UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 20-F
(Mark One)


[ ]  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                                       OR

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934 For the fiscal year ended October 31, 2004

                           ---------------------------

                                       OR

[ ]  TRANSITION  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
     EXCHANGE ACT OF 1934 For the transition period from to

                         Commission file number 0-30456


                            CHARTWELL TECHNOLOGY INC.
             (Exact name of Registrant as specified in its charter)

                                      None
                 (Translation of Registrant's name into English)

                                 Alberta, Canada
                 (Jurisdiction of incorporation or organization)

        Suite 400, 750 - 11th Street SW, Calgary, Alberta, Canada T2P 3N7
                    (Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

    Title of each class                Name of each exchange on which registered
           None                                        None

Securities registered or to be registered pursuant to Section 12(g) of the Act.

                         Common Shares without par value
                                (Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.

                                      None
                                (Title of Class)

Indicate the number of  outstanding  shares of each of the  issuer's  classes of
capital  or common  stock as of the close of the  period  covered  by the annual
report. 16,022,966 Common Shares without par value as at October 31, 2004.



<PAGE>



Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                          [X] Yes       [ ] No

Indicate by check mark which financial statement item the registrant has elected
to follow.

                        [X]  Item 17     [ ]  Item 18

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY  PROCEEDINGS  DURING THE PAST
FIVE YEARS)

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be filed by  Sections  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.

                             Yes                No


<PAGE>


NOTE REGARDING FORWARD LOOKING STATEMENTS


This Annual Report on Form 20-F  contains  forward-looking  statements  based on
beliefs of our  management.  Any  statements  contained in this Annual Report on
Form  20-F  that are not  historical  facts are  forward-looking  statements  as
defined in the U.S. Private  Securities  Litigation  Reform Act of 1995. We have
based  these   forward-looking   statements  on  our  current  expectations  and
projections about future events, including, but not limited to:

     o    Registrant's limited operating history;

     o    under-capitalization;

     o    government regulations;

     o    risks involving new product  development;  unpredictability  of future
          revenues;

     o    risks of technological change; our dependence on key personnel;

     o    competition and low barriers to entry;

     o    dependence on continued growth in use of the Internet;

     o    our  ability  to  protect  its   intellectual   property   rights  and
          uncertainty  regarding  infringing  intellectual  property  rights  of
          others;

     o    general economic and business conditions;

     o    attracting and retaining personnel;

     o    competition in the software industry;

     o    implementing our business strategy;

     o    developing and introducing new products;

     o    regulatory and political conditions;

     o    obtaining and expanding market acceptance of our products; and

     o    other risks and  uncertainties,  some of which we describe under "Item
          3. Key Information-- Risk Factors."


The words "anticipate,"  "believe,"  "continue,"  "counting on," "is confident,"
"estimate," "expect," "forecast," "intend," "may," "plan," "project," "predict,"
"should," "wants," "will," "would" and similar  expressions as they relate to us
are  intended to  identify  such  forward-looking  statements.  Such  statements
reflect our current views and assumptions and all forward-looking statements are
subject to various risks and  uncertainties  that could cause actual  results to
differ  materially from  expectations.  The factors that could affect our future
financial  results are discussed  more fully under "Item 3. Key  Information  --
Risk  Factors," as well as  elsewhere in this Annual  Report on Form 20-F and in
our other filings with the U.S. Securities and Exchange Commission ("SEC").



                                      -i-

<PAGE>


The  Registrant's  management  has included  projections  and  estimates in this
Annual  Report,  which are based  primarily on  management's  assessment  of the
Registrant's  results of operations,  discussions  and  negotiations  with third
parties,  management's  experience  and a  review  of  information  filed by its
competitors with the Securities and Exchange Commission.

The  Registrant  cautions  readers  not to  place  undue  reliance  on any  such
forward-looking statements, which speak only as of the date made. The Registrant
disclaims any obligation  subsequently to revise any forward-looking  statements
to  reflect  events or  circumstances  after the date of such  statements  or to
reflect the occurrence of anticipated or unanticipated events.

NOTE REGARDING CURRENCY

In this  Annual  Report,  unless  otherwise  specified,  all dollar  amounts are
expressed in Canadian  Dollars.  References  in this  document to "$" and "Cdn$"
refer to Canadian dollars, unless otherwise specified; references to "US$" refer
to US dollars.



                                      -ii-


<PAGE>


GLOSSARY

Some of the terms and abbreviations used throughout this Annual Report are
defined below:

"CGC" means  Chartwell  Games Corp.  a  wholly-owned  subsidiary  of the Company
(formerly Gaming Tech Corporation ("GT")).

"Common  Shares"  means one or more common shares in the  authorized  capital of
Chartwell Technology Inc.

"Company" or "Chartwell" or "Registrant" means Chartwell Technology Inc.

"Flash" is a bandwidth friendly and browser independent vector-graphic animation
technology.  As long as  different  browsers  are  equipped  with the  necessary
plug-ins,  Flash animations will look the same. With Flash,  user can draw their
own animations or import other vector-based images.

"GT" means Gaming Tech  Corporation,  a  wholly-owned  subsidiary of the Company
(see also CGC).

"GTI" means Gateway Technology, Inc., a wholly-owned subsidiary of the Company.

"HTML" means the Hyper Text Markup Language which is the authoring language used
to create documents on the World Wide Web. HTML defines the structure and layout
of a Web document by using a variety of tags and attributes.  There are hundreds
of  tags  used to  format  and  layout  the  information  on a Web  Site  and on
individual Web pages. Tags are also used to specify hypertext links. These allow
Web  developers to direct users to other Web Sites or pages with only a click of
the mouse on either an image or word(s).

"Internet" is a global network connecting millions of computers. As of 1999, the
Internet has more than 200 million users  worldwide,  and that number is growing
rapidly.  More than 100  countries are linked into  exchanges of data,  news and
opinions.  Unlike online services, which are centrally controlled,  the Internet
is  decentralized  by  design.  Each  Internet  computer,  called  the host,  is
independent.  Its operators can choose which Internet  services to use and which
local services to make available to the global Internet  community.  There are a
variety of ways to access the Internet including online services such as America
Online or through a commercial Internet Service Provider.

"Intranet" is a network based on transmission control and Internet protocols (an
Internet)  belonging to an organization,  accessible only by such organization's
members, employee or others with authorization. An Intranet's Web Sites look and
act just like any other Web Sites,  but the  firewall  surrounding  an  Intranet
prevents  unauthorized  access. Like the Internet itself,  Intranets are used to
share  information.  Secure  Intranets  are a growing  segment  of the  Internet
because they are much less  expensive to build and manage than private  networks
based on proprietary protocols.

"Java" is a high  level  programming  language  developed  by Sun  Microsystems.
Compiled Java code can be run on most computers  because Java  interpreters  and
runtime  environments,  known as Java  Virtual  Machines  (VMs),  exist for most
operating systems,  including UNIX, the Macintosh OS, and Windows.  Bytecode can
also be converted directly into machine language  instructions by a just-in-time
compiler (JIT). Java is a general purpose programming  language with a number of
features that make the language well suited for use on the World Wide Web. Small
Java  applications  are called  Java  applets and can be  downloaded  from a Web
server and run on a computer by a Java-compatible Web browser,  such as Netscape
Navigator or Microsoft Internet Explorer.

"server"  means is a  computer  or  device  on a network  that  manages  network
resources. For example, a file server is a computer and storage device dedicated
to storing files. Any user on the network can store files on the server. A print
server is a computer that manages one or more printers,  and a network server is
a


                                      -iii-

<PAGE>

computer that manages  network  traffic.  A database server is a computer system
that processes database queries. Servers are often dedicated,  meaning that they
perform no other tasks besides their server tasks.

"Shockwave" is a technology developed by Macromedia, Inc. that enables Web pages
to  include  multimedia   objects.   To  create  a  shockwave  object,  you  use
Macromedia's  multimedia  authoring tool called DIRECTOR,  and then compress the
object with a program  called  AFTERBURNER.  You then insert a reference  to the
"shocked"  file in your  Web  page.  To see a  Shockwave  object,  you  need the
Shockwave plug-in,  a program that integrates  seamlessly with your Web browser.
The plug-in is freely available from  Macromedia's Web site as either a Netscape
Navigator plug-in or an ActiveX control.  Shockwave  supports audio,  animation,
video and even  processes  user  actions  such as mouse  clicks.  It runs on all
Windows platforms as well as the Macintosh.

"software" means computer instructions or data and includes anything that can be
stored  electronically.  The storage  devices and display  devices are hardware.
Software  is often  divided  into two  categories:  (i)  system  software  which
includes the operating  system and all the utilities that enable the computer to
function;  and (ii)  applications  software which includes  programs that assist
users such as word processors, spreadsheets and database management systems.

"TSX" or the "Exchange" means the Toronto Stock Exchange.

"Web Site" is a location  on the World Wide Web.  Each Web Site  contains a home
page, which is the first document users see on entering the site. The site might
also contain additional documents and files.

"World Wide Web" or "Web"  refers to a system of Internet  servers  that support
specially formatted documents.  The documents are formatted in a language called
Hyper Text Mark-up  Language  ("HTML") that supports links to other documents as
well as graphics, audio and video files.



                                      -iv-

<PAGE>


                                TABLE OF CONTENTS


PART I.........................................................................1
   Item 1. Identity of Directors, Senior Management and Advisers...............1
     A. Directors and senior management........................................1
     B. Advisers...............................................................1
     C. Auditor................................................................1
   Item 2. Offer Statistics and Expected Timetable.............................1
     A. Offer statistics.......................................................1
     B. Method and expected timetable..........................................1
   Item 3. Key Information.....................................................2
     A. Selected financial data................................................2
     B. Capitalization and indebtedness........................................3
     C. Reason for the offer and use of proceeds...............................4
     D. Risk factors...........................................................4
   Item 4. Information on the Company..........................................9
     A. History and development of the company.................................9
     B. Business Overview.....................................................11
     C. Organizational structure..............................................20
     D. Property, plants and equipment........................................21
   Item 5. Operating and Financial Review and Prospects.......................21
     A. Operating results.....................................................21
     B. Liquidity and capital resources.......................................33
     C. Research and development, patents and licenses, etc...................33
     D. Trend information.....................................................34
     E. Off balance sheet arrangements........................................34
     F. Tabular disclosure of contractual obligations.........................34
     G. Safe harbour..........................................................34
   Item 6. Directors, Senior Management and Employees.........................35
     A. Directors and senior management.......................................35
     B. Compensation..........................................................37
     C. Board practices.......................................................38
     D. Employees.............................................................40
     E. Share ownership.......................................................40
   Item 7. Major Shareholders and Related Party Transactions..................42
     A. Major shareholders....................................................42
     B. Related party transactions............................................42
     C. Interests of experts and counsel......................................42
   Item 8. Financial Information..............................................42
     A. Consolidated statements and other financial information...............42
     B. Significant changes...................................................43
   Item 9. The Offer and Listing..............................................43
     A. Offer and listing details.............................................43
     B. Plan of distribution..................................................44
     C. Markets...............................................................44
     D. Selling shareholders..................................................44
     E. Dilution..............................................................44
     F. Expenses of the issue.................................................44
   Item 10. Additional Information............................................44
     A. Share Capital.........................................................44
     B. Memorandum and articles of association................................47
     C. Material Contracts....................................................47
     D. Exchange controls.....................................................47
     E. Taxation..............................................................49
     F. Dividends and paying agents...........................................55
     G. Statement by experts..................................................55


                                      -v-

<PAGE>


     H. Documents on display..................................................55
     I. Subsidiary information................................................56
   Item 11. Quantitative and Qualitative Disclosures About Market Risk........56
   Item 12. Description of Securities Other than Equity Securities............56
     A. Debt securities.......................................................56
     B. Warrants and rights...................................................56
     C. Other securities......................................................56
     D. American depositary shares............................................56
PART II.......................................................................57
   Item 13. Defaults, Dividend Arrearages and Delinquencies...................57
   Item 14. Material Modifications to the Rights of Security Holders
            and Use of Proceeds...............................................57
   Item 15. Controls and Procedures...........................................57
   Item 16A.  Audit Committee Financial Expert................................57
   Item 16B.  Code of Ethics..................................................57
   Item 16C.  Principal Accountant Fees and Services..........................58
   Item 16D.  Exemptions from the Listing Standards for Audit Committees......59
   Item 16E.  Purchases of Equity Securities by the Issuer and Affiliated
              Purchasers......................................................59
PART III......................................................................60
   Item 17. Financial Statements..............................................60
   Item 18. Financial Statements..............................................61
   Item 19. Exhibits..........................................................61


                                      -vi-

<PAGE>

                                     PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

     A.   Directors and senior management.

Not applicable.

     B.   Advisers.

Not applicable.

     C.   Auditor.

Not applicable.


ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

     A.   Offer statistics.

Not applicable.

     B.   Method and expected timetable.

Not applicable.



