may increase competition throughout Europe, which could negatively impact the Company’s business. However, 70% of our licensees’ business has come from players outside the US—over 60% from the UK and continental Europe alone—which positions us well relative to many other significant participants in the industry. Notwithstanding the anticipated increase in competition arising from the passage of the UIGEA, the advantage of our European base of business is expected to present new opportunities for the Company, such as the recent agreement with Betsafe.

OVERVIEW OF RESULTS
CryptoLogic reported strong results in Q3 2006 that were significantly ahead of Q3 2005 despite incurring $1.6 million in charges associated with the proposed establishment of an executive headquarters in Ireland. The improvement was primarily attributable to organic growth in online casino and online poker player activity among CryptoLogic’s licensees’.

Revenue rose 32% in Q3 2006 to $27.7 million (Q3 2005: $21.0 million). Q3 2006 EBITDA(1) increased by 27% to $7.6 million (Q3 2005: $5.9 million). EBITDA(1) margin dipped slightly to 27% of revenue in Q3 2006 (Q3 2005: 28%). Earnings in the quarter rose 41% to $7.2 million, or $0.53 per diluted share (Q3 2005: $5.1 million, or $0.36 per diluted share). We achieved the gains in EBITDA(1) and net earnings despite $1.6 million in charges associated with the proposed establishment of our executive headquarters in Ireland.


CryptoLogic’s balance sheet at September 30, 2006 continued to be strong. Cash, cash equivalents, security deposits and short term investments rose to $129.2 million at quarter-end (December 31, 2005:

$99.1 million). The Company had no debt at quarter-end, nor year-end 2005. Working capital at September 30, 2006 grew to $97.2 million (December 31, 2005: $73.6 million).

Revenue for the nine-months ended September 30, 2006 increased 39% to $85.0 million (Q3 2005 YTD: $61.2 million). EBITDA(1) for the first nine months in 2006 rose by 48% to $25.7 million (Q3 2005 YTD: $17.3 million). EBITDA(1) margin for the first nine months in 2006 grew to 30% of revenue (Q3 2005 YTD: 28%). Nine-month earnings improved by 57% to $23.1 million, or $1.68 per diluted share (Q3
2005 YTD: $14.7 million, or $1.04 per diluted share).

On November 1, CryptoLogic’s Board of Directors declared its next quarterly cash dividend of US$0.12 per share, which is unchanged from the previous two quarters. The dividend is payable on December 15, 2006 to shareholders of record on December 8, 2006.


RESULTS OF OPERATIONS

Revenue
In Q3 2006, CryptoLogic grew revenue 32% to $27.7 million (Q3 2005: $21.0 million), fueled by strong organic growth by licensees. Online casino was the largest and fastest growing portion of revenues. Revenue for the first nine months of 2006 increased 39% to $85.0 million (Q3 2005 YTD: $61.2 million).

Internet Casino
Q3 2006 Internet casino fees grew 29% to $16.3 million (Q3 2005: $12.6 million) and accounted for 59% of total Q3 2006 revenue (Q3 2005: 60%). For the year to date, Internet casino software revenue grew 31% to $49.2 million and represented 58% of total revenue (Q3 2005 YTD: $37.5 million; 61% of total
revenue).

Casino software and support services fee revenue is calculated as a percentage of a licensee’s level of activity in its online casino site. Such revenue is affected by the number of active players on licensees’ sites and their related gaming activity. In turn, these results are influenced by a variety of factors, including the effectiveness of our licensees’ marketing programs, the entertainment value of
CryptoLogic-developed casino games, and the frequency and success of new offerings.

In order to help licensees offer a fresh and dynamic entertainment experience that attracts and retains players, CryptoLogic typically releases new casino game packs twice each year. The company believes that the improvement in both Q3 2006 and year-to-date casino licensing revenue over the comparable periods of 2005 was attributable to organic growth at our licensees’ sites, driven largely by the success of the innovative new, high-yield games launched in Q2 2006 and previously.

The release in Q2 2006 of 11 new casino games contributed significantly to licensing revenues in the third quarter. Exciting, high-yield slot game titles, like new Marvel Super Hero-themed games based on Thor and Silver Surfer, performed well, as did an updated 20-line version of Rags to Riches. Previously
released slots such as The Hulk, Bejeweled and Millionaires ClubTM continued to draw significant wagering at our licensees’ sites. At $4.6 million (or £4.6 million or €4.6 million), the Millionaires ClubTM jackpot continues to be the largest jackpot in online gaming history.

