CHARTWELL TECHNOLOGY INC.

CHARTWELL TECHNOLOGY INC.

January 11, 2005 09:08 ET

Chartwell Announces Fiscal Year 2004 Fourth Quarter and Year End Results


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: CHARTWELL TECHNOLOGY INC.

TSX SYMBOL: CWH

JANUARY 11, 2005 - 09:08 ET

Chartwell Announces Fiscal Year 2004 Fourth Quarter
and Year End Results

CALGARY, ALBERTA--(CCNMatthews - Jan. 11, 2005) -

- Annual Revenue Growth of 66%, Net Income of $4.0M, EPS of $0.24 -

Chartwell Technology Inc. (TSX:CWH), a leading provider of gaming
software systems to the online and remote gaming industry, is pleased to
announce audited financial results for the fourth quarter and year ended
October 31, 2004.

Highlights of the year included:

- Revenue of $12.2M compared to $7.3M in 2003;

- Operating income of $3.6M and net income of $4.0M compared to
operating income of $1.1M and net income of $1.7M in 2003;

- Earnings per diluted share of $0.24 compared to $0.12 in 2003;

- Recurring software license fees $11.3M compared to $6.3M in 2003;

- Cash flow from operations of $4.2M compared to $1.4M in 2003;

- Remained debt-free with working capital of $10.5M compared to $6.5M in
2003;

- Two consecutive years of profitability.

Highlights of the fourth quarter included:

- Revenue of $3.5M compared to $2.1M in the comparative quarter of 2003;

- Operating income of $831K and net income of $1.5 million compared to
operating income of $744K and net income of $1.4 million in the
comparative quarter of 2003;

- Earnings per diluted share of $0.08 compared to $0.06 in the
comparative quarter of 2003(prior to restatement) and $0.10 following
restatement;

- Recurring software license fees of $3.2 million compared to $1.8
million in the comparative quarter of 2003;

- Cash flow from operations of $1.8M compared to $919K in the
comparative quarter of 2003;

- Eighth consecutive quarter of profitability.

"We are very pleased with our fourth quarter and fiscal year 2004
results", states Don Gleason, CFO. "We ended the year with significant
revenue growth, increased our profitability by 139%, doubled our
earnings per share and generated in excess of $4.0M in cash flow from
operations. Our investment in product development, sales, marketing and
business development gives us confidence in our ability to drive
continued growth in the expanding market for our products. We are
extremely proud of the hard work and accomplishments of the entire
Chartwell team and we look forward to 2005 and carrying this momentum
throughout the year."

Twelve Months Ended October 31, 2004

Compared to the same twelve-month period of 2003, total revenue
increased 66%, net income increased 139% and earnings per diluted share
increased 100%.

Total revenue increased to $12.2 million compared to $7.3M in fiscal
2003. Recurring software license fees increased 79% to $11.3 compared to
$6.3 million in fiscal 2003. Recurring revenue represented 92% of total
revenue in fiscal 2004 compared to 86% in fiscal 2003.

Total operating expenses, including foreign exchange, increased 37% to
$8.6 million compared to $6.3 million in fiscal 2003. As a percentage of
total revenue, operating expenses have decreased to 70% from 86% in
fiscal 2003. Compared to the same twelve-month period of 2003, software
development and support expenses increased 34% to $4.4 million compared
to $3.2 million; sales, general and administrative expenses increased
80% to $3.5 million compared to $1.9 million and foreign exchange losses
decreased 71% to $233K from $795K. In fiscal 2004, the Company opened a
sales office in the United Kingdom, moved to a larger facility in
Calgary to accommodate additional personnel and upgraded its listing to
the TSX Exchange from the TSX Venture Exchange. All of these factors
contributed to the increase in expenses as noted above.

Income from operations increased 243% to $3.6 million compared to $1.1
million in fiscal 2003.

Net income after tax increased 139% to $4.0 million compared to $1.7
million in fiscal 2003. Basic and diluted earnings per share increased
to $0.28 and $0.24 compared to $0.12 and $0.12 in fiscal 2003.

Three Months Ended October 31, 2004

Compared to the same period of 2003, total revenue increased 65%, net
income increased 6% and earnings per diluted share decreased 20%. The
decrease in diluted EPS is attributable to the significant increase in
the weighted average share count resulting from the addition of in the
money options.

Total revenue increased to $3.5 million compared to $2.1 million in the
comparative period of 2003. Recurring software license fees increased
75% to $3.2 million compared to $1.8 million.