                                      -1-
<PAGE>

ITEM 3. KEY INFORMATION

     A.   Selected financial data.

The  following   table  sets  forth   selected   financial  data  regarding  our
consolidated operating results and financial position. The data has been derived
from  our  consolidated  financial  statements,  which  have  been  prepared  in
accordance with accounting  principles  generally  accepted in Canada ("Canadian
GAAP").  For reconciliation to accounting  principles  generally accepted in the
United States ("U.S. GAAP"), see note 11 to the audited  Consolidated  Financial
Statements  for the three fiscal years ended October 31, 2004,  2003,  and 2002.
The  following  selected  financial  data is  qualified  in its entirety by, and
should be read in conjunction  with the  consolidated  financial  statements and
notes thereto included elsewhere this Annual Report. The selected financial data
is expressed in Canadian  dollars (in accordance  with Canadian GAAP and some in
U.S. GAAP where indicated).

<TABLE>
                                      --------------------------------------------------------------------
                                                          Fiscal year Ended October 31
                                                                (audited) (Cdn$)
                                      --------------------------------------------------------------------
                                          2004          2003          2002          2001          2000
                                      --------------------------------------------------------------------
<S>                                      <C>           <C>           <C>           <C>           <C>
Operating Revenue

    Software Set-up                      798,343       919,892       896,560       803,990       640,253
                                      --------------------------------------------------------------------
   Software Licensing                 11,268,494     6,300,335     2,646,766       908.876       172,463
                                      --------------------------------------------------------------------
   Interest and other                    134,640       109,411       302,031       394,782       338,924
                                      --------------------------------------------------------------------
Total Operating Revenue               12,201,477     7,329,638     3,845,357     2,107,648     1,151,640
                                      --------------------------------------------------------------------
Total Expenses                         8,594,660     6,278,100     5,166,164     3,912,300     4,011,581
                                      --------------------------------------------------------------------
Income (Loss) from                     3,606,817     1,051,538    (1,320,807)   (1,804,652)   (2,859,941)

Continuing Operations before income
taxes

Income taxes:
Future income tax reduction             (414,964)     (630,000)         N/A           N/A           N/A

Net Income (Loss)

    Canadian GAAP                      4,021,781     1,681,538    (1,320,807)   (1,804,652)   (2,859,941)
                                      --------------------------------------------------------------------
    US GAAP                            1,180,157       921,690    (1,338,087)   (2,639,762)   (2,978,726)
                                      --------------------------------------------------------------------
Net Income  (Loss) per diluted Share
from Continuing Operations
    Canadian GAAP                           0.24         $0.12        $(0.10)       $(0.14)       $(0.27)
    US GAAP                                 0.07         $0.07        $(0.10)       $(0.20)       $(0.28)
                                      --------------------------------------------------------------------
                                       5,995,863     3,465,120     1,704,267     2,741,078     8,793,474
Cash and cash equivalents
Total Assets
    Canadian GAAP                     14,961,622     9,218,705     6,951,837     8,159,948     9,826,562
    US GAAP                           14,353,722     8,628,591     6,894,036     8,187,573     9,826,562
Total Liabilites                       1,840,033     1,913,934     1,506,104     1,514,496     1,468,959
Net Assets                            13,121,589     7,304,771     5,445,733     6,645,452     8,357,603
Shares Outstanding                    16,022,966    15,987,701    15,817,701    15,628,501    15,550,501
                                      --------------------------------------------------------------------
</TABLE>


The Company paid no dividends during the past five fiscal years.


                                      -2-
<PAGE>


CURRENCY AND EXCHANGE RATES

Our  financial  statements  are stated in Canadian  Dollars and are  prepared in
accordance with Canadian  Generally Accepted  Accounting  Principles (GAAP), the
application  of which,  in our case,  conforms in all material  respects for the
periods  presented  with the US GAAP as noted in the  footnotes to the financial
statements.  In this  Annual  Report,  unless  otherwise  specified,  all dollar
amounts are  expressed in Canadian  Dollars.  References in this document to "$"
and "Cdn$" refer to Canadian dollars, unless otherwise specified;  references to
"US$" refer to US dollars.

The  following  table shows the rates  derived from the noon buying rates in New
York City for cable  transfers  payable in Canadian  dollars,  as certified  for
customs  purposes  by the  Federal  Reserve  Bank of New York.  The high and low
exchange  rates for each  month  during the  previous  six months are as follows
(Canadian dollars per United States $1.00):

        ------------------------------------------------------------------
        Month                         High                       Low
        ------------------------------------------------------------------
        March 2005                    1.2463                     1.2017
        February 2005                 1.2562                     1.2294
        January 2005                  1.2422                     1.1982
        December 2004                 1.2401                     1.1856
        November 2004                 1.2263                     1.1775
        October 2004                  1.2726                     1.2194
        September 2004                1.3071                     1.2648
        ------------------------------------------------------------------

The high, low, average and closing exchange rates for each of the Company's five
previous fiscal years are as follows (Canadian dollars per United States $1.00):


                     Company's Fiscal Year Ended October 31
------------------------------------------------------------------------------
                  2004           2003         2002          2001        2000
------------------------------------------------------------------------------
High             $1.3970       $1.3043       $1.5108      $1.4933      $1.4350
Low              1.2194         1.5903       1.6128        1.5905      1.5311
Average          1.3195         1.4379       1.5718        1.5411      1.4771
Period End       1.2209         1.3195       1.5610        1.5905      1.5273
------------------------------------------------------------------------------

On April 8, 2005,  the  exchange  rate of Canadian  dollars  into United  States
dollars,  based upon the noon buying  rate in New York City for cable  transfers
payable in Canadian  dollars as  certified  for customs  purposes by the Federal
Reserve Bank of New York, was U.S. $1.00 equals Cdn$1.2252.

     B.   Capitalization and indebtedness.

Not applicable.


                                      -3-
<PAGE>


     C.   Reason for the offer and use of proceeds.

Not applicable.

     D.   Risk factors.

The  securities of the  Registrant  are highly  speculative.  In evaluating  the
Registrant,  it is important  to consider  that the  Registrant  is in the early
stage of its  operations  as a developer  of gaming  entertainment  software.  A
prospective  investor  or other  person  reviewing  the  Registrant  should  not
consider an investment  unless the investor is capable of sustaining an economic
loss of the entire  investment.  All costs have been funded  through  equity and
related party  advances.  Certain  risks are  associated  with the  Registrant's
business  including  the  following  (the  order in which they  appear  does not
necessarily reflect management's opinion of their order or priority):

OUR OPERATING RESULTS ARE DIFFICULT TO PREDICT, WHICH MAY AFFECT OUR BUSINESS.

Our operating  results may fluctuate  significantly due to a variety of factors,
many of which are outside of our control.  Factors that may harm our business or
cause our operating results to fluctuate include the following:

     -    the ability of sublicensees of our Online Games technologies to obtain
          new players and to encourage existing players to play Online Games;

     -    the mix of games and other products developed by us;

     -    CGC's  inability  to obtain  additional  licensees of our Online Games
          technologies;

     -    our inability to adequately  maintain,  upgrade and develop our Online
          Games technologies;

     -    the  ability  of our  competitors  to  offer  new or  enhanced  gaming
          technologies, services or products;

     -    price competition;

     -    fluctuations in the demand for Internet wagering;

     -    an increase in the number of Internet wagering web sites;

     -    our failure to develop strategic marketing relationships;

     -    the amount  and timing of  operating  costs and  capital  expenditures
          relating to commercializing our Online Games technologies;

     -    changes in the  regulatory  and political  environment  that adversely
          affect the Internet gaming industry, licensees and our business; and

     -    economic conditions specific to the Internet,  online commerce and the
          Internet gaming and entertainment industry.

A number of these  factors  are  expected  to affect  our  ability  to  generate
revenues and to continue to be  commercially  profitable.  We cannot  assure you
that we will sustain commercial profitability.


LACK OF CONTINUED ACCEPTANCE OF OUR PRODUCTS WILL AFFECT OUR BUSINESS.

Poor market acceptance of our products or other unanticipated  events may result
in  lower  revenues  than  anticipated,   making  anticipated   expenditures  on
development,  advertising and promotion not feasible. Initially, our success may
be limited by our lack of experience marketing Internet gaming technologies, our
limited international marketing experience and our lack of brand recognition. We
cannot assure you that our  technologies  will be accepted in the marketplace or
that we will earn sufficient revenues from sublicensing our products to earn any
profits.


OUR PRODUCTS WILL BECOME  OBSOLETE IF WE DO NOT UPGRADE AND IMPROVE OUR PRODUCTS
AND DEVELOP NEW TECHNOLOGIES.

The success of our products and our ability to sublicense our technologies and
to develop a competitive advantage in the market will depend on our ability to
improve our products and develop new and innovative technologies.  Our


                                      -4-
<PAGE>

operations  will be at risk if our  products  are not  continually  upgraded and
improved.  The high technology industry is characterized by a consistent flow of
new  product and  service  offerings,  which may render  existing  products  and
services obsolete. Without continued development, our products could be rendered
obsolete in 18 to 24 months.


WE EXPAND OUR GAME  OFFERINGS  AND ENTER NEW  BUSINESS  CATEGORIES  THAT MAY NOT
ACHIEVE MARKET ACCEPTANCE.

Any new game, product or service that is developed by us, which is not favorably
received by sublicensees or end-users could damage our brand or reputation. This
damage could impair our ability to attract new customers,  which could cause our
revenues to fall below expectations. An expansion of our business into other new
business  categories or use  applications  will require  significant  additional
expenses, and strain our management,  financial and operational resources.  This
type of expansion  would also subject us to increased  business  risks and could
aversely  affect our  levels of  customer  service.  We may choose to expand our
operations by developing new games,  services,  products or applications for our
technologies,  promoting new or complementary  games,  expanding the breadth and
depth of products and services  offered or expanding our market presence through
relationships  with third parties.  If we allocate our resources to an expansion
strategy that fails to provide acceptable returns,  our results of operation may
be materially adversely affected.


OUR  SUCCESS IS  DEPENDENT  ON CERTAIN  TECHNOLOGIES  DEVELOPED  BY  THIRD-PARTY
VENDORS AND THE INTERNET,  WHICH MAY FAIL AND HAVE A MATERIAL  ADVERSE AFFECT ON
OUR BUSINESS.

We  incorporate  into our  products  certain  software  licensed  to us by other
software developers,  which are not licensed exclusively to us. Our business may
be materially adversely affected if the third party software developers in which
we rely upon are acquired by a competitor  or terminate our ability to use their
software.

Our  success  is also  dependent  upon  licensees  who  depend on the  Internet.
Internet  service  providers who do not guarantee  access to the Internet or the
reliability of Internet service.  Accordingly,  we could face materially adverse
consequences if Internet  service  providers chose not to permit Internet access
to licensees.

Because our products  incorporate  software  developed  and  maintained by third
parties,  we are also  dependent  to a certain  extent upon such third  parties'
abilities to enhance their current products, to develop new products on a timely
and cost-effective basis and to respond to emerging industry standards and other
technological  changes.  There  can be no  assurance  that we  would  be able to
replace the functionality provided by the third-party software currently offered
in  conjunction  with our  products  in the  event  that such  software  becomes
obsolete or incompatible  with future versions of our products,  or is otherwise
not adequately  maintained or updated.  The absence of, or any significant delay
in, the replacement of that  functionality  could have a material adverse effect
on our sales.


OUR SUCCESS  DEPENDS ON OUR ABILITY TO PREVENT  OTHERS  FROM  INFRINGING  ON OUR
TECHNOLOGIES.

Our success is heavily  dependent upon  proprietary  technology.  To protect our
proprietary  technology,  we rely  principally  upon  copyright and trade secret
protection.  All proprietary information which is capable of copyright is marked
as such. All employees and consultants  are required to execute  confidentiality
agreements with us.  However,  there can be no assurance that the steps taken by
us in this regard will be adequate to prevent  misappropriation  or  independent
third-party  development  of  our  technology.  Further,  the  laws  of  certain
countries  in which we intend to license our  technologies  or products  may not
protect software and intellectual property rights to the same extent as the laws
of Canada or the United States.  We do not include in our software any mechanism
to prevent or inhibit  unauthorized  use, but we generally require the execution
of an agreement that restricts  unauthorized copying and use of our products. If
unauthorized  copying or misuse of our products were to occur,  our business and
results of operations could be materially adversely affected.

While the disclosure and use of our proprietary  technology,  know-how and trade
secrets are generally  controlled  under  agreements with the parties  involved,
there can be no assurance that all  confidentiality  agreements will be honored,
that others will not independently develop similar or superior technology,  that
disputes will not arise  concerning the ownership of intellectual  property,  or
that  illegal  or  unauthorized  dissemination  of our  proprietary  technology,
know-how and trade secrets will not occur.


                                      -5-
<PAGE>

INTELLECTUAL  PROPERTY  CLAIMS  AGAINST  US CAN BE COSTLY  AND COULD  IMPAIR OUR
BUSINESS.

We believe  that our products and  technology  do not infringe  patents or other
proprietary  rights of third  parties.  However,  there can be no assurance that
third parties will not claim that our current or future  products  infringe such
rights of third parties. We expect that software developers will increasingly be
subject  to such  claims as the number of  products  and  competitors  providing
Internet related software and services grows and overlaps occur. Any such claim,
with or without merit,  could result in costly litigation or require us to enter
into royalty or licensing agreements in order to obtain a license to continue to
develop and market the  affected  products.  There can be no  assurance  that we
would  prevail  in any such  action  or that  any  license  (including  licenses
proposed by third parties) would be made  available on  commercially  acceptable
terms, if at all. If we become involved in litigation over  proprietary  rights,
it  could  consume  a  substantial  portion  of  our  managerial  and  financial
resources, which could have a material adverse effect on our business, financial
condition and operations.