The Company expects the release of its next game pack in Q4 2006 to help drive revenue in what is typically a stronger quarter for Internet gaming (see Revenue trends in this MD&A). In total for Q4 2006, however, we expect Internet casino revenue to decrease from recent quarters as licensees no longer accept bets from US players as a result of the UIGEA. Such players represented approximately 40% of licensees’ Internet casino revenues for the year to date (see Outlook and Unlawful Internet Gambling Enforcement Act in this MD&A).


Internet Poker
Q3 2006 Internet poker fees grew 19% to $8.3 million (Q3 2005: $7.0 million) and represented 30% of Q3 2006 revenue (Q3 2005: 33%). For the year to date, Internet poker software revenue grew 43% to $27.2 million and represented 32% of total revenue (Q3 2005 YTD: $19.1 million; 31% of total revenue).

Through WagerLogic, CryptoLogic offers a “virtual” central poker room for its licensees. Based on published reports and our own estimates, we believe that our licensees’ central poker network is the world’s largest that excludes US players.

Fees from online poker are based on a percentage of the licensee’s “rake” per hand in regular or ring games (the rake is typically 5% of the pot, up to a maximum amount per hand), or fixed fees for entry into poker tournaments. Players prefer poker rooms with strong “liquidity” — rooms that offer high availability of games at the desired stake levels, in their currency of choice, on a 24/7 basis.

The growth in poker software licensing revenue in both Q3 2006 and the year to date over comparable periods of 2005 was attributable to organic growth at our poker licensees’ sites. Over that time, CryptoLogic has added a number of features, including faster ring and tournament games that have increased the revenue-earning potential of the room for licensees and ourselves.

The Company believes that its Internet poker business in Q3 2006 would have grown faster in the absence of competition during July and August for players’ attention from the premier land-based poker tournament, the World Series of Poker, and from FIFA World Cup in the first week of July (see Revenue trends in this MD&A).

During Q3 2006 and shortly thereafter, we launched two new developments which we believe will improve poker room liquidity in the future. First, our new poker platform, Distributed Poker, triples poker room capacity to over 50,000 simultaneous players, increases uptime and lets licensees introduce brand new games into the central room with little or no disruption to players or games. Also, subsequent to quarter end, CryptoLogic introduced Hold’Em BlackjackTM, a brand new game that combines elements of blackjack and poker. Instead of playing against the house, players try to reach 21 while wagering on hands and competing for a pot in a head-to-head format, like poker. Hold'Em BlackjackTM was developed internally exclusively for licensees of WagerLogic Limited.

We expect these developments and the addition of our newest licensee, Betsafe, to help drive poker revenue in Q4 2006 and beyond. However, in total for Q4 we expect Internet poker revenue to decrease due to Betfair’s exit from the poker room at the end of October 2006, moderating organic growth rates in the industry, and because our licensees no longer accept bets from US players as a result of the UIGEA. US players represented approximately 15% of licensees’ Internet poker revenues for the year to date (see Outlook and Unlawful Internet Gambling Enforcement Act in this MD&A).


Other sources of revenue
We also earn revenue from licensing our online bingo software and certain other sources, including fees for software customization, advertising and marketing support. Bingo licensing revenue continued to account for less than 1% of revenue in Q3 2006 as a result of CryptoLogic’s ongoing focus on our core software businesses, Internet casino and Internet poker. Shortly after the quarter end, our online bingo licensee stopped offering the product to players.

Other revenue in Q3 2006 was $3.1 million, or 11% of total revenue (Q3 2005: $1.3 million, or 6% of revenue). For the year to date, revenue from other sources was $8.5 million, or 10% of total revenue (Q3 2005 YTD: $4.2 million, or 7% of revenue). The increases in both Q3 2006 and year-to-date results over the comparable periods of 2005 are primarily attributable to revenue from our exit agreement with Betfair, higher revenue from our marketing support services, and increased revenue associated with our gaming information portal.

We expect the expiry of our exit agreement with Betfair in January 2007 and the UIGEA (see Unlawful Internet Gambling Enforcement Act in this MD&A) to reduce other sources of revenue, although revenue from the Playboy properties, for which we are providing marketing support services, is expected to begin in Q1 2007 and will partially offset these factors.

