CryptoLogic Delivers Record Results in Q2 2006

Market Wire, August, 2006

ALL FINANCIAL FIGURES ARE IN US$

CryptoLogic Inc. (TSX: CRY)(NASDAQ: CRYP)(LSE: CRP), a leading software developer and supplier to the global Internet casino and Internet poker markets, reported record financial results for the second quarter and six months ended June 30, 2006. Better-than-expected performance was attributable to strong organic growth in online poker software fees and a particularly strong quarter in online casino software fees, driven by the release of innovative new casino games and CryptoLogic's expanded high-margin slot portfolio.

These achievements are especially notable because the second quarter is typically slower in online gaming and because the company's licensees had to compete for players' attention with the World Cup-particularly in the UK and Continental Europe.

"CryptoLogic's new casino games went head-to-head with the World Cup and warm weather-and won. Our Q2 revenue and earnings were far ahead of expectations and surpassed our results in Q1 2006, which is typically a stronger quarter," said Lewis Rose, CryptoLogic's President and CEO. "Players have embraced our new games and industry commentators agree that we have 'taken the online slot experience to the next level.' CryptoLogic's player-centric, product diversification and innovation strategy is paying off."

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Financial Highlights
(in millions of US       Three months ended         Six months ended
 dollars, except per                June 30,                 June 30,
 share data)
                       2006   2005 % Change    2006    2005 % Change
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Revenue               $30.4  $19.9       52%  $57.3   $40.2       43%
Earnings               $8.2   $4.7       73%  $15.9    $9.6       66%
Earnings per diluted
 share                $0.59  $0.33       79%  $1.15   $0.67       72%
EBITDA(1)              $9.4   $5.6       69%  $18.1   $11.4       59%
Casino revenue        $17.9  $11.7       53%  $32.9   $24.9       32%
Poker revenue          $9.3   $6.6       41%  $18.9   $12.1       56%
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Other highlights included:

- Product diversification and innovation. Internet casino license fees represented 59% of revenue, while Internet poker fees contributed 31%. Compared to Q1 2006, total revenue grew 12%, Internet casino fees grew 19% and Internet poker fees dipped 4%. During Q2 2006, the company launched 11 innovative new casino games, including additional Marvel Super Hero-themed slots and the first-ever online version of Texas Hold'em Bonus Poker. As expected, Internet poker results were affected by competition for players' attention from the World Cup.

- Geographic diversification. More than 65% of licensees' revenue continued to be generated from overseas markets. The UK and continental Europe together accounted for over 60% of total Q2 2006 revenue.

- Customer diversification. After the quarter-end, WagerLogic signed an agreement to launch the first-ever online Playboy-branded Internet poker destination. Visitors to the new site will tap into a shared poker room with more than 9,000 simultaneous players from all licensees' sites.

- Dividend. On August 1, CryptoLogic's Board of Directors declared its next quarterly cash dividend of US$0.12 per share, payable on September 15, 2006 to shareholders of record on September 8, 2006.

Record Financial Performance

Total Revenue. CryptoLogic increased its revenue by 52% to a record $30.4 million (Q2 2005: $19.9 million), well ahead of the company's estimate of $26.4 to $26.7 million, and 12% higher than in Q1 2006-typically a stronger quarter. The performance was attributable to solid organic growth in Internet poker fees and stronger than anticipated growth in Internet casino fees.

EBITDA(1). EBITDA(1) for the quarter grew 69% to a record $9.4 million (Q2 2005: $5.6 million). EBITDA(1) margin grew in the quarter to 31% of revenue (Q2 2005: 28%).

Earnings and Earnings per Diluted Share. At a record $8.2 million, CryptoLogic's Q2 2006 earnings grew 73% (Q2 2005: $4.7 million). Earnings per diluted share rose 79% to $0.59 (Q2 2005: $0.33), ahead of the company's guidance of $0.48 to $0.49 due to better-than-expected revenue and the inherent leverage in CryptoLogic's business model as revenue rises.

Balance Sheet and Cash Flow. CryptoLogic's financial strength continued to be reflected in its strong balance sheet and operating cash flow. At June 30, 2006, total cash grew to $126.9 million (comprising cash and cash equivalents, short term investments, and security deposits), or $9.23 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 June 30, 2006 rose to $91.7 million, or $6.66 per diluted share (December 31, 2005: $73.6 million, or $5.23 per diluted share). Cash flow from operating activities was $18.3 million in Q2 2006 (Q2 2005: $6.6 million).