OUR  ABILITY  TO  LICENSE  OUR  TECHNOLOGY  WILL BE  ADVERSELY  AFFECTED  IF OUR
TECHNOLOGY'S SECURITY MEASURES FAIL.

Our technologies incorporate security and authentication protections designed to
allow  licensees to protect  certain  personal  information of players,  such as
credit card numbers,  player information and player account balances.  We cannot
predict  that whether  events or  developments  will result in a  compromise  or
breach of the technology we use to protect a player's personal  information.  If
the security  measures in our software  fail,  licensees may lose many customers
and our ability to license our technologies will be adversely affected.

Furthermore,  the servers and computer systems of licensees may be vulnerable to
computer  viruses,  physical or electronic  break-ins  and similar  disruptions,
which could disrupt their operations and their ability to pay us licensing fees.
Any material failure of such systems may have a material affect on our business.
We may need to expend  significant  additional  capital and other  resources  to
protect  against  a  security  breach  or to  alleviate  problems  caused by any
breaches. We cannot assure you that we can prevent all security breaches.


OUR TARGET  CUSTOMERS ARE CONCENTRATED AND MAY BASE THEIR BUYING DECISION ON THE
AVAILABILITY  OF SERVICES THAT WE DO NOT OFFER,  WHICH MAY AFFECT OUR ABILITY TO
MARKET AND SELL OUR PRODUCTS.

We believe that the customers for our Online Games Internet  gaming software are
primarily individual entrepreneurs.  These potential customers may make purchase
decisions  on the  availability  of  services  that  we do not  offer,  such  as
management services,  transaction  clearing services,  Internet gaming licensing
services and Internet casino marketing services.  Several of our competitors may
offer  these  services in packages  that may be more  attractive  to this target
market.  This  may  affect  our  ability  to  successfully  market  and sell our
services.

The customers for our Internet entertainment and Intranet gaming software may be
primarily large corporations,  Indian tribes and other entities that license our
technologies for their licensed casino operations or for entertainment purposes.
In order to effectively target and market to this target market, we will need to
develop specialized marketing programs and modifications to our software to meet
their specific business needs. We cannot assure you that we will successfully be
able to  market  and sell our  technology  to this  target  market  or that such
efforts will be profitable.

If we  cannot  build and  sustain a large  customer  base for our  products  and
services,  our ability to upgrade,  improve and develop new technologies will be
adversely  affected and our ability to generate  revenues and earn a profit will
be adversely affected.


THE LOSS OF OUR KEY MANAGEMENT PERSONNEL MAY ADVERSELY AFFECT OUR BUSINESS.

We will depend on a relatively small number of key employees including Darold H.
Parken, the President, Dave Acorn, the VP of Product & Client Management, Andrew
Smith, our Technical Director, and Lee Richardson,  Chief Executive of Chartwell
Games,  the  loss  of  whom  could  have  an  adverse  affect  on the  financial
performance of our business.  We do not have  employment  agreements  with these
individuals,  and  accordingly  cannot assure you that they will continue  their
service with the Company. We currently do not maintain key man life insurance on
any of our managers.


                                      -6-
<PAGE>

We rely on our management and if you are not prepared to do so should not invest
in our  securities.  All of the  directors  and  officers of the Company may not
devote all of their time to the  affairs of the  company,  but will be  devoting
such time as is required to manage the company.  The  directors and officers are
engaged and will continue to be engaged in the search for business  prospects on
behalf of themselves and others. See "Conflicts of Interest."


RAPID  GROWTH MAY STRAIN OUR  RESOURCES  AND THE  ABILITY FOR OUR  PERSONNEL  TO
EFFECTIVELY SUPPORT OUR BUSINESS.

We expect to grow rapidly,  which may strain our  resources.  Limitations on our
personnel  and  resources  may affect our  ability  to  provide  the  quality of
service,  technical support and marketing support needed to achieve and maintain
a competitive market position.  There is a high demand for software  development
and sales personnel,  which may affect our ability to hire qualified  personnel.
The loss of qualified personnel, growth in the demand for qualified personnel or
our inability to recruit and train qualified personnel on a timely may adversely
affect  the  timeliness  of the  services  we  provide  or the  delivery  of our
software.

Rapid growth may strain our resources and increase our cost of doing business by
reducing our  efficiency.  We cannot  assure you that we will have the resources
necessary to develop and maintain a competitive market position.


OUR  INABILITY  TO GROW  AND TO  SUCCESSFULLY  MANAGE  OUR  GROWTH  MAY HARM OUR
BUSINESS.

To achieve our projected revenues and other targeted operating results,  we will
be required to rapidly expand our systems,  procedures,  controls, employee base
and facilities.  The success of the expansion plans will depend in part upon our
ability to continue to attract,  retain and motivate key  personnel.  Failure to
make the required  expansions and upgrades could have a material  adverse effect
on our  business,  financial  condition,  results of  operations  and  corporate
relationships.  Our results of  operations  will also be  adversely  affected if
revenues  do not  increase  sufficiently  to  compensate  for  the  increase  in
operating  expenses  resulting  from any expansion and there can be no assurance
that any expansion  will be profitable or will not adversely  affect our results
of operations.


OUR OPERATIONS COULD BE AFFECTED BY CURRENCY FLUCTUATIONS.

Our  profitability  may also be adversely  affected by  fluctuations in currency
exchange  rates.  Our  sublicensing  agreements are denominated in United States
dollars.   CGC's   obligation  and  our  obligations   related  to  our  license
arrangements  are generally  denominated in United States  dollars.  We hold our
funds in Canadian dollars.  Fluctuating currency rates between the United States
dollar and the Canadian  dollar may affect our results of operations.  We do not
engage in hedging transactions to protect against such fluctuations.


BROKER-DEALERS  MAY BE  DISCOURAGED  FROM EFFECTING  TRANSACTIONS  IN OUR SHARES
BECAUSE  THEY ARE  CONSIDERED  PENNY  STOCKS AND ARE  SUBJECT TO THE PENNY STOCK
RULES.

Rules 15g-1  through  15g-9  promulgated  under the  Exchange  Act impose  sales
practice and disclosure  requirements on NASD  brokers-dealers who make a market
in "a penny  stock." A penny stock  generally  includes  any  non-NASDAQ  equity
security that has a market price of less than US$5.00 per share.  Our shares are
quoted on the Toronto Stock  Exchange and the closing price of our shares during
the fiscal year ended October 31, 2004 ranged from $1.60 to $4.36 per share.  As
such,  our shares will be deemed  penny stock for the  purposes of the  Exchange
Act. The  additional  sales practice and  disclosure  requirements  imposed upon
brokers-dealers may discourage broker-dealers from effecting transactions in our
shares, which could severely limit the market liquidity of the shares and impede
the sale of our shares in the secondary market.

Under the penny stock regulations, a broker-dealer selling penny stock to anyone
other than an  established  customer or  "accredited  investor,"  generally,  an
individual  with  net  worth in  excess  of  US$1,000,000  or an  annual  income
exceeding US$200,000, or US$300,000 together with his or her spouse, must make a
special  suitability  determination  for the  purchaser  and  must  receive  the
purchaser's  written  consent  to the  transaction  prior  to sale,  unless  the
broker-dealer  or the transaction is otherwise  exempt.  In addition,  the penny
stock regulations require the broker-dealer to deliver, prior to any transaction
involving a penny  stock,  a  disclosure  schedule  prepared  by the  Commission
relating to the penny stock market,  unless the broker-dealer or the transaction
is otherwise  exempt. A broker-dealer  is also required to disclose  commissions
payable to the broker-dealer and the registered representative


                                      -7-
<PAGE>

and current quotations for the securities.  Finally, a broker-dealer is required
to send monthly  statements  disclosing recent price information with respect to
the penny stock held in a customer's account and information with respect to the
limited market in penny stocks.


DUE TO INTENSE COMPETITION, OUR FINANCIAL PERFORMANCE COULD SUFFER.

Although online gaming is a fast growing industry,  it is becoming  increasingly
competitive.  There are currently several  competitors for the licensing of play
for real Internet gaming software, including, among others, Realtime Gaming, Net
Entertainment, Parlay Entertainment, Playtech Inc., Wagerworks Inc. Microgaming,
Cryptologic  Inc. and Boss Media AB. We believe  that each of these  competitors
offers Internet gaming  technologies that compete directly with our Online Games
application.  Many of these competitors have greater financial resources than us
and have  established  relationships  with  licensees or are operating  Internet
gaming Web Sites.

Many of our  competitors  currently offer a full range of products and services,
including Internet gaming software, assistance in procuring licenses, electronic
funds transfer  services,  data management  services,  administrative  services,
hosting of server software,  credit card processing and other banking  services,
marketing consulting services and turn-key Internet gaming systems.

We believe  that our  competitors  may develop  software and  technologies  that
compete  with  our  technologies.  These  potential  competitors  include  large
software development companies that develop a broad range of products as well as
Internet  gaming  companies  that  have  developed  technologies  for  their own
businesses.

Our competitors may be able to develop  technologies  more effectively or may be
able to license their  technologies  on more favorable terms based on the number
of  sublicensees  that license their  products.  Competitors may also adopt more
aggressive  pricing or licensing  policies than us, which may hinder our ability
to penetrate the market and license our technologies.

In  addition,  increased  competition  is likely to result in price  reductions,
reduced  gross  margins and an increased  number of  competitors  competing  for
market share, any of which could seriously harm our ability to generate revenues
and our results of operations.  We expect competition to intensify in the future
because current and new competitors can enter our market with little difficulty,
and our competitors may sell their software at reduced prices.


CONSOLIDATION  IN THE SOFTWARE  INDUSTRY MAY RESULT IN  INSTABILITY  OF SOFTWARE
DEMAND AND STRONGER PEER COMPANIES IN THE LONG TERM.

The entire IT sector, including the software industry, is currently experiencing
consolidation  through mergers and acquisitions,  particularly  involving larger
companies.  Large  companies  continue  to expand  into areas we target and thus
increasingly  compete  with us.  Transactions  in  which  we or our  competitors
participate  could  have a material  adverse  effect on us in a variety of ways,
such  as  delaying  sales  due to  customer  uncertainty  and  subjecting  us to
competition  from stronger  established  or new peer group  companies  with more
resources, larger customer bases and a wider variety of products than we have.


THE GAMING INDUSTRY IS A VOLATILE INDUSTRY.

The gaming  industry  is a volatile  industry,  which is  sensitive  to economic
conditions.  When economic  conditions are prosperous,  gaming industry revenues
increase. Conversely, when economic conditions are unfavorable,  gaming industry
revenues decline. Any significant decline in general corporate conditions or the
economy that affect  consumer  spending could have a material  adverse affect on
the Company's business, financial condition and results of operations.


CHANGES  IN  INTERNET  GAMING  REGULATIONS  MAY HAVE AN  ADVERSE  EFFECT  ON THE
BUSINESS OF THE COMPANY.

Historically,  the gaming industry is subject to intense government  regulation.
Many countries are currently  struggling  with issues  surrounding  wagering and
gambling over the Internet. More specifically, they are considering


                                      -8-
<PAGE>

the  merits,  limitations  and  enforceability  of  prohibition,  regulation  or
taxation of wagering  and gambling  transactions  that are  transacted  over the
Internet. There are significant differences of opinion and law between countries
such as the United Kingdom, United States, Canada, Australia,  Liechtenstein and
Antigua.  Nevertheless,  several countries accept Internet gambling as legal and
some countries offer licenses for the operation of online casinos.

To the best of our  knowledge,  all of our licensees  operate their  interactive
Casinos from jurisdictions where Internet gaming is regulated or tolerated.  All
licensees  provide a  representation  in their license  agreements to the effect
that such licensee will assume  responsibility  for  determining the legality of
using our software, including, without limitation, accepting wagers in whichever
jurisdictions they choose to market to and receive wagers from.

As has been the case for several years, a significant  debate exists whether the
laws of any country other than the country where the computer gaming servers are
physically  located have  jurisdiction  over the  operations  of a licensee.  We
license our software only to licensees that maintain an internet  gaming license
issued by a jurisdiction in which internet gaming is legal.

We are unaware of any  regulations or laws that prohibit the development and the
licensing  of  Internet  gaming  software,  which  may  potentially  be  used in
violation  of  applicable  statutes.  However,  it is possible  that our planned
activities  may  be  alleged  to  violate  an  applicable  statute  based  on an
interpretation   of  the  statute  or  based  on  a  future  change  of  law  or
interpretation  or enforcement  policy.  Such allegations could result in either
civil or criminal proceedings brought by governmental or private litigants. As a
result of such  proceedings,  we could  incur  substantial  litigation  expense,
fines,  diversion of the attention of key  employees,  and  injunctions or other
prohibitions  preventing  us  from  engaging  in  various  anticipated  business
activities. Such an outcome would have a material adverse effect on our business
and our results of operations.