Geographic diversification
CryptoLogic continues to be well-diversified in key global markets that embrace online gaming. Licensees’ revenues from players outside the United States were approximately 70% of overall Q3 2006 and year-to-date revenues, as they were in Q3 2005 and Q3 2005 YTD. For all periods, the UK and Continental Europe together accounted for over 60% of revenues.

As a result of the UIGEA, WagerLogic licensees no longer accept wagers from US players. Today, 100% of licensees’ revenue comes from players outside the US (see Unlawful Internet Gambling Enforcement Act in this MD&A).


Revenue trends
We experience seasonality in our business. The first and fourth quarters of the year are typically our strongest, as players spend more time online during the colder months. We expect this trend to continue, particularly for the more developed online casino market. Online poker activity can be affected by andbased poker tournaments and other sporting events, due to the similar demographics between poker players and sports fans.

While the global online gaming market continues to promise vast growth potential, the effect of the UIGEA, moderating growth in online poker, and increased competition present challenges for the industry. We believe, however, that continued disciplined execution of our business strategy will contribute to ongoing growth in the future (see Outlook in this MD&A).


Operating Costs
Operating costs comprise software development and support costs, including all personnel, equity compensation costs for employee stock options and our Long Term Incentive Program, licensee support, customer service costs and compliance-related expenditures. Operating costs were $16.9 million in Q3 2006, or 61% of revenue (Q3 2005: $12.8 million, or 61% or revenue) and $50.4 million in the nine
months ending September 30, 2006, or 59% of revenue (Q3 2005 YTD: $38.0 million, or 62% of revenue).

[Newsflash]

09.11.2006

CRYPTOLOGIC-DEVELOPED SOFTWARE DELIVERS A HAND IN THE SAND AT THE EXCLUSIVE 2006 CARIBBEAN POKER CLASSIC™

Players to enjoy big poker excitement, big names and big prize pool estimated at $1.5 million

November 9, 2006 (Toronto, ON) - Some of the world's best Internet poker players will move from on-line to 'on-land' at the third annual Caribbean Poker Classic , an event featuring world-class poker action in the splendor of a tropical paradise. The tournament, offered exclusively through licensees of WagerLogic, CryptoLogic's wholly owned subsidiary, will take place in St. Kitts from November 24th to December 3rd, 2006.

This year's Caribbean Poker Classic will be held at the exclusive St. Kitts Marriott Resort & The Royal Beach Casino. Internet poker players are now vying to win coveted seats at the $6,300 main event, and a chance to win the estimated $1.5 million prize pot.

"For world-class poker action, the Caribbean Poker Classic is the place to be," said Andy Goetsch, CryptoLogic's Vice President of Poker Software Development. "Like CryptoLogic's poker software, the Caribbean Poker Classic attracts the best of the best - whether they learned their skills on-line or on-land. And with the addition of the first land-based Hold'Em Blackjack™ tournament, 2006 will be bigger and better than ever."

This year's event lineup has some of the game's top professionals competing for the top prize, including World Series of Poker winners Rob Varkonyi and Kathy Liebert, and some of the most recognizable faces of poker in Europe, including Willie Tann, Simon Trumper, Dave Colclough, Marc Goodwin, Ram Vaswani and Surinder Sunar.

The 2006 Caribbean Poker Classic also marks the debut on land of Hold'Em Blackjack, an exciting, easy-to-learn new game that combines the intensity of poker with the simplicity of blackjack. Developed exclusively for WagerLogic licensees by Goetsch and his team, Hold'Em Blackjack has already become a favourite with online players all over the world since its launch earlier this fall.

Hosted by WagerLogic licensees in association with Thomas Kremser's TK Poker Consulting GMBH, the Caribbean Poker Classic will also offer action-packed side tournaments and satellite games. Online players can qualify for the ultimate CPC prize pass through tournaments at williamhillpoker.com, interpoker.com, ukbettingpoker.co.uk, littlewoodspoker.com, sunpoker.com, classicpoker.com and pokerplex.com. The $11,300 prize package includes the $6,300 buy-in for the championship event, a nine-night package for two at the exclusive St. Kitts Marriot Resort and return airfare for two.

"From Internet hopefuls to professional players, the Caribbean Poker Classic proves that our software delivers what today's players want most," said A.J. Slivinski, WagerLogic's Managing Director. "While there will be just one champ, this event offers a winning hand for everyone: it's an exciting way for us to help our customers engage and drive players to their sites. And for players, it provides world-class poker action - in paradise."