Total operating expenses, including foreign exchange, increased 94% to
$2.7 million compared to $1.4 million in the comparative period of 2003.
Overall, operating expenses as a percentage of total revenue increased
to 76% from 65% in the comparative period of 2003. Compared to the same
period in 2003, software development and support expenses increased 206%
to $1.2 million compared to $405K; sales, general and administrative
expenses increased 45% to $960K compared to $661K and foreign exchange
losses increased 17% to $247K compared to $211K. The percentage increase
in total expenses in the comparative quarters is primarily due to $103K
of stock based compensation expense recorded in the current quarter and
the deferral of $531K of software development expense recorded in the
fourth quarter of fiscal 2003. Without the stock based compensation
expense in the 4th quarter 2004 and software development deferral
expense in the 4th quarter 2003, the increase in operating expenses
would have been limited to 34%.

Income from operations increased 12% to $831K compared to $744K in the
comparative period of 2003.

Net income after tax increased 6% to $1.5 million compared to $1.4
million in the same period of 2003. Net income is net of the future tax
recovery of $631K in fiscal 2004 compared to $630K in the comparative
period of 2003. Basic and diluted earnings per share were $0.10 and
$0.08 compared to $0.10 and $0.10 in the comparative quarter of 2003.
The decrease in diluted earning per share is solely attributable to the
increase in the number of shares resulting from options that are in the
money.

The fourth quarter of 2004 represents Chartwell's eighth consecutive
quarter of profitability.

Balance Sheet

Chartwell continues to maintain a solid financial base from which to
execute its growth strategy. In fiscal 2004, the Company realized $4.2
million in cash flow from operations compared to $1.4 million in fiscal
2003. Cash at October 31, 2004, including short term investments,
increased to $9.3 million from $5.2 million and working capital
increased to $10.5 million compared to $6.5 million at October 31, 2003.
The Company's balance sheet has been further strengthened by its recent
private placement of $11.0 million completed in the first quarter of
fiscal 2005.

Audited Consolidated Financial Statements

Audited 2004 consolidated financial statements may be accessed through
www.sedar.com or on the Chartwell website at
www.chartwelltechnology.com. In addition, copies of the filed statements
will be available upon request by contacting Chartwell Investor
Relations by e-mail at investor@chartwelltechnology.com. The audited
2004 consolidated statements will also be published in the Company's
2004 Annual Report that will be mailed to shareholders along with
meeting materials for the 2005 Annual General Meeting.

Forward Looking Statements

This news release and the documents referred to herein may contain
forward-looking statements that involve risks and uncertainties, which
may cause actual results to differ materially from the statements made.
Such statements reflect the Company's current views with respect to
future events and are subject to risks and uncertainties. Many factors
could cause our actual results to differ materially from the statements
made including, but not limited to, certain delays in testing and
evaluation of products, regulation of the online gaming industry, and
other factors and risks detailed from time to time in filings made by
the Company with Canadian and U.S. Securities Regulators. Should one or
more of these risks or uncertainties materialize, or should assumptions
underlying the forward-looking statements prove incorrect, actual
results may vary materially from those described herein as intended,
planned, anticipated or expected. The Company does not intend and does
not assume any obligation to update these forward-looking statements. We
do not assume any responsibility for the accuracy or completeness of
these forward-looking statements.

About Chartwell

Chartwell Technology Inc. specializes in the development of gaming
applications and entertainment content for the Internet and wireless
platforms and other remote access devices. Chartwell's JAVA and Flash
based software products and games are designed for deployment in gaming,
entertainment, advertising and promotional applications. Chartwell does
not participate in the online gaming business of its clients.
Chartwell's team of highly trained professionals is committed to
delivering the highest quality software and maintaining its leading edge
through continuous development and unparalleled customer support.

Chartwell invites you to preview and play our games at
www.chartwelltechnology.com

Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995: The statements contained herein which are not historical fact
are forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially from
those expressed in the forward-looking statements, including, but not
limited to, certain delays in testing and evaluation of products,
regulation of the online gaming industry, and other risks detailed from
time to time in Chartwell's filings with the Securities & Exchange
Commission. We assume no responsibility for the accuracy and
completeness of these statements and are under no duty to update any of
the forward-looking statements contained herein to conform these
statements to actual results. This is not an offer to sell or a
solicitation of an offer to purchase any securities.