CGC's  strategy is to  sublicense  Online Games  software to operators  that are
licensed  to  operate  Internet  gaming  web sites.  As such,  we believe  CGC's
activities will conform to current gaming laws and regulations.  However,  there
is little case law authority related to the interpretation of gaming statutes as
they  relate  to they  relate to the  Internet  and the  wording  of many of the
applicable statutes is ambiguous. Consequently, it is possible that sublicensees
of Online Games  applications  may be alleged to violate an  applicable  statute
based on an  interpretation of the statute or based on a future change of law or
interpretation or enforcement policy.


CREDIT CARD COMPANIES MAY LIMIT CREDIT CARD USE IN INTERNET GAMING.

Licensees'   revenues  are  generally  collected  through  on-line  credit  card
processing. Recently some credit card companies, such as MasterCard, and certain
credit  card  issuing  banks  in the  United  States,  have  stopped  processing
transactions from on-line gaming  customers.  Such further action by credit card
companies  or  issuers  could have a material  adverse  effect on the  Company's
business, revenues, operating results and financial condition.


ITEM 4. INFORMATION ON THE COMPANY

     A.   History and development of the company.

Introduction
------------

Chartwell  Technology Inc. ("we," "us," "our," "Chartwell," the "Company" or the
"Registrant" as the context requires) and our wholly owned subsidiaries, Gateway
Technology  Inc.  ("GTI"),  a Delaware  corporation,  and  Chartwell  Games Corp
("CGC"),  formerly Gaming Tech  Corporation  ("GT"), a Belize  corporation,  are
engaged in the business of developing, marketing and licensing computer software
applications for gaming and  entertainment on the Internet and internal intranet
systems.  Our principal  office is located at Chartwell House, 750 - 11th Street
SW, Suite 400, Calgary, Alberta, Canada, T2P 3N7. Our common stock trades on the
Toronto Stock Exchange under the symbol CWH:TSX.


                                      -9-
<PAGE>

Corporate History 1992 - 2004
-----------------------------

We were  incorporated  as  "Napier  Explorations  Inc." in British  Columbia  on
December  16, 1987 to engage in business as a mineral  exploration  company.  We
changed our name to "Brockton Resources Inc." on May 1, 1989. From our inception
to April  1992,  we  conducted  a  program  of  mineral  lease  acquisition  and
exploration  activities.  We abandoned our mineral  properties in April 1992. On
November 19, 1992, we changed our name to "Chartwell Ventures Ltd."

We remained  inactive until May 1994, when we acquired a 1.967% working interest
in a petroleum  and natural gas property,  the Harmattan  East Viking Unit No. 1
located in Township 32, Ranges 2 and 3, W5M, known as the "Harmattan  Property",
for $740,000.  Mobil Oil (Canada) was the operator of the Harmattan Property and
we received  revenues  from  production on the  Harmattan  Property  through our
working  interest.  On December 18, 1995,  we continued our  incorporation  into
Alberta,  Canada under the Business  Corporations Act of Alberta. From June 1994
through  November 1998, our only asset and business was our working  interest in
the Harmattan Property.

Effective  November 1, 1998, we acquired GTI,  which was engaged in the business
of  developing  software  and  integrating  computer  hardware  and software for
Internet and Intranet based computer  applications.  GTI was a computer hardware
and software  integrator that  specialized in developing and licensing  Internet
and Intranet  based  computing  solutions,  with a focus in the area of Internet
based commerce and Internet/Intranet gaming. After acquiring GTI, we shifted our
business  strategy  from the oil and gas  industry  to the  software  technology
development and licensing industry.  On December 8, 1998, we changed our name to
"Chartwell  Technology  Inc." At this  time,  we  changed  our  business  to the
development of computer software.

In February  1999, we sold our entire  interest in the Harmattan  Property to an
arms'-length  third party.  Our sale of the  Harmattan  Property was effected to
divest our oil and gas operation  and to focus our resources on the  development
of our computer hardware and software integration business. We received approval
of the Alberta  Stock  Exchange  related to our change in business in accordance
with its  policies.  During our fiscal year ended  October 31,  1999,  we raised
$500,000  through  a  private  placement  of  convertible  debentures  and share
purchase warrants ("1999  Warrants") and $1,000,000  through a private placement
of special warrants ("1999 Special Warrants")  completed on May 26, 1999. All of
the 1999 Special  Warrants and 1999  Warrants  were  exercised  resulting in the
issuance of 1,100,000 Common Shares in aggregate and resulting in a further cash
infusion  of  $1,375,000.  Effective  June  7,  1999,  all  of  our  convertible
debentures were converted into 500,000 Common Shares.

Under an agreement  dated October 8, 1998,  GTI acquired from Corel  Corporation
all proprietary  rights to certain  software code, which formed the basis of our
Internet gaming product. Since our acquisition of GTI, we have completed a total
redevelopment of our Internet gaming software product.

On  November  1,  1999,  we sold  certain  parts of our  interest  in our gaming
software and assigned all our software  sublicensing  agreements  related to our
gaming software to our wholly owned subsidiary Chartwell Games Corp. ("CGC"). We
organized CGC as an independent  operating  subsidiary to license and manage the
wagering version of our Online Games software application. Our business plan and
strategy  is to  focus  primarily  on  the  development,  marketing  and  market
development of our entertainment software.

During the year ended October 31, 2000, we raised $10,075,000  through a private
placement of Special  Warrants  completed on March 10, 2000.  During this fiscal
year the Company  began to earn license fee revenue from the sales of its online
gaming software.

During the fiscal  years  ended  October  31,  2001,  2002 and 2003 the  Company
continued  development  and  licensing of our software  products.  Marketing and
sales efforts were focused mainly on Europe and Asia due to the perceived demand
from this region.  During this three year period the Company's licensing revenue
increased to $6,300,335 from $172,463 in fiscal 2000.

During the year ended October 31, 2004, the Company increased the size and scope
of its sales and marketing  organization  and  established  London,  U.K. as the
Company's sales and marketing  office.  This resulted in our  establishment of a
strong  Corporate  presence  in a key  market  area.  During  the  year  we also
completed  development of our newest core gaming system and product  development
continued to be driven by our markets and our customers.


                                      -10-
<PAGE>

On December 7, 2004, the Company closed a private  placement of 2,365,592 common
shares at a price of $4.65 for gross proceeds of approximately $11,000,000.  The
underwriters were granted 141,936  compensation options exercisable at $5.10 per
share for 18 months.

See Item 4.B. and Item 5 below for important  events in the  development  of the
Company's business for fiscal year ended October 31, 2004.

There has not been any indication of any public takeover offers by third parties
in  respect  of the  Company's  shares or by the  Company  in  respect  of other
company's shares during the last or current financial year.

     B.   Business Overview.

OUR BUSINESS

Chartwell  is  a  leading  software   provider  to  the  online  gaming  market.
Headquartered  in Calgary,  Chartwell  has software  development  operations  in
Canada  and sales and  markerting  operations  in London,  U.K.  We trade on the
Toronto Stock Exchange under the symbol CWH:TSX.  Our business plan and strategy
is to focus on the  continued  development  and marketing of our online suite of
games. We do not offer electronic funds transfer  services,  provide credit card
processing or banking services, conduct any gaming operations on our Web Site or
servers, provide gaming marketing or administrative services or provide services
related  to  obtaining   gaming  licnses  or  government   approval  for  gaming
activities.  Our  business is  developing  and  licensing  gaming  software  and
software  that is  designed  to assist  operators  with the  administration  and
management  of a  variety  of  game  playing  Web  Sites.  Our  licensees  must,
therefore,  manage,  support and  administer  their own Web Site servers and the
games  offered on their sites and market their Web Site  operations  without our
assistance.

Development of Our Business - 2004

During the year ended  October 31,  2004,  we  maintained  our overall  focus on
product  development  driven by our  markets  and our  customers.  We  completed
development  of  our  newest  core  gaming  system  release  and  the  community
infrastructure  system to support both the Poker and Bingo  communities in 2005.
We also completed the commercial application of our mobile gaming system and the
alpha version of our kiosk gaming systems both of which are targeted for rollout
in 2005.

During  fiscal  2004,  we raised  the  profile  of  Chartwell  in the  financial
community  through  continued  financial  performance  and the  upgrading of our
public  listing  form the TSX Venture  Exchange to the Toronto  Stock  Exchange.
Three  firms  initiated  research  coverage  and market  capitalization  grew by
approximately 300%.

During  fiscal  2004,  we also  increased  the size and  scope of our  sales and
marketing  organization and established  London, U.K. as the Company's sales and
marketing office. This enabled us to create a strong Corporate presence in a key
market area with a closer proximity to current customers and prospects.

We will continue to develop and deliver new games and gaming options to our
licensees and will continue to deploy our gaming suite to new delivery channels
and platforms like kiosk and wireless.devices.

OUR PRODUCTS

Chartwell Gaming System

Chartwell  does not operate  any gaming  sites,  nor do we operate our  clients'
sites.  What we do is provide gaming systems to our clients,  who then offer the
games  to  players.   Players  never  place  bets  with  Chartwell  directly  or
indirectly.  Instead of competing  with our clients,  we enter into  "technology
partnerships" with them,  eliminating any potential for conflict of interest. We
offer a customized approach, creating a unique system for each individual client
that  complements  their current  online  operation and brand image.  Cyberboss,
Chartwell's administration, marketing and reporting software, and Cyberbanx, our
proprietary  e-commerce engine, provide our clients with all the tools


                                      -11-
<PAGE>

necessary for the successful  operation and promotion of their Chartwell  Gaming
System.  Chartwell's  gaming  solution can also be provided  under a third party
managed services solution.

Our  entertainment  software  products  consist of Online  Casino,  soft  games,
multiplayer  Bingo and multiplayer  Poker games.  The Online Casino  comprises a
large selection of card games,  table games,  slots and video poker.  The online
Casino suite is available in in-browser or download  versions and a selection of
these  games  can also be  played  using  Java  enabled  mobile  devices  and on
networked  kiosks.  All games can be operated in a wagering  mode for real money
applications or a free mode for fun or entertainment applications.  The software
can be deployed  in either a  standalone  configuration  or  integrated  into an
existing gaming site.

We continually  upgrade our support  software and technologies to increase their
functionality  and  capabilities.  The  ability of our  licensees  to maintain a
high-quality  gaming  environment is critical to the success of our Online Games
product and to our licensing  revenue.  The Online Games  software is subject to
technological  obsolescence and as technology advances,  we will attempt to stay
ahead of the  competition  by upgrading the quality of our software with respect
to new gaming products,  graphics,  sound and other features to meet rising user
expectations.

We believe  that  maintaining  a gaming  environment,  which  includes  security
measures to protect player  information,  confidentiality of player information,
responsible gaming features, variety of games, state of the art graphics, sounds
and  processing  speeds,  will  contribute to our ability to generate  licensing
revenues.  We have  designed our Online  Games  software to feature the look and
feel of wagering  games that are played in a physical  environment  by using our
proprietary technology.Our Online Games software provides the following built-in
security  features  that are  designed to prevent  hackers or  licensees  of our
software from manipulating games and systems, including:

Although  we  have  implemented   security  measures  to  prevent  tampering  or
manipulating of our games, we cannot guarantee that such security  measures will
not be  breached  or that  future  technologies  will  not  render  our  systems
obsolete.  If our Online Games security measures are breached,  our business and
results of operations will be adversely affected.



                                      -12-
<PAGE>

Multiplayer Poker

Chartwell's  multiplayer  poker  provides  players  with a selection of the most
popular poker games. Our multiplayer poker is licensed as part of a fully hosted
Poker  community.   Having  players  from  multiple  sites  and  using  multiple
currencies all playing  together  allows more games,  more game  selection,  and
larger  pots,   which  in  turn  provides  higher  revenue   potential  for  all
participating licensees. Community members can benefit from the critical mass of
the network and still be able to hold  tables,  tournaments  or  promotions  for
their respective players.  Each member of the community retains full control and
confidentiality  of their own players and data,  allowing  them to use  existing
payment systems and providing a secure environment or their players.

Multiplayer Bingo

Chartwell's  in-browser,  multiplayer North American  (75-ball) and UK (90-ball)
bingo systems are Flash-based  for smooth,  state of the art graphics and can be
fully customized to match client's  existing  branding and themes.  Clients have
the option of joining the Chartwell  Bingo  community,  where bingo players from
multiple  Chartwell  clients  can all play and chat  together in the same games,
increasing  game  selection and  accumulating  larger  jackpots.  Like Chartwell
Poker,  each bingo player enters the bingo community from a  client-branded  web
site and plays in a bingo hall branded  with their  particular  site's  colours,
logos and other  design  considerations.  The  Chartwell  Bingo  community  also
supports  deposits in any  currency,  allowing  players from around the world to
play  together.  Alternately,  Chartwell  Bingo can be deployed as a stand-alone
product or integrated with a current online operation.

Soft Games

Along the  traditional  suite of casino games  Chartwell  also offers a range of
different  "soft" or fixed odds games.  Soft games include  scratch cards,  pull
tabs, lottery-style games and hi/lo games which are more chance-based than games
like poker or sports-betting which require higher levels of skills and strategy.
These  games  are  gaining  a  widespread   acceptance  as  a  form  inexpensive
entertainment,  allowing us to expand the online gaming demographic by appealing
to a larger audience, including traditionally non-gaming markets.