CryptoLogic-developed software powers the world's largest shared poker network that excludes US players. The network includes some of the world's top Internet gaming brands, including soon-to-be launched sites from Playboy and Betsafe. For more information on the Caribbean Poker Classic, including how to qualify, visit www.caribbeanpokerclassic.com.

[Casinonews]

28.11.2006

CryptoLogic and William Hill in Contract Renewal Negotiations, Launch New Non-Download Games

TORONTO, ONTARIO, Nov 28, 2006 (CCNMatthews via COMTEX News Network) -- CryptoLogic Inc. (TSX:CRY)(NASDAQ:CRYP)(LSE:CRP), a leading software developer to the global Internet gaming industry, today announced that its wholly-owned subsidiary, WagerLogic Limited, is in the process of negotiating a renewal contract with European betting and gaming giant, William Hill. The companies have entered into a non-binding term sheet which reflects the agreement in principle and builds on the companies' mutually beneficial seven-year relationship. Additionally, William Hill launched an innovative suite of 24 new CryptoLogic-developed non-download games on its online casino site, www.williamhillcasino.com.

Based on the provisions of the term sheet, the companies expect to finalize and sign a three-year long form contract. The current contract was to expire in November but has been extended to allow for the completion of negotiations in early December.

"We have an excellent relationship with William Hill and look forward to even more success both through a new contract later this year and the new business opportunities that this exciting suite of non-downloadable games represent," said Lewis Rose, CryptoLogic's President and CEO.

WagerLogic has supplied William Hill with the new non-download games under its status, established earlier this year, as preferred supplier for such games to William Hill's primary UK pound sterling and US dollar properties.

"CryptoLogic's continuous flow of innovative games is one of the major reasons we have worked together for over seven years," said Peter Nolan, William Hill's Group Director, Remote Channels. "Non-download games are great tools to attract new players, keep casual players involved, and to cross-sell downloadable casino games, which offer an even richer entertainment experience."

Altogether, CryptoLogic now offers over 60 exciting non-download games, which complement the company's suite of over 200 market-leading downloadable games, and has introduced almost 100 new games since 2004. The new non-download suite includes some of the Internet's most popular slot titles.

According to Justin Thouin, Vice President, Casino Software Development, "We already offer the best, most innovative suite of downloadable online casino games. By converting 24 of our most popular titles into non-download format, we have staked out a leadership position in that category, too."

Now at William Hill, gamers can instantly play slot favourites like Bejeweled, the wildly popular gem-matching game, with one click of the mouse-no waiting. The non-download version of Millionaires' Club™ gives players a shot at its record-setting online jackpot, currently exceeding 4.7 million US dollars, pound sterling or euro. And for the first time, players can enjoy instant play versions of exclusive high-impact action slots featuring Marvel Super Heroes like Blade, Silver Surfer, Daredevil, The Hulk, Punisher, Thor and the X-Men.

"These new games take advantage of proven winners from our deep download game roster to deliver a unique new Internet entertainment experience for the instant game player," added A.J. Slivinski, WagerLogic's Managing Director.

[Casinonews]

13.12.2006

CryptoLogic Signs 3-year Contract With New UK Poker Club

E-gaming software developer wins exclusive contract with DTDPoker.com, the online home of DUSKTILLDAWN - soon to be the largest live poker venue in Europe

TORONTO, ONTARIO, Dec 13, 2006 (CCNMatthews via COMTEX News Network) -- CryptoLogic Inc. (TSX:CRY)(NASDAQ:CRYP)(LSE:CRP), a leading software developer to the global Internet gaming industry, has announced an exclusive 3-year contract to be the software provider for www.DTDPoker.com, the online home of the new UK-based poker club, DUSKTILLDAWN. CryptoLogic's proven poker software launched the new site today.
DUSKTILLDAWN has generated considerable buzz and once its doors open in Nottingham in April 2007, it will be the largest live poker venue in Europe. The company has also applied to be the first fully-licensed dedicated poker facility in the UK.

"With DUSKTILLDAWN, CryptoLogic adds a dynamic brand to its growing list of poker customers," said Lewis Rose, CryptoLogic's President and CEO. "This agreement reinforces CryptoLogic's focus on Europe - and our commitment to maintaining our global leadership in Internet poker. It's about giving players a superior poker experience - from 'dusk till dawn', around the clock and around the world."