CHARTWELL TECHNOLOGY INC.
Consolidated Balance Sheets

As at October 31
(stated in Canadian dollars)
---------------------------------------------------------------------
2004 2003
---------------------------------------------------------------------

Assets
Current assets:
Cash $ 5,995,863 $ 3,465,120
Short term investments 3,318,286 1,712,890
Accounts receivable 1,916,309 1,991,725
Deferred set-up expense 58,585 47,452
Prepaid expenses and deposits 230,632 148,699
Notes receivable 117,873 -
Future income tax asset 115,000 110,000
---------------------------------------------------------------------
Total current assets 11,752,548 7,475,886

Due from related parties 178,961 190,512
Property and equipment 431,824 338,969
Goodwill 811,666 -
Deferred software development costs 607,900 530,948
Deferred set-up expense 68,186 162,390
Notes receivable 180,573 -
Future income tax asset 929,964 520,000

---------------------------------------------------------------------
$ 14,961,622 $ 9,218,705
---------------------------------------------------------------------
---------------------------------------------------------------------

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued
liabilities $ 708,900 $ 217,012
Current portion of obligations
under capital lease 15,640 5,956
Deferred revenue 478,952 707,433
---------------------------------------------------------------------
Total Current liabilities 1,203,492 930,401

Deferred revenue 615,748 980,502
Obligations under capital lease 20,793 3,031

Shareholders' equity:
Share capital 16,502,188 14,809,723
Contributed surplus 102,572 -
Deficit (3,483,171) (7,504,952)
---------------------------------------------------------------------
Total Shareholders equity 13,121,589 7,304,771

---------------------------------------------------------------------
$ 14,961,622 $ 9,218,705
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CHARTWELL TECHNOLOGY INC.
Audited Consolidated Statements of Operations and Deficit

Years ended October 31
(stated in Canadian dollars)
--------------------------------------------------------------------
--------------------------------------------------------------------
2004 2003 2002
--------------------------------------------------------------------

Revenue:
Software license fees $ 11,268,494 $ 6,300,335 $ 2,646,766
Software set-up fees 798,343 919,892 896,560
Interest and other 134,640 109,411 302,031
--------------------------------------------------------------------
12,201,477 7,329,638 3,845,357

Expenses
Software development
and support 4,417,981 3,288,164 2,648,223
Sales, general and
administrative 3,498,607 1,947,372 2,385,652
Amortization of
deferred software
development costs 98,048 110,068 110,076
Stock-based
compensation 102,572 - -
Depreciation and
amortization 244,251 137,310 108,008
Foreign currency
loss (gain) 233,201 795,186 (85,795)
--------------------------------------------------------------------
8,594,660 6,278,100 5,166,164
--------------------------------------------------------------------
Net income (loss)
before income taxes 3,606,817 1,051,538 (1,320,807)

Income taxes:
Future income
tax recovery (414,964) (630,000) -
--------------------------------------------------------------------
Net income (loss) 4,021,781 1,681,538 (1,320,807)

Deficit, beginning
of year (7,504,952) (9,186,490) (7,865,683)
--------------------------------------------------------------------
Deficit, end of year $ (3,483,171) $ (7,504,952) $ (9,186,490)
--------------------------------------------------------------------
--------------------------------------------------------------------
Net income (loss)
per share:
Basic $ 0.28 $ 0.12 $ (0.10)
Diluted 0.24 0.12 (0.10)


CHARTWELL TECHNOLOGY INC.
Consolidated Statements of Cash Flows

Years ended October 31
(stated in Canadian dollars)

--------------------------------------------------------------------
--------------------------------------------------------------------
2004 2003 2002
--------------------------------------------------------------------
Cash provided by (used in):

Operations:
Net income (loss) $ 4,021,781 $ 1,681,538 $ (1,320,807)
Depreciation and
amortization 244,251 137,310 108,008
Unrealized foreign
exchange losses 268,327 550,234 -
Amortization of
deferred software
development costs 98,048 110,068 110,076
Stock-based
compensation 102,572 - -
Interest income
capitalized (11,413) (27,947) (11,570)
Issue of shares as
finders fee - 25,000 -
Future income tax
recovery (414,964) (630,000) -
Write-down of
long-term securities - - 42,882
Gain on disposal of
Property and Equipment (9,213) - 24,258
Contracts acquired
on acquisition 25,000 - -
--------------------------------------------------------------------
4,324,389 1,846,203 (1,047,153)

Change in non-cash
working capital:

Accounts receivable (34,819) (863,086) (79,598)
Due from related parties 20,000 - -
Deferred set-up expense 83,071 107,441 (94,741)
Prepaid expenses (100,904) (69,552) 720
Accounts payable and
accrued liabilities 491,888 47,858 109,257
Deferred revenue (593,235) 366,813 (107,363)
--------------------------------------------------------------------
(133,999) (410,526) (171,725)
--------------------------------------------------------------------
4,190,390 1,435,677 (1,218,878)
Financing:
Issue of shares for cash 855,799 152,500 121,088
Repayment of lease
obligations 27,446 (6,841) (10,286)
--------------------------------------------------------------------
883,245 145,659 110,802