Mobile Games

Chartwell has created a suite of casino and soft games for  Java-enabled  mobile
devices.  Games feature custom  branding and animation.  Clients  offering other
Chartwell  products  on their site can easily add  mobile  games,  with  players
accessing the mobile  download  using their  existing user names,  passwords and
player accounts.  Chartwell is able to deploy its mobile casino suite across all
leading mobile phone manufacturers and wireless carrier networks.  Our target is
to support the vast majority of phones in the UK and European marketplace at all
times.

We have also developed  related  applications,  CyberBoss and  CyberBanx,  which
provide the back-end tools required for a completely  integrated Internet gaming
system.

CyberBoss is a comprehensive administrative utility that provides licensees with
a  suite  of  administrative,  marketing,  customer  relations'  management  and
promotional tools. By using CyberBoss  licensees are able to securely access and
classify server and transaction data from virtually  anywhere via a web browser.
The  CyberBoss   system   features   password   encryption   features  for  data
transmissions  and access by the licensee.  We do not  administer  the CyberBoss
system or store licensee operations data.

CyberBanx is a proprietary e-commerce engine that facilitates secure,  automated
player  access to their  account  deposits and  withdrawals  through a number of
third  party  credit  card and  payment  processors.  The  software  features  a
high-level security system that uses multiple level password encryption software
for data  transmissions  and can be  programmed  to  require a variety of player
information  including  name,  address,   credit  card  number,  maximum  player
information  that may be required by third party  credit card and wire  transfer
processing  systems.  CyberBanx also features technology that permits a licensee
to  authenticate  and verify the identity of the parties  sending and  receiving
data. As a security  measure our licensees do not store credit card  information
in the gaming system database.

Although  we  have  implemented   security  measures  to  prevent  tampering  or
manipulating of our games, we cannot guarantee that such security  measures will
not be  breached  or that  future  technologies  will  not  render  our  systems



                                      -13-
<PAGE>

obsolete.  If our Online Games security measures are breached,  our business and
results of operations will be adversely affected.

We have also  designed  and  developed  a Site  Development  Kit  (SDK),  a Game
Development Kit (GDK) and an External Game Interface (EGI).  These  applications
are not licensed separately.

The SDK is a  comprehensive  integration  interface  that  allows  for  seamless
integration of a customer's  administration system to the Gaming System. The GDK
and EGI are interfaces  that enable rapid  development  and deployment of online
games.  The GDK is a  standard  interface  to the back  -end of the  system  and
supports  rapid  internal  game  development  as well as  providing a method for
independent  third party game  developers  to add to the gaming  suite.  The EGI
allows for the  addition of existing  third  party  applications  such as sports
books to be integrated into the Gaming System.

Managed Services Solution

Previously,  the typical Chartwell client has been a large, sophisticated entity
with a  solid  IT  infrastructure,  an  established  player  base,  and  payment
processing  facilities.  Many of these  operators run  sportsbooks or land-based
casinos, and as such appreciate the ability to run their Chartwell Gaming System
themselves.  There is another  market  segment of  operators  who have an online
presence  and large  database of  customers  but are not  currently  involved in
gaming. They may recognize the benefit of adding ganes to their site but are not
currently involved in gamaing and may not have the industry experience necessary
to manage day-to-day  operations of a gaming site. These operators are seeking a
service  provider  who can assist them in this  regard  while  allowing  them to
maintain  ownership of their player  database  and brand.  For these  operators,
Chartwell now offers a managed services solution.  Elite Club Managemnet N.V. is
an  independent  company  acting as  Chartwell's  exclusive  provider of managed
services.  Elite Club holds the gaming license,  hosts the game on behalf of the
licensees,  provides  player access,  manages the operations of the gaming site,
supplies the  hardware,  connectivity  and third party  software.  The client is
responsible for marketing and player acquisitions.

Online Games Licensing

CGC  licenses  Online  Games play for real  applications  only to  operators  of
Internet  gaming Web Sites who have been  granted  Internet  gaming  licenses by
jurisdictions  that permit  Internet  gaming.  We also  license our Online Games
applications  to a variety  of  entertainment  Web Sites for  entertainment  and
promotional  purposes.  We modify  our  Online  Games  applications  to meet our
licensees'  specifications and marketing theme. We do not offer electronic funds
transfer services,  provide credit card processing or banking services,  conduct
any gaming  operations on our Web Site or server,  provide  gaming  marketing or
administrative services or provide services related to obtaining gaming licenses
or  governmental  approval for gaming  activities.  The material  terms of CGC's
standard licensing agreement are as follows:

     o    The initial term is generally  for a period of three years,  renewable
          for an additional two year period unless the licensee provides written
          notice of  termination  at least 90 days prior to the  expiration of a
          term;

     o    The licenses are non-exclusive and non-transferable;

     o    CGC may terminate the license  agreement if the licensee  breaches any
          material term of the license;


                                      -14-
<PAGE>

     o    We will maintain and upgrade our software and retain all right,  title
          and interest in our technologies;

     o    The licensee  paysa monthly  licensing fee. The fee is calculated as a
          percentage of the gross win of the licensee's  online casino.  whichis
          on

     o    The licensee must be licensed in a jurisdiction  that permits Internet
          gaming and must  remain in full  compliance  with the gaming  laws and
          regulatory requirements in the licensing jurisdiction.

CGC has  reserved the right to cancel any license if certain  standards  are not
met.

As of  March  31,  2005,  CGC has  licensing  agreements  with  twenty-two  (22)
licensees.  Sixteen (16) of these  licensees  have  launched  licensed  Internet
gaming Web Sites. The Company cannot confirm if or when the remaining  licensees
will launch their Web Sites.

None of the  Company,  GTI or CGC intend to own or operate any  Internet  gaming
operations.

Internet Games and Gaming Software Market

The market for Internet gaming software how shown consoiderable  growth over the
past two years with considerable growth potential ahead. Online casino continues
to be major growth area.  Poker is emerging as a rapidly  expanding game segment
and  gaining  popularity  around the world.  According  to Poker  Pulse,  Global
Betting and Gaming  Consultnats,  online Poker has grown  20-fold since 2002, is
about 15% of the Internet gaming industry and is forecasted to double next year.
Mobile gaming,  particlulary  mobile lotteries,  is now beginning to emerge as a
gaming  option.   Juniper  Reseach  believes  that,   regulatiory   restrictions
notwithstanding,  the total market for mobile  gambling  services could generate
revenues of more than US$19.3 billion in 2009, or nearly one-third of all mobile
entertainment  revenues.  The  continued  growth in the online casino market and
growth  in these  new  game  areas  offer  vast  market  potential  and  revenue
opportunities for Chartwell.

We cannot assure you that we will benefit from the increase size of the Internet
gaming market or the growth trend in the market in recent years.  We also cannot
assure  you that we will be able to  successfully  compete  against  established
companies that are in the business of licensing Internet gaming software.

Competition

Although online gaming is a fast growing industry,  it is becoming  increasingly
competitive and sophisticated.  There are currently several  competitors for the
licensing of play for real Internet gaming  software,  including,  among others,
Realtime  Gaming,  Net  Entertainment,  Parlay  Entertainment,   Playtech  Inc.,
Wagerworks Inc. Microgaming, Cryptologic Inc. and Boss Media AB. We believe that
each of these  competitors  offers  Internet  gaming  technologies  that compete
directly  with our Online  Games  application.  Many of these  competitors  have
greater  financial  resources than us and have  established  relationships  with
licensees or are operating Internet gaming Web Sites.

Many of our  competitors  currently offer a full range of products and services,
including Internet gaming software, assistance in procuring licenses, electronic
funds transfer  services,  data management  services,  administrative  services,
hosting of server software,  credit card processing and other banking  services,
marketing consulting services and turn-key Internet gaming systems.

We believe  that our  competitors  may develop  software and  technologies  that
compete  with  our  technologies.  These  potential  competitors  include  large
software development companies that develop a broad range of products as well as
Internet  gaming  companies  that  have  developed  technologies  for  their own
businesses.


                                      -15-
<PAGE>

Our competitors may be able to develop  technologies  more effectively or may be
able to license their  technologies  on more favorable terms based on the number
of  sublicensees  that license their  products.  Competitors may also adopt more
aggressive  pricing or licensing  policies than us, which may hinder our ability
to penetrate the market and license our technologies.

In  addition,  increased  competition  is likely to result in price  reductions,
reduced  gross  margins and an increased  number of  competitors  competing  for
market share, any of which could seriously harm our ability to generate revenues
and our results of operations.  We expect competition to intensify in the future
because current and new competitors can enter our market with little difficulty,
and our competitors may sell their software at reduced prices.

Barriers to Entry

Barriers to entry into the Internet/Intranet  gaming and entertainment  software
industry  include  significant  capital costs relating to software  development,
lead time relating to software  development  and scarcity of qualified  software
programmers.

Set forth below are the market  barriers we believe we face and our strategy for
addressing these issues:

<TABLE>
Barrier                                                     Our Strategy
------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>
Developing technology that is compatible with the           Develop new technologies to improve the speed of play,
Internet and that transforms commonly played tangible       graphics, sound and simplify the procedures for
games of chance into virtual games that are easy for        playing our Online Games games.
players to play and understand
------------------------------------------------------------------------------------------------------------------
Developing a web-site infrastructure that is secure and     Improve and develop our CyberBanx and CyberBoss
that can process transactions on a timely and accurate      software on a continual basis
basis
------------------------------------------------------------------------------------------------------------------
Obtaining an experienced management and technical team to   Recruit and maintain experienced software developers
develop an effective marketing, gaming and Internet         and management with experience in software licensing
strategy
------------------------------------------------------------------------------------------------------------------
Developing a solid reputation among licensees               Provide software that incorporates current technology;
                                                            Provide games that are entertaining; and
                                                            Provide  software  support services to address licensee
                                                            requests.
------------------------------------------------------------------------------------------------------------------
</TABLE>


We believe that each of these market  barriers must be overcome to establish and
maintain a  successful  position in the  Internet  gaming  software  development
market.  We cannot assure you that we will be able to overcome these barriers to
entry or that new competitors will not overcome them more quickly than us. If we
fail to  overcome  these  barriers,  we may be unable  to  compete  or  generate
sufficient  revenues to earn profits,  which will have a material  affect on our
business and results of operations.

Technology

Although software  development varies  significantly in terms of the programming
languages  used and operating  systems on which such software  runs, we view the
Internet games and gaming software markets as being divided between applications
which are developed in popular  programming  languages such as C++ which require
the user to install software prior to playing and those  applications  developed
in Java which require no  installation.  A significant  part of our Online Games
software  was  developed  in Java.  The  cross-platform  nature of Java makes it
possible to play Online Games on all major  operating  systems without having to
install any part of the software prior to playing.  We believe the browser based
capability of our software provides a competitive advantage over our competition
whose software requires installation.

We believe that our no install,  Java and Flash based Online Games software will
provide  licensees with the ability to present our players with the most current
version of our Online Games every time a user logs onto a system with no need to
install upgrades.


                                      -16-
<PAGE>

Our Online Games  software is designed to run on all popular web  browsers.  The
server  software  was  designed to operate in the Windows NT and 2000  operating
system and has been modified to operate on Linux and Unix systems.

Strategic Relationships

We  intend  to  develop  strategic  relationships  with  licensees,   which  are
anticipated to use our Online Games  technologies  to develop virtual casinos on
the  Internet.  We anticipate  we will receive  ongoing  license fees from these
licensing  arrangements.  We also  anticipate  our licensees will provide useful
feedback,  such as the  popularity  of games,  requested  features,  operational
suggestions to improve web site  administration,  customer  comments,  which are
expected to assist us in upgrading  our  technologies  and  developing  the next
generation of products and gaming solutions.

We also  anticipate we will enter into  strategic  relationships  with potential
vendors and licensees of our Intranet gaming and entertaining  solutions.  These
vendors  and  licensees  may  allow  us to  offer  our  Intranet  solutions  for
applications  in land based  gaming  establishments.  We also  believe  that our
Intranet solutions may be successfully  marketed as an entertainment  product in
non-gaming  environments.  We  anticipate  that  vendors  and  licensees  of our
Intranet software solutions may provide useful feedback,  which may assist us in
developing new technologies and in marketing our products.

Regulatory Environment - Internet Gaming Regulation

Historically,  the gaming industry is subject to intense government  regulation.
Many countries are currently  struggling  with issues  surrounding  wagering and
gambling over the Internet. More specifically,  they are considering the merits,
limitations  and  enforceability  of  prohibition,  regulation  or  taxation  of
wagering and gambling transactions that are transacted over the Internet.  There
are  significant  differences  of opinion and law between  countries such as the
United Kingdom,  United States,  Canada,  Australia,  Liechtenstein and Antigua.
Nevertheless,  several  countries  accept  Internet  gambling  as legal and some
countries offer licenses for the operation of online casinos.

To the best of our  knowledge,  all of our licensees  operate their  interactive
Casinos from jurisdictions where Internet gaming is regulated or tolerated.  All
licensees  provide a  representation  in their license  agreements to the effect
that such licensee will assume  responsibility  for  determining the legality of
using our software, including, without limitation, accepting wagers in whichever
jurisdictions they choose to market to and receive wagers from.

As has been the case for several years, a significant  debate exists whether the
laws of any country other than the country where the computer gaming servers are
physically  located have  jurisdiction  over the  operations  of a licensee.  We
license our software only to licensees that maintain an internet  gaming license
issued by a jurisdiction in which internet gaming is legal.