Licensed through subsidiary WagerLogic Limited, the CryptoLogic-developed software will give DTDPoker.com players access to the world's largest shared poker network that excludes the U.S. This means that players will always find the game they want, in the currency they want, at the stake and level they want - anytime. The company's new games include Hold'Em Blackjack™, created exclusively for CryptoLogic licensees, which combines the intensity of poker with the simplicity of blackjack. CryptoLogic has also designed a new tournament leader board, giving Internet poker sites new opportunities to create exciting events, and giving players new opportunities to win.

"We had a number of offers from other online poker software providers but as poker players we knew that CryptoLogic's poker network is the biggest and best in Europe, has significant capacity to grow, and is highly secure," said Rob Yong, DUSKTILLDAWN's Managing Director. "DUSKTILLDAWN will be as exciting online as it is on land - and we trust CryptoLogic to help us deliver a constant flow of features and innovations for players of all levels."

DTDPoker.com joins the company's other poker licensees, including williamhillpoker.com, interpoker.com, sunpoker.com, pokerplex.com, classicpoker.com, ukbettingpoker.co.uk, littlewoodspoker.com, and soon-to-be launched Playboy and Betsafe sites.

"CryptoLogic's integrity and innovation are the keys to success," said AJ Slivinski, Managing Director of WagerLogic. "The recent additions to our licensee base and our line-up of games and tournament options strengthen our reputation as we build Europe's #1 Internet poker network."

[Casinonews]

18.12.2006

Simplicity, Selection and Statistics: CryptoLogic Redesigns Poker Software

CryptoLogic enhances Internet poker experience with appealing design, improved navigation, new choices and more information

TORONTO, ONTARIO, Dec 18, 2006 (CCNMatthews via COMTEX News Network) -- CryptoLogic Inc. (TSX:CRY)(NASDAQ:CRYP)(LSE:CRP), a leading software developer to the global Internet gaming industry, has redesigned its poker software, licensed through its WagerLogic Limited subsidiary. The appealing new design includes enhancements to the main lobby, game tables and tournament lobby, making it easier than ever for players to navigate, select their game and stake level, and access key statistics on the game and their play. Also, players can launch a game of blackjack or-for the first time in the industry-any casino game directly from a poker table or lobby without missing a moment of the action.
"This is an exciting day for CryptoLogic, because we're taking our award-winning poker software to a new level that offers players more simplicity, selection and statistics!" said Lewis Rose, CryptoLogic's President and CEO. "CryptoLogic's redesigned poker software demonstrates our continued commitment to provide the best entertainment experience available on the Internet - to benefit our customers, their players and our business."

The main lobby

The improved layout of CryptoLogic's new main lobby enables players to quickly find the most suitable game, browse updated choices and find detailed information on upcoming games and tournaments. For example, Texas Hold'Em players can quickly find tables at just the right limit, find out who is playing and the size of their chip stack. Or, with a click and a glance players can get information on today's hottest Internet poker tournaments and how to enter the satellites for each. A new menu bar at the top of the lobby organizes options that players have become used to, such as account, display and customer service information, plus new features like links to the latest licensee-specific poker news and promotions-also available from prominent banner ads in the lobby.

The poker tables

New poker tables display betting action with compelling visuals that highlight fold, check, bet and raise decisions, and enable players to save and view notes made on their competitors. In-depth and instant play information, including current rank and chip stack size, let players compare their table status. An improved "Stats" button provides at-a-glance information on your own actions and overall game statistics, without the need for scrolling. The enhanced tables also incorporate a new pot display and improved hand history details, including a unique "Last 15 Hands" option. Additional features, to be released in January, will enable players to upload individual pictures and icons for identification and display at the table.

The tournament lobby

CryptoLogic has improved the tournament lobby, too. Highlights include new icons that draw attention to special features, summaries and key details of upcoming or ongoing Internet poker tournaments. New options let players confirm information about running time, blind levels, stack sizes and prize pool distribution - including a pop-up window displaying the betting structure and break times. Players can also track their progress with improved lists to help them locate and monitor players from other tables.

Blackjack and casino games

Whether browsing games or tournaments from a lobby or waiting for their turn at a table, players can launch a game of blackjack or any of the 201 CryptoLogic-developed downloadable games in the casino. No other poker room offers the flexibility to play the full breadth of casino games while in the poker environment. CryptoLogic's award-winning casino offering includes player favourites like the slot version of Bejeweled, the casual game blockbuster, Marvel slots, based on Super Heroes like The Hulk, X-Men and Thor, and Millionaires Club®, which currently offers a world-record online jackpot of approximately $4.9 million.

