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CryptoLogic's Third-Quarter Results Meet Targets

All financial figures are expressed in U.S. dollars.

``CryptoLogic continues to be in the top percentile of public companies today meeting its financial targets,'' said Jean Noelting, CryptoLogic's president and CEO. ``Strong revenue growth, high profitability and cash generation remain the priority at CryptoLogic. We projected revenue of $9.7-$10.2 million and net income between $4.2-$4.6 million, well ahead of last year. Our third quarter results meet our financial forecasts. Importantly, business developments are also progressing well against our 2001 objectives and will position us strongly for the future.''

Noelting added, ``We said the second half of this year would see new licensee development and the initial results of CryptoLogic's acquisition plans. This is exactly what CryptoLogic delivered in the third quarter. While the legislative landscape continues to evolve around the world, CryptoLogic is increasing its global presence in strictly regulated geographies - most notably the UK, which is one of the most advanced.

"CryptoLogic has helped shape the I-gaming industry from its inception. We continue to lead the way - migrating to Tier 1, land-based standards for regulated Web entertainment, broadening the gaming spectrum to attract the mainstream market and accelerating the 'brick and click' strategies of major gaming organizations worldwide.''

Financial Results on Target (all figures in US dollars)

Revenue for the third quarter of 2001 increased 32% to $10.7 million compared to $8.1 million in the prior 2000 quarter. This excludes interest income of $0.5 million in 2001 compared to $0.9 million in the corresponding year quarter. Interest income was historically part of total revenue, but effective the first quarter of 2001 has been reclassified and is shown below income from operations in the consolidated statements of income.

Net income for the quarter rose significantly by 69% to $4.4 million or $0.33 per share ($0.30 per share on a fully diluted basis) compared to $2.6 million in the 2000 quarter or $0.18 per share ($0.17 per share on a fully diluted basis). Third quarter expense levels remain relatively consistent for 2001 and reflect the company's continued investment in compliance, infrastructure and development to support a globally diverse organization and client base. CryptoLogic maintained high net margins at 41% for the quarter.

As previously announced, CryptoLogic promptly detected and resolved a system intrusion that caused higher win rates in certain games in the third quarter. There was no compromise of player information, no disruption of service and players were paid out in the normal course. The company has enhanced its already strict security measures and remains committed to regulatory compliance, which further subjects CryptoLogic to rigorous, external monitoring and ongoing audits by government regulators.

Consequently, the company's third quarter results reflect a net impact of $0.6 million, after an expected $1.3 million insurance claim. This insurance claim has been reflected in prepaid expenses and other on the balance sheet. Without this financial impact, CryptoLogic would have posted exceptional third quarter performance with net income of $5.0 million on $11.3 million in revenue - easily exceeding expectations. Due to this incident, the company still delivered quarterly results well on track with projections.

For the nine months ended September 30, 2001, the company's revenue rose 31% to $32.4 million compared to $24.7 million in the prior year period. Net income for the nine-month period was up 26% to $14.4 million versus $11.4 million in the same 2000 period. As a result, earnings per share for the nine months ended September 30, 2001 were $1.05 compared to $0.89 in 2000. On a fully diluted basis, earnings per share were $0.95 compared to $0.75 in 2000.

CryptoLogic remained well capitalized with a total cash position at $59.0 million. During the third quarter, the company continued to see exceptional investment value in its shares and repurchased 45,000 shares through its normal buy back program. Up to October 18, 2001, CryptoLogic has repurchased a total of 225,000 shares or about 35% of the 650,000 shares authorized under its current buy back until May 17, 2002.

Global Market Expansion

CryptoLogic expanded its European presence with one of the best known gaming organizations in the UK, Littlewoods Leisure - operator of the world's most popular football pool as well as being the UK's largest charity lottery. Littlewoods chose CryptoLogic's proven e-gaming technology to extend exciting new online casino action to the 1.6 million households that bet with Littlewoods each week.

Equally exciting is that Littlewoods is amongst the first three online gaming licenses awarded in the highly regulated jurisdiction of the Isle of Man. The other successful applicants are MGM Mirage and Sun International. Due to its significant compliance efforts in Australia, CryptoLogic can accelerate time to market for Littlewoods in full compliance with Isle of Man requirements. As a result, CryptoLogic is on track to be the first to launch Littlewoods' online casino this fall in this strictly regulated UK market.

Consistent with its strategy to offer licensees value-added marketing services, CryptoLogic made its first acquisition this year of the leading gaming content provider, WinnerOnLine, subsequent to quarter end. With over 1,400 gaming sites on the Internet today, this is a business that is driven by marketing - the ability to attract a growing and loyal user franchise is critical for CryptoLogic's licensees. The addition of WinnerOnline's player-focused content and more than 350,000 unique visitors each month will give licensees a superb marketing channel to a targeted user community and help drive greater player traffic and revenue potential.

Legislative Developments

While there remain anti-online gaming efforts at the federal level in the U.S., State initiatives to legalize Internet gaming show promise - most notably in Nevada, New Jersey as well as California's new law to allow online horseracing. As well, top U.S. casinos seeking to expand onto the Internet lend support to accelerate the move to a regulated American market.

The legislative landscape will continue to develop, but there is positive momentum for regulation, particularly overseas. The British government recently opened major new markets - Isle of Man and Alderney - for regulated Internet gaming that have attracted some of the most recognized names in the gaming industry including MGM Mirage.

CryptoLogic is in the final stages of certification in Australia -- widely seen as the world's strictest regulatory model. The company is near completion of its Isle of Man certification and has commenced application in Alderney. Given its Australian efforts, CryptoLogic is well positioned to meet the requirements in these two UK jurisdictions in a shorter timeframe as evidenced by the autumn launch of Littlewoods' online casino.

CryptoLogic is once again at the forefront of regulatory compliance. In 2001, the company adopted Tier 1 probity standards consistent with strict regulations for land-based gaming in Nevada and complementary to Australia and Europe. Current licensees are being subjected to this higher probity check. The company's regulatory commitment and compliance in multi-jurisdictions will be a competitive advantage as CryptoLogic continues discussion with top gaming names in the U.S., Europe and Asia.

``We are pleased with the company's performance on track with our 2001 targets,'' commented Noelting. ``We live in uncertain times - economically and politically - but CryptoLogic's fundamentals remain solid. We will continue to stay the course, which has delivered excellent results to date. On the horizon, we are working to add more licensees, strategic acquisitions, expand into new gaming areas and release version 5.0 with new progressive games, tournaments and global currency support.''

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