In the United States, the Federal Interstate Wire Act contains  provisions which
make it a crime for anyone in the  business  of gaming to use an  interstate  or
international telephone line to transmit information assisting in the placing of
wagers,  unless the wagering is legal in the  jurisdictions  from which and into
which the  transmission is made.  There are other federal laws impacting  gaming
activities  including the Interstate Wagering  Paraphernalia Act, the Travel Act
and the Organized  Crime Control Act.  However,  it remains  unresolved  whether
these other laws apply to gaming conducted over the Internet.

Various U.S.  regulatory  and  legislative  agencies are  conducting  studies of
interstate and interactive  wagering and one, the National Gambling Impact Study
Commission,  has  recommended  the  prohibition of Internet  gambling within the
United States and the development of enforcement strategies by the Department of
Justice.

We believe  that any change in either the  substance or the  enforcement  of the
applicable  or  proposed  rules and  regulations  in these  areas  could have an
adverse effect on our business and prospects.


                                      -17-
<PAGE>


In the United  States,  all 50 states  currently  have  statutes or  regulations
regarding  gaming  activities,  and three  states have no gaming at all. In most
states it is illegal to place or accept a wager,  with  specific  state-by-state
statutory exceptions.

In addition,  as electronic  commerce further develops,  it may generally be the
subject of government  regulation.  As well, current laws, which pre-date or are
incompatible with Internet electronic commerce, may be enforced in a manner that
restricts the electronic  commerce market.  Any such  developments  could have a
material adverse effect on the Company's business,  revenues,  operating results
and financial condition.

We are unaware of any  regulations or laws that prohibit the development and the
licensing  of  Internet  gaming  software,  which  may  potentially  be  used in
violation of applicable statutes. It is possible that our planned activities may
be alleged to violate an applicable  statute based on an  interpretation  of the
statute  or based on a future  change of law or  interpretation  or  enforcement
policy.  Such allegations  could result in either civil or criminal  proceedings
brought by governmental or private  litigants.  As a result of such proceedings,
we could incur substantial litigation expense, fines, diversion of the attention
of key  employees,  and  injunctions  or other  prohibitions  preventing us from
engaging in various anticipated business activities.  Such an outcome would have
a material adverse effect on our business and our results of operations.

CGC's  strategy is to  sublicense  Online Games  software to operators  that are
licensed  to  operate  Internet  gaming  web sites.  As such,  we believe  CGC's
activities will conform to current gaming laws and regulations.  However,  there
is little case law authority related to the interpretation of gaming statutes as
they  relate  to they  relate to the  Internet  and the  wording  of many of the
applicable statutes is ambiguous. Consequently, it is possible that sublicensees
of Online Games  applications  may be alleged to violate an  applicable  statute
based on an  interpretation of the statute or based on a future change of law or
interpretation or enforcement policy.

Marketing Strategies

The following summarizes our strategic focus and operating strategy:

PROVIDE HIGH QUALITY,  INNOVATIVE  AND SUPERIOR  PRODUCTS AND SERVICES.  We will
continue  to  position  our  product in the market  based on the  quality of our
customer support and the quality of our graphics, sounds, back office system and
security  features  and the  speed of our  software  and  systems.  We intend to
continue to remain focused on designing  technology that achieves efficiency for
licensees and that is innovative, easy to use and appealing to players.

PROVIDE  MARKET-ORIENTED  AND CUSTOMER FOCUSED  SOLUTIONS.  A key to our success
will be the success of our licensees. We intend to continue to obtain input from
our licensees on game content and features and to continue to design and develop
a  wider  variety  of  gaming  products  that  will  meet  their  needs  and the
expectations  of their  customers.  We intend to assist  licensees  by providing
customized  software  solutions  featuring unique graphics,  themes and features
that will  allow  licensees  to  differentiate  their web sites and games in the
marketplace

PROVIDE  OUR  CUSTOMERS  WITH A VARIETY  OF GAMING  PLATFORMS.  The  market  for
electronic  gaming is  expanding  to new  platforms  like  mobile and  networked
kiosks.  During  fiscal 2004,  we completed the  commercial  application  of our
mobile gaming system and the alpha  version of our kiosk gaming  systems.  We to
market these new gaming offering to existing and new customers PROVIDE COMMUNITY
BASED POKER AND BINGO  PRODUCTS.  We intend to formally  roll-out our  community
based Poker and Bingo products in 2005 and we intend to integrate these into new
and existing licensees.

EUROPEAN FOCUS. We intend to continue and accelerate our established strategy of
focusing our new business development  activities primarily in Europe. Our sales
team,  operating from London,  U.K. has over 25 years of combined  experience in
the U.K. and European  online  gaming  sector.  We believe that our proximity to
existing and


                                      -18-
<PAGE>

prospective  licensees  and our broader and deeper  industry  experience  can be
effectively utilized to develop new opportunities and add new licensees.

We cannot assure you that we will  successfully  differentiate  our technologies
from our competitors or will develop a competitive advantage in the marketplace.

Product Development Strategy

We  believe  that the most  significant  factor  influencing  the  licensing  of
Internet  gaming  software  is  player  appeal  followed  by a mix  of  elements
including  price,  service,   reliability,   technical   capability,   interface
capability,  upgradeability,  ability to customize and differentiate  from other
web  sites,  management  and  administrative  support  tools  and the  financial
condition and  reputation  of the  developer.  We believe the factors  affecting
player  appeal is a combination  of play  features,  game variety,  ease of use,
appealing graphics, sound and special effects.

To increase the player appeal of Online Games games, we have designed them to be
easy to use and to play and to feature  appealing  graphics,  sound and  special
effects.  Version 6.2 is our next product release. We intend to continue to make
significant  investments  in research  and  development  in  designing  our next
generation of Online Games. We intend to develop new technologies and to license
the latest  available  technologies  to improve the look,  feel and speed of our
games. Our goal is to incorporate new games, graphics,  sounds and features into
our games to differentiate our Online Games games from those of our competitors.
To appeal to licensees,  we intend to develop  technologies that allow operators
to market and  differentiate  their Internet  casinos by featuring unique themes
and customized  visual  elements.  We also intend to enhance our technologies to
provide data support and information systems that allow operators to develop and
manage  marketing  programs  targeted  at  their  customers  and to  manage  the
administrative and financial aspects of their business  efficiently through data
retention and analysis and accounting capabilities.

PLAN OF OPERATION

We are continuing to develop our business, expand our suite of games, deploy our
games  across new  platforms  and sign new  licensees.  Fiscal year 2004 was our
second consecutive year of profitability and substantial revenue growth.  During
the fiscal years ended  October 31, 2004,  and October 31, 2003, we had revenues
from continuing  operations of $12,201,477 and $7,329,638  respectively.  During
these  same  periods,  we had  operating  income of  $4,021,781  and  $1,681,538
respectively.  As of October 31, 2004,  our  accumulated  deficit was reduced to
$3,483,171.  At  October  31,  2004,  our cash and short term  investments  were
$9,314,149 and we had working capital of $10,549,056.  Subsequent to October 31,
2004 on December 7, 2004, the Company completed a private placement of 2,365,592
common shares at $4.65 per share for gross proceeds of approximately $11,000,000
(net proceeds of $10.3  million  after  underwriters'  fees and  expenses).  The
Company issued the underwriters  141,136  compensation options exercisable for a
period of 18 months at $5.10 per share.  We believe we have  sufficient  working
capital to fund our operations  through our fiscal year ending October 31, 2005.
See "Item 5.B - Liquidity and Capital Resources."

Our business plan through our fiscal year ending October 31, 2005 is to increase
our market share in the traditional internet casino market,  establish our Poker
and Bingo  Communities,  roll out our Mobile and Kiosk  offerings  and establish
market share in these new market areas.



                                      -19-
<PAGE>


ONLINE GAMES SOFTWARE

Software Maintenance and Upgrades

During the year ended  October 31, 2004,  we released new versions of our Online
Games  software.  Through our fiscal year ending  October 31,  2005,  we plan to
maintain and upgrade software that is being used by our present licensees and to
integrate new and unique  gaming  applications  into our customer  base. We have
targeted to formally roll-out our Multi-player  Poker and Multi-player Bingo and
new soft and lottery style games.  We will also  continue the  deployment of our
expanding  suite of games to  alternate  platforms  like  molbile  and  wireless
devices  and  networked  kiosks.  In  addition,  we are  continuing  to  develop
localization  of the  software,  which means  developing  the screens in various
languages to accommodate non-English-speaking players.

We will  continue to offer  customization  to the current  version of our Online
Games  software,  which  allows  licensees to  differentiate  its web site using
interfaces with unique graphic and sound effects and themes.  The gaming engines
that run the Online  Games are  essentially  the same for each  sublicensee  who
customize  their  individual  web sites with graphic and sound  interfaces  that
provide the  appearance of a unique web site.  We also  customize or upgrade the
back-end  systems,  which  allow  licensees  to  structure  the  layout of their
Internet casino web sites and  operations,  and accounting  applications,  which
permit  licensees to  administer  and structure  their  accounting  systems,  to
provide different types and structures of reports upon the request of licensees.

Graphic Development and Creation

We have  in-house  graphics  designers  that design and create the HTML graphics
that are required to customize and  distinguish  licensees'  gaming  sites.  Our
in-house  graphic  services work with  licensees to develop web site  interfaces
that feature unique themes designed to appeal to the licensee's target markets.

Present and Future Sales of Online Games Software

Our strategy for marketing and  licensing  our  technology is to continue  sales
efforts to present  leads as well as  exhibiting  at trade shows,  limited trade
publication  advertising,   online  advertising  and  implementing  a  marketing
campaign  targeted  at  existing   Internet  gaming  companies.   We  have  also
established a sales and marketing  office in London,  England that is staffed by
sales and marketing professionals with extensive industry experience.  We expect
that the  establishment  of the London  office will  increase our  visibility in
Europe and will generate more revenue opportunities for the Company.

Staffing

At March 31, 2005, we had ninety-three (93) employees and contractors  including
subsidiaries. CGC had four (4) full time employees. None of the employees of the
Company or CGC are covered by a collective bargaining agreement.

     C.   Organizational structure.

CTI has two  wholly-owned  subsidiaries:  GTI and CGC. CGC has one  wholly-owned
subsidiary:  Chartwell Games (Malta) Holding Limited and Chartwell Games (Malta)
Holding  Limited  has  one  wholly-owned  subsidiary:  Chartwell  Games  (Malta)
Limited.

GTI, our wholly  owned  subsidiary,  was formed on June 27, 1997,  as a Delaware
corporation. GTI was primarily responsible for the Company's marketing and sales
functions  until May 31, 2000,  from and after which time GTI has been  inactive
and will be dissolved.


                                      -20-
<PAGE>

On November 5, 1999, we organized CGC (formerly GT) as an international business
corporation  under  the laws of  Belize.  CGC was  organized  as an  independent
operating  subsidiary to license our real money wagering software  applications.
We own all the issued and outstanding shares of CGC.

In  December  of 2004,  CGC  organized  the Malta  companies  for the purpose of
conducting all software licensing transactions.

We are  headquartered  in Calgary,  Canada,  and are primarily  responsible  for
technology and software development, software upgrade and maintenance, corporate
finance,  strategic  planning  and  other  corporate  functions  related  to the
development  of our  business.  In  March  2004,  CGC  established  a sales  and
marketing  office in London,  UK which is  staffed  by four  sales and  industry
professionals.

We, GTI and CGC have  never been  subject  to any  bankruptcy,  receivership  or
similar proceedings.

     D.   Property, plants and equipment.

Our executive  offices are located in leased  premises of  approximately  11,072
square feet at Suite 400, 750 - 11th Street SW, Calgary,  Alberta,  Canada.  The
lease is for a term of six years  commencing  December  1, 2003 at a base annual
rental rate of  approximately  $166,080 with  operating  costs of  approximately
$130,405 annually. We consider these premises suitable for our current needs. We
have an office of  approximately  838 square feet at 1166 Alberni Street,  Suite
1400, Vancouver, British Columbia, Canada. The lease is for a term of five years
commencing January 1, 2004 at a base annual rental rate of approximately  $9,380
with operating costs of approximately $9,965 annually.

CGC's principal offices are located in London, England.


ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

     A.   Operating results.

The following discussion and analysis of the results of operations and financial
condition of the Company for the fiscal years ending October 31, 2004,  2003 and
2002  should  be  read in  conjunction  with  the  Company's  audited  financial
statements and the related notes included with this annual report. The financial
statements have been prepared in accordance with accounting principles generally
accepted in Canada, which conform to accounting principles in the United States,
except as  described  in the notes to  financial  statements.  Unless  expressly
stated  otherwise,  all  references  to dollar  amounts in this  section  are in
Canadian  dollars (in  accordance  with Canadian  GAAP).  A  description  of the
material  differences  between Canadian GAAP and US GAAP is contained in Note 11
of the notes to financial statements.

OVERVIEW

Chartwell  develops,  markets,  implements and supports gaming  applications and
entertainment content for the internet and wireless platforms.  Chartwell's JAVA
and Flash based  software  products  and games are designed  for  deployment  in
gaming, entertainment and promotional applications. Chartwell does not operate a
gaming site nor do we operate our clients gaming sites.