"From fast action to hot competition-at any level-CryptoLogic's new software delivers what today's sophisticated players demand," said Andy Goetsch, CryptoLogic's Vice President of Poker Software Development. "It all stems from the core principle that drives CryptoLogic's poker strategy: knowing the heart of the online player."

Through WagerLogic Limited, CryptoLogic's licensing subsidiary, the redesigned poker software is available today at all licensees' sites, including williamhillpoker.com, interpoker.com, sunpoker.com, pokerplex.com, ukbettingpoker.co.uk, littlewoodspoker.com, classicpoker.com and dtdpoker.com.

According to AJ Slivinski, WagerLogic's Managing Director, "All of our licensees get the advantage of this major enhancement at once. Soon, players will also be able to enjoy the same poker excitement at our newest licensees, Playboy and Betsafe."

[Casinonews]

21.12.2006

CryptoLogic and William Hill Finalize 3-Year Renewal Contract, Launch Spanish Poker Site

Contract includes substantially unchanged financial terms, enhanced exclusivity and incentives to increase gaming activity

TORONTO, ONTARIO, Dec 21, 2006 (CCNMatthews via COMTEX News Network) -- CryptoLogic Inc. (TSX:CRY)(NASDAQ:CRYP)(LSE:CRP), a leading software developer to the global Internet gaming industry, today announced that its wholly-owned subsidiary WagerLogic Limited has executed a final contract with William Hill, one of the best-known names in European betting and gaming. Under the new contract, the companies have renewed their relationship for another three years on financial terms that are materially the same as those in their former agreement, with incentives to increase gaming activity. The companies have also launched a new Spanish language poker site, at www.williamhillpoker.co.uk (or es.williamhillpoker.com).
"We are very excited about the prospect of continuing our partnership with William Hill-an icon in the UK betting market and one of CryptoLogic's most important relationships," said Lewis Rose, CryptoLogic's President and CEO. "While much of the online gaming world has only recently started paying attention to the UK and continental Europe, we have been focusing our attention on these markets for the past five years. Our relationship with William Hill exemplifies our strength in the region and the success of our strategy."

The contract will provide enhanced rights of exclusivity to CryptoLogic as software provider of choice for William Hill's key online casino and poker businesses. While the financial terms remain unchanged based on historical activity levels, William Hill will be rewarded with lower marginal rates for increases in gaming activity. Such increases are expected based on new development and business initiatives planned by the companies.

"Based on our seven-year history with CryptoLogic and the exciting initiatives already underway, like Spanish Poker, I am confident that we will grow our business significantly," said Peter Nolan, William Hill's Group Director, Remote Channels. "CryptoLogic powers one of the largest poker networks in the world, with particularly strong liquidity in European markets. Their award-winning Internet casino software-both download and non-download versions-creates an engaging entertainment experience that draws new players to our sites and keeps current players coming back."

The regulations under the UK Gambling Act are scheduled for completion on September 1, 2007, and are expected to have implications for the businesses of both companies. Under the agreement, the companies have committed to work together to achieve a mutually beneficial result in the new environment. If such a result can't be reached, both parties have a right to terminate the contract or portions thereof.

The Spanish language poker site adds to the Greek site that CryptoLogic previously developed for William Hill.

Rose added, "Spain is one of Europe's biggest poker markets and the country is embracing Internet gaming. Europe is an increasingly competitive market, so we'll continue to give our licensees an edge and distinguish CryptoLogic as the software provider of choice through more language-specific offerings like Spanish poker."

CryptoLogic-developed games are featured at William Hill's gaming sites, including www.williamhillcasino.com, and www.williamhillpoker.com. Recently, CryptoLogic also announced new contracts with Betsafe and DTDPoker, both European poker rooms with strong potential.

"With a new poker customer launched this month, other poker and casino customers that will debut early next year and ongoing business that is secure in long-term agreements, we are excited about the future," said A.J. Slivinski, WagerLogic's Managing Director.

About William Hill

Founded in 1934, William Hill is one of the best-known names in the UK betting industry. It is one of the leading providers of fixed odds bookmaking services, offering odds and taking bets on a wide range of sporting and other events, as well as offering Amusement with Prizes machines and Fixed Odds Betting Terminals in licensed betting offices and operating online casino and poker sites, and greyhound stadia. It is a market leader in all major betting channels in the UK with an established international presence through its online businesses.