Investing:
Sale (purchase) of short
term investments (1,605,396) 1,468,604 168,513
Purchase of property
and equipment (604,404) (207,905) (97,248)
Deferred software
development costs (175,000) (530,948) -
--------------------------------------------------------------------
(2,384,800) 729,751 71,265

Effect of foreign exchange
rate changes on cash (158,092) (550,234) -
--------------------------------------------------------------------
Increase (decrease)
in cash 2,530,743 1,760,853 (1,036,811)
Cash, beginning of year 3,465,120 1,704,267 2,741,078
--------------------------------------------------------------------
Cash, end of year $ 5,995,863 $ 3,465,120 $ 1,704,267
--------------------------------------------------------------------
--------------------------------------------------------------------
Supplemental cash
flow information:
Cash interest received $ 123,228 $ 101,464 $ 290,462
Cash interest paid (2,048) (1,955) (2,201)


CHARTWELL TECHNOLOGY INC.
Consolidated Statements of Operations and Deficit

Three months ended October 31
(stated in Canadian dollars)
(Unaudited)
---------------------------------------------------------------------
2004 2003
---------------------------------------------------------------------

Revenue:
Software license fees $ 3,237,277 $ 1,847,097
Software set-up fees 208,732 246,297
Interest and other 44,407 22,553
---------------------------------------------------------------------
3,490,416 2,115,947

Expenses
Software development and support 1,238,094 404,720
Sales, general and administrative 959,818 660,965
Amortization of deferred software
development costs 58,829 27,517
Stock-based compensation 102,572 -
Depreciation and amortization 52,794 67,511
Foreign currency loss (gain) 247,490 211,267
---------------------------------------------------------------------
2,659,597 1,371,980

---------------------------------------------------------------------
Net income (loss) before income taxes 830,819 743,967

Income taxes:
Future income tax recovery (note 7) (630,749) (630,000)

---------------------------------------------------------------------
Net income (loss) 1,461,568 1,373,967

Deficit, beginning of year (4,944,739) (8,878,919)

---------------------------------------------------------------------
Deficit, end of year $ (3,483,171) $ (7,504,952)
---------------------------------------------------------------------
---------------------------------------------------------------------

Net income (loss) per share:
Basic $ 0.10 $ 0.10
Diluted 0.08 0.10
---------------------------------------------------------------------
---------------------------------------------------------------------


CHARTWELL TECHNOLOGY INC.
Consolidated Statements of Cash Flows

Three months ended October 31
(stated in Canadian dollars)
(Unaudited)
---------------------------------------------------------------------
2004 2003
---------------------------------------------------------------------

Cash provided by (used in):

Operations:
Net income (loss) $ 1,461,568 $ 1,373,967
Depreciation and amortization 52,794 67,511
Unrealized foreign exchange losses 282,616 151,614
Amortization of deferred software
development costs 58,829 27,517
Stock-based compensation 102,572 -
Interest income capitalized (5,145) (22,052)
Issue of shares as finders fee - 25,000
Future income tax recovery (630,749) (630,000)
Write-down of long-term securities - -
Gain on disposal of Property
and Equipment (9,213) -
Contracts acquired on
acquisition 25,000 - -
---------------------------------------------------------------------
1,313,272 993,557
Change in non-cash working capital:
Accounts receivable 151,814 (2,161)
Due from related parties- - -
Deferred set-up expense 17,438 (34,609)
Prepaid expenses (42,350) (35,355)
Accounts payable and
accrued liabilities 553,133 1,964
Deferred revenue (233,256) (4,605)
---------------------------------------------------------------------
446,779 (74,766)

---------------------------------------------------------------------
1,760,051 918,791
Financing:
Issue of shares for cash 129,374 127,500
Repayment of lease obligations (3,779) (1,822)
---------------------------------------------------------------------
125,595 125,678
Investing:
Sale (purchase) of short
term investments (38,705) (7,604)
Purchase of property and equipment (18,332) (14,700)
Deferred software development costs - (530,948)
---------------------------------------------------------------------
(57,037) (553,252)

Effect of foreign exchange rate
changes on cash (172,381) (151,614)

---------------------------------------------------------------------
Increase (decrease) in cash 1,656,228 389,603
Cash, beginning of period 4,339,635 3,125,517

---------------------------------------------------------------------
Cash, end of year $ 5,995,863 $ 3,465,120
---------------------------------------------------------------------
---------------------------------------------------------------------

Supplemental cash flow information:
Cash interest received $ 39,264 $ 20,502
Cash interest paid 538 (377)
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