Business Model

Substantially all of Chartwell's revenue is of a recurring nature in the form of
software  license  fees.  Chartwell's  licensees  pay an  ongoing  fee  for  the
licensing  and  support of our  software.  The license  fee is  calculated  as a
percentage of each  licensee's  level of activity.  Additional  sales revenue is
derived  from  software  setup-fees  which  are one time  costs on new  customer
installations.   Subsequent  to  October  31,  2003,  the  Company  revised  its
accounting  policy for the  recognition of set-up fee revenue and related set-up
costs.  The Company's  contractual  agreements  with  licensees  provide for the
provision of graphics, web design, software implementation  services,  licensing
of the software and  provision of software  upgrades  over the fixed term of the
contract.  Set-up fee revenue


                                      -21-
<PAGE>

and related costs are recognized ratably over the term of the contract. Prior to
the  revision of its  policy,  the  Company  recognized  set-up fees and related
set-up costs using the completed  contract method of accounting.  The accounting
change was  adopted  retroactively.  At October  31,  2004 the  Company has $1.1
million of deferred  set-up fees which will be taken into  revenue over the next
five years.

Expenses are classified into five categories, software development and support;
sales, general and administrative ("SG&A"); depreciation and amortization, stock
compensation expense and foreign currency gains or losses. Software development
and support consists of personnel and related costs associated with the design
Fand development of new products, support of existing products, customer
implementation and quality assurance. SG&A expenses consist of personnel and
related costs associated with the Company's sales, marketing and business
development activities. In addition, SG&A expenses include the costs of all
administrative, financial and IT personnel, investor relations and professional
fees relating to our public company listing. Stock compensation expense consists
of the estimated fair value of options granted to consultants during the year.
Depreciation and amortization expenses are based on the estimated useful life of
our assets and include the amortization of deferred software development costs.
The company operates internationally with 100% of its revenue derived from
non-Canadian sources. Under the Company's licensing agreements, the majority of
the Company's revenue is received in U.S. dollars. Consequently, the Company is
exposed to currency fluctuations which result in foreign currency gains or
losses which are reported in this expense category.

FINANCIAL REVIEW

Chartwell  realized strong top line and bottom line growth in fiscal 2004. Total
revenue  increased to $12.2 million  compared to $7.3 million in 2003;  earnings
("net income") grew by 139.1% with diluted  earnings per share of $0.24 compared
to $0.12 in 2003. The strong growth reflected incremental revenue from new games
and increased revenue from existing clients.

In 2004,  92.4% of  Chartwell's  revenue was of a recurring  nature  compared to
86.0% in 2003,  and was  generated  from long  term  licensing  agreements  that
generally extend from three to five years. Our five largest licensees  accounted
for approximately  91.3% of our recurring license fees in 2004 compared to 93.4%
in 2003. In 2004, we either  renegotiated or extended contracts with four of our
major clients.

The  Company  continued  to invest in key  areas of our  business,  specifically
related to product  development,  sales and marketing and our European presence.
In March,  the  Company  opened a sales  office in the United  Kingdom and added
three senior sales and marketing professionals to our sales team. Resources were
also added in the areas of software development,  quality assurance and customer
support. Overall, headcount,  including consultants,  increased to seventy-seven
from fifty-six in 2003.  These  staffing  additions are necessary to continue to
deliver on our product, revenue and customer support initiatives.

Increased  expenditures  will  continue to be  necessary  in 2005 to sustain and
build for long-term growth.

Chartwell continued to strengthen its balance sheet in 2004. Cash and short-term
investments  increased  to $9.3 million  compared to $5.2  million in 2003.  The
Company's balance sheet was further  strengthened by the completion of a private
placement of $10.5 million in the first quarter of 2005.


                                      -22-
<PAGE>

SELECTED ANNUAL FINANCIAL DATA

Comparison of the years ended October 31, 2004, 2003 and 2002:

<TABLE>
Consolidated Statement of Operations and Deficit
                                                     % of                      % of                       % of
Year ended October 31,                   2004       Revenue        2003       Revenue         2002       Revenue
                                        -------------------------------------------------------------------------
(Amounts in Thousands,
  Except Per Share Data)

Revenue
<S>                                    <C>           <C>          <C>          <C>         <C>            <C>
  Software license fees                $11,268       92.4%        $ 6,300      86.0%       $  2,647       68.8%
  Software set-up fees                     798        6.5%            920      12.6%            896       23.3%
  Interest & other                         135        1.1%            109       1.5%            302        7.9%
                                        -------------------------------------------------------------------------
                                        12,201      100.0%          7,329     100.0%          3,845      100.0%

Expenses
  Software development & support         4,418       36.2%          3,288      44.9%          2,648       68.9%
  Sales, general & administrative        3,499       28.7%          1,948      26.6%          2,386       62.1%
  Amortization of deferred software
     development costs                      98        0.8%            110       1.5%            110        2.9%
  Stock-based compensation                 103        0.8%              -       0.0%              -        0.0%
  Depreciation & amortization              244        2.0%            137       1.9%            108        2.8%
  Foreign currency loss (gain)             233        1.9%            795      10.8%            (86)      (2.2)%
                                        -------------------------------------------------------------------------
                                         8,595       70.4%          6,278      85.7%          5,166      134.4%

Net income (loss) before taxes           3,606       29.6%          1,051      14.3%         (1,321)     (34.4)%

Income taxes                              (415)      (3.4)%          (630)     (8.6)%             -        0.0%

Net income (loss)                      $ 4,021       33.0%        $ 1,681      22.9%       $ (1,321)     (34.4)%

Net income (loss) per share
   Basic                               $  0.28                    $  0.12                  $  (0.10)
   Diluted                             $  0.24                    $  0.12                  $  (0.10)
</TABLE>

<TABLE>
October 31,                                     2004            2003            2002
(Amounts in CAD dollars, in Thousands)       -----------------------------------------

<S>                                           <C>             <C>             <C>
Consolidated Balance Sheet Data
  Cash & short-term investments               $  9,314        $ 5,178         $ 4,886
  Working capital                               10,549          6,545           5,484
  Total assets                                  14,962          9,219           6,952
  Deferred revenue                               1,095          1,688           1,321
  Total shoareholders equity                    13,122          7,305           5,446
</TABLE>



                                      -23-
<PAGE>

SELECTED QUARTERLY FINANCIAL DATA

The following  table sets out selected  unaudited  financial  information of the
Company on a  consolidated  basis for the last eight  quarters.  2003  quarterly
results reflect the restated  amounts  resulting from the adoption of the change
in  accounting  policy for the  recognition  of set up fee revenue as previously
noted.

<TABLE>
                                                              Fiscal 2004 Quarters

                                          Q1          Q2             Q3         Q4         Annual
                                        ------------------------------------------------------------
<S>                                    <C>           <C>          <C>          <C>         <C>
Revenue
  Software license fees                $   215     $   191        $   184    $   208       $    798
  Software set-up fees                   1,939       2,699          3,393      3,237         11,268
  Interest & other                          44          26             21         44            135
                                        ------------------------------------------------------------
                                         2,198       2,916          3,598      3,489         12,201

Expenses
  Software development & support         1,002       1,006          1,172      1,238          4,418
  Sales, general & administrative          771       1,004            764        960          3,499
  Amortization of deferred software
     development costs                      --          --             39         59             98
  Stock-based compensation                  --          --             --        103            103
  Depreciation & amortization               35          53            103         53            244
  Foreign currency loss (gain)             (41)        (76)           105        247            233
                                        ------------------------------------------------------------
                                         1,767       1,985          2,183      2,660          8,595

Net income (loss) before taxes             431         931          1,415        829          3,606

Income taxes                                45         (33)           204       (631)          (415)
                                        ------------------------------------------------------------
Net income (loss)                      $   386         964        $ 1,211    $ 1,460       $  4,021
                                        ============================================================

Basic earnings per share               $  0.03     $  0.07        $  0.08    $  0.10       $   0.28
Diluted earnings per share             $  0.03     $  0.06        $  0.07    $  0.08       $   0.24
</TABLE>


<TABLE>
                                                              Fiscal 2003 Quarters

                                          Q1          Q2             Q3         Q4         Annual
                                        ------------------------------------------------------------
<S>                                    <C>           <C>          <C>          <C>         <C>
Revenue
  Software license fees                $   198     $   234        $   241    $   246       $    919
  Software set-up fees                   1,183       1,577          1,693      1,847          6,300
  Interest & other                          28          27             32         23            110
                                        ------------------------------------------------------------
                                         1,409       1,838          1,966      2,116          7,329

Expenses
  Software development & support           883         976          1,024        405          3,288
  Sales, general & administrative          423         390            473        661          1,947
  Amortization of deferred software
     development costs                      28          28             28         28            112
  Stock-based compensation                  --          --             --         --             --
  Depreciation & amortization               21          22             26         68            137
  Foreign currency loss (gain)              --         383            201        211            795
                                        ------------------------------------------------------------
                                         1,355       1,799          1,752      1,373          6,279

Net income (loss) before taxes              54          39            214        743          1,050

Income taxes                                --          --             --       (630)          (630)
                                        ------------------------------------------------------------
Net income (loss)                      $    54          39        $   214    $ 1,373       $  1,680
                                        ============================================================

Basic earnings per share               $    --     $    --        $  0.02    $  0.10       $   0.12
Diluted earnings per share             $    --     $    --        $  0.02    $  0.10       $   0.12
</TABLE>



                                      -24-
<PAGE>

RESULTS OF OPERATIONS

YEAR ENDED OCTOBER 31, 2004 COMPARED TO THE YEAR ENDED OCTOBER 31, 2003.

REVENUE
Compared to the same period of 2003, total revenue in 2004 increased by 66.5%.

In 2004,  Chartwell  generated  progressively  stronger  quarterly  revenue  due
primarily to the growing business of existing  customers.  The average quarterly
growth rate was 16.2% in 2004  compared  to 13.6% in the year ended  October 31,
2003.

Total  revenues  increased to $12.2  million for the year ended October 31, 2004
compared to $7.3 million for the year ended October 31, 2003.  Revenue growth is
primarily  attributable to the significant  growth in recurring software license
fees which  increased  78.9% to $11.3 million in the year ended October 31, 2004
compared to $6.3 million in the year ended October 31, 2003.  Recurring  license
fees remain the biggest  contributor to revenue and  represented  92.4% of total
revenue  in fiscal  2004  compared  to 86.0% of total  revenue  in fiscal  2003.
Looking  forward,  we expect that  recurring  license  fees as a  percentage  of
revenue will continue to increase.

Set-up fee revenue  decreased  13.2% to $798  thousand in the year ended October
31, 2004  compared  to $920  thousand in the year ended  October 31,  2003.  The
decrease is primarily  attributable  to smaller set-up fees from new clients and
reflects the impact of the change in revenue  recognition  policy.  We expect to
realize $479 thousand of deferred set-up fees as revenue in fiscal 2005.

Interest and other revenues  increased  23.1% to $135 thousand in the year ended
October 31, 2004  compared to $109  thousand in the year ended October 31, 2003.
The increase in short-term  investments to $3.3 million in 2004 compared to $1.7
million in 2003 accounted for the increase in interest income.

We anticipate  that  revenues  will continue to increase  during our fiscal year
2005, as we enter into new software  licensing  agreements and as we continue to
earn increasing revenues from our installed base of customers.

OPERATING EXPENSES
Compared to the same period of 2003, total operating  expenses in 2004 increased
by 36.9%.

Total operating expenses increased to $8.6 million in the year ended October 31,
2004 compared to $6.3 million in the year ended October 31, 2003.  Overall,  the
increase in expenses in the current year is largely attributable to the increase
in headcount and related  infrastructure  costs, stock compensation  expense and
depreciation and amortization.

As a percentage of total revenue, total operating expenses decreased to 70.4% in
fiscal 2004 compared to 85.7% in the prior year.

SOFTWARE DEVELOPMENT & SUPPORT

Software  development  and support  costs  continue to represent  the  Company's
largest  expenditure  area.  In 2004,  software  development  and support  costs
increased  by 34.3% to $4.4  million  compared  to $3.3  million in 2003.  Costs
relating to the  development  of software are  expensed as incurred  unless they
meet the  criteria  for  deferral and  amortization  under  generally  accepting
accounting  principles.  In 2004,  the Company  deferred  costs of $175 thousand
compared to $531  thousand  in 2003.  This  deferral  had the effect of reducing
software  development  and  support  costs  by  the  equivalent  amount  in  the
respective  years.  Had the Company not deferred  costs in both years,  the year
over year increase would have been 20.2%. The Company commenced amortizing these
costs in the third quarter of 2004.

The  Company's  product  development  focus  continues  to be  reflected  in its
employee  demographics as 80% of the total employee population were dedicated to
product  design,  development and support.  Salaries and benefits  accounted for
82.8% of software development costs in 2004 compared 81.2% in 2003.


                                      -25-
<PAGE>

As a percentage of revenue,  software development and support expenses decreased
to 36.2% in 2004 compared to 44.9% in 2003.

Due to the increasing  demands for new gaming products and the Company's product
development and support initiatives, we anticipate adding technical resources in
fiscal  2005  which  will  result  in  a  corresponding   increase  in  software
development expenses.

SALES, GENERAL & ADMINISTRATIVE

SG&A  expenses  increased  by 79.6% to $3.5  million  in 2004  compared  to $1.9
million in 2003.  The increase in 2004 was primarily  attributable  to increased
sales and marketing  costs  resulting  from the opening of the London U.K. sales
office  and the  addition  of  sales  and  marketing  personnel.  Expenses  also
increased  in a number of other areas due to the  general  growth of the Company
and the upgrade of its public listing to the Toronto Stock Exchange from the TSX
Venture Exchange.

As a percentage of revenue,  SG&A expenses  increased  slightly in 2004 to 28.7%
compared to 26.6% in 2003.

AMORTIZATION OF DEFERRED SOFTWARE DEVELOPEMNT COSTS

Amortization  expenses  decreased 11.0% to $98 thousand in 2004 compared to $110
thousand  in  2003.  The  expense  reflects  two  quarters  of  amortization  of
previously deferred software development costs. The deferred costs will continue
to be amortized over an estimated remaining useful life of thirty months.

STOCK BASED COMPENSATION

In 2004, the Company recorded $103 thousand of stock based compensation  expense
relating  to the grant of  options  to  consultants.  There  was no  comparative
expense in 2003.

DEPRECIATION & AMORTIZATION

Depreciation  and  amortization  expenses  increased 77.9% to $244 thousand from
$137 thousand in 2003. The increase reflected additional  investment in computer
hardware and software. As a percentage of revenue, depreciation and amortization
increased  to 2.0% in  2004  compared  to 1.9%  in  2003.  It is  expected  that
continued  investment in computer  hardware and software will be required as the
Company continues to grow but depreciation and amortization will remain constant
as a percentage of revenue.

FOREIGN CURRENCY LOSSES

Foreign  currency  losses  decreased by 70.7% to $233 thousand  compared to $795
thousand in 2003. The currency loss reflects the significant decline in the U.S.
dollar  compared to its Canadian  counterpart.  The U.S.  dollar  exchange  rate
declined from 1.2993 in November, 2003 to 1.2190 in October, 2004.

INCOME TAXES

Income tax assets relate to the Company's  future tax benefits  which arise from
loss carry  forwards and research and  development  costs.  The valuation of tax
assets  is based on the  amount  of tax  benefits  available  combined  with the
determination  as to when the tax benefits  will be realized and the tax rate in
effect at that time. The tax assets are based on Management's  best estimates of
the timing of the recovery of these  assets.  At October 31,  2004,  the Company
recorded an additional future tax asset of $1.0 million. The recognition of this
future tax asset and the write off the corresponding asset of $630 thousand from
2003 resulted in a net tax recovery of $415  thousand in 2004.  The net recovery
is treated as an expense recovery in the current year.

At October  31, 2004 the Company has no  valuation  allowance  remaining  and is
expected to be taxable in 2005.

NET INCOME

In 2004, net income increased 139.1% to $4.0 million compared to $1.7 million in
2003. Diluted earnings per share


                                      -26-
<PAGE>

increased  to  $0.24  compared  to  $0.12.   Increased   earnings  in  2004  are
attributable to effectively  managing  expenses in proportion to revenue as well
as a significant reduction in foreign currency losses in 2004.

LIQUIDITY & CAPITAL RESOURCES

OPERATING ACTIVITIES

The Company's principal sources of cash were its cash on hand and cash flow from
operations. In 2004, the Company continued to increase its cash position to fund
its working capital needs.

In 2004,  the  Company  generated  cash flow  from  operations  of $4.2  million
compared to $1.4 million in 2003. The increase in cash flow was due primarily to
the increase in net income.

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.

FINANCING ACTIVITIES

The Company's financing activities consisted primarily of the issuance of shares
resulting  from the exercise of stock  options.  In 2004,  the Company  realized
proceeds of $856 thousand from the exercise of 702 thousand  stock options at an
average price of $1.22. In 2003, the Company realized  proceeds of $152 thousand
from the exercise of 145 thousand  stock  options at an average  price of $1.05.
There were no other significant financing activities in either year.

In the first quarter of 2005, the Company closed a private placement  consisting
of 2.4 million  common  shares which were sold at a price of $4.65 per share for
net proceeds of $10.3 million.

INVESTING ACTIVITIES

The Company's  investing  activities  consist primarily of the purchase of short
term  investments  and property  and  equipment  which  included  computers  and
software  for  internal  use  and  furniture,  fixtures  and  telecommunications
technology  relating to the  relocation of the Company's  office.  In 2004,  the
Company's net use of funds for investing  purposes was $2.4 million compared net
proceeds of $730 thousand in 2003.  The negative  cash  position from  investing
activities was primarily  attributable  to the purchase of $1.6 million in short
term investments and $604 thousand of property and equipment.

We do not know of any trends, demands,  commitments,  events or uncertainty that
will result in, or that are reasonably likely to result in, our liquidity either
materially  increasing or decreasing  at present or in the  foreseeable  future.
Material  increases or decreases in our liquidity are  determined by the success
or failure of our software operations.


YEAR ENDED OCTOBER 31, 2003 COMPARED TO THE YEAR ENDED OCTOBER 31, 2002

REVENUE
Compared to the same period of 2002, total revenue in 2003 increased by 90.6%.

Total  revenue  increased  by $3.5  million to $7.3  million  for the year ended
October 31, 2003  compared to $3.8 million for the year ended  October 31, 2002.
All of the  Company's  revenue  was billed in U.S.  dollars.  As a result of the
continued strengthening of the Canadian dollar compared to its U.S. counterpart,
the amount of operating revenue reported in fiscal 2003 was  approximately  $600
thousand lower than would have been reported if the average  exchange rate would
have remained at historical levels.

Revenue growth occurred in both set up fees and license fees.  Recurring license
fees increased  138.0% to $6.3 million from $2.6 million in 2002.  This increase
was  attributable  to the strong quarter over quarter  revenue growth within our
installed base of clients.  License fees  represented  86.0% of total revenue in
2003, up from 68.8% in 2002.


                                      -27-
<PAGE>

Interest and other revenues for the fiscal year ended October 31, 2003 were $109
thousand  compared to $302  thousand in 2002, a decrease of 63.8%.  The decrease
was due to a reduction  in earned  interest  resulting  from a decrease in short
term investments of $1.4M.


OPERATING EXPENSES
Compared to the same period in 2002, operating expenses in 2003 grew by 21.5%.

The Company's expenses are classified into four categories: software development
and support,  general and  administrative,  depreciation  and  amortization  and
foreign currency losses.

In fiscal 2003,  total  operating  expenses  increased to $6.3million  from $5.2
million  in 2002.  This  increase  is due  solely  to an  increase  in  software
development and support expenses and foreign currency losses of $795 thousand.

SOFTWARE DEVELOPMENT & SUPPORT

Software  development and support was the Company's largest  expenditure area in
2003. In fiscal 2003,  expenses  increased by $600 thousand to $3.3 million from
$2.7million  in 2002.  In 2003,  the  Company  deferred  $531  thousand of costs
relating to the development of the Company's Community Poker product. Management
estimated that the appropriate amortization period would be three years and that
amortization would commence in 2004 with commercial availability of the product.
There was no deferral of costs in 2002.

In 2003, 75% of the total employee  population was dedicated to product  design,
development and support and the  corresponding  salaries and benefits  accounted
for 93.0% of software development costs in 2003 compared to 81.2% in 2002.

As a percentage of operating revenue, software development expenses decreased to
44.9% from 68.9% in 2002.

SALES, GENERAL & ADMINISTRATIVE

SG&A expenses include salaries,  benefits and expenses of corporate personnel in
addition to all sales, marketing, and business development expenses.

In fiscal 2003,  SG&A  expenses  decreased by $438 thousand to $1.9 million from
$2.4million  in 2002.  The decrease was due primarily to a reduction in contract
termination expenses of $220 thousand and lower consulting fees.

As a percentage of operating  revenue,  SG&A expenses decreased to 26.6% in 2003
compared to 62.1% in 2002.

DEPRECIATION & AMORTIZATION

Amortization  expense remained  constant at $110 thousand in 2003. Costs related
to the acquisition of Gateway  Technology Inc. were fully amortized in the year.
In fiscal 2003,  depreciation  expense increased by 27.1% to $137 thousand.  The
increase is due to the Company's purchase of $208 thousand of computer systems.

FOREIGN CURRENCY (GAINS) LOSSES

In 2003, the Company  incurred $795 thousand of foreign currency losses compared
to a foreign currency gain of $86 thousand in 2002. All of the Company's revenue
is received in U.S. dollars and the Company did not have any hedging programs to
mitigate the risk of downward  fluctuations in the U.S.  dollar.  As a result of
the significant  decline in the U.S dollar relative to its Canadian  counterpart
the Company realized a significant foreign currency loss.


                                      -28-
<PAGE>

NET INCOME (LOSS)

In 2003, net income  increased to $1.7 million from a net loss of $1.3million in
2002.  This was due to the  combination  of a  significantly  larger  growth  in
revenues  (90.6%) than in expenses (21.5%) and the positive effect of the future
income tax recovery of $630 thousand on current income.

Earnings  per share,  fully  diluted,  for the year ended  October 31, 2003 were
$0.12 compared to a loss per share,  fully  diluted,  of $0.10 for the preceding
year.

LIQUIDITY & CAPITAL RESOURCES

OPERATING ACTIVITIES

The  Company's  principal  sources of capital are its cash on hand and cash flow
from operations.

In 2003,  the  Company  generated  cash flow  from  operations  of $1.4  million
compared to a  utilization  of $1.2 million in 2002.  The improved cash flow was
due primarily to net income in 2003.

At October  31,  2003,  the Company had cash,  cash  equivalents  and short term
investments  of $5.2  million  compared  to  $4.9  million  at the end of  2002.
Accounts  receivable  increased  to $2.0  million  from $1.1  million in 2002. A
significant  portion of the  receivables  were collected in the first quarter of
2004.  There  was  no  significant   change  in  accounts  payable  and  accrued
liabilities in 2003 compared to 2002.

Deferred  revenue at October 31, 2003 was $1.7 million  compared to $1.3 million
at October 31, 2002.  Deferred  revenue is attributable to set-up fees which are
recorded as revenue ratably over the term of the software  licensing  agreement,
typically three to five years.

FINANCING ACTIVITIES

In 2003,  the Company  generated  proceeds of $152 thousand from the exercise of
145 thousand stock options  compared to proceeds of $121 thousand in 2002. There
were no other significant financing activities.

INVESTING ACTIVITIES

In 2003, the Company's net proceeds from investing activities were $730 thousand
compared to $71 thousand in 2002. The positive cash position was attributable to
proceeds of $1.5 million from the sale of short term investments.  Investment in
new capital assets  totaled $208 thousand,  compared to $97 thousand in 2002 and
deferred development costs totaled $531 thousand. There was no deferral in 2002.

Related Party Transactions

SG&A  expenses  for the year ended  October 31, 2004  include  legal fees of $60
thousand and  consulting  fees of $165 thousand paid to certain  officers of the
Company in the normal  course of business.  Amounts due from related  parties of
$179  thousand  consist  of  amounts  due  from  certain  Company  officers  and
directors. Of these amounts, $30 thousand is non-interest bearing, unsecured and
with no set terms of repayment.  The remaining  $149 thousand bears 6% interest,
is secured by 189 thousand  common shares of the Company and has no set terms of
repayment.

Critical Accounting Policies and Estimates

Significant  accounting  policies  and methods  used in the  preparation  of the
Company's  financial  statements  are  described  in  note  1 to  the  financial
statements of the Company for the year ended October 31, 2004.

The preparation of financial  statements in accordance  with Canadian  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the reported  amounts of assets and liabilities and the
disclosure of contingent  assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenue and expenses during the
reporting period. Areas of significant estimates include the


                                      -29-
<PAGE>

recoverability of deferred software development costs,  amortization periods for
property and  equipment,  provision for doubtful  accounts,  the  realization of
future tax assets,  deferred  set-up fee expenses and stock based  compensation.
Actual  results could differ from  management's  best  estimates and  underlying
assumptions as additional information becomes available in the future.

Deferred Software Development Costs

Research  costs are expensed as incurred.  Costs related to the  development  of
software are expensed as incurred.  Costs related to the development of software
are  expensed as incurred  unless such costs meet the  criteria for deferral and
amortization  under  Canadian  generally  accounting  principles.  The  criteria
include  identifiable  costs  attributable  to a clearly  defined  product,  the
establishment  of  technical  feasibility,  identification  of a market  for the
software,  the  Company's  intent to market the  software  and the  existence of
adequate  resources to complete the project.  In the year ended October 31, 2004
the Company deferred $175 thousand of software  development  costs which will be
amortized over an estimated  useful life of three years  commencing in the third
quarter of 2004.

Revenue Recognition

The Company enters into  contractual  agreements with licensees that provide for
the provision of graphics, web design and software implementation  services, the
licensing of software,  and the provision of unspecified  software upgrades over
the fixed term of the contract.  Revenue under such contractual  arrangements is
not  recognized  before there exists  persuasive  evidence  that an  arrangement
exists,  delivery  has  occurred,  the fee is fixed  and  determinable,  and the
collectibility  of  outstanding  amounts is  considered  probable.  The  Company
considers  persuasive evidence to exist when a formal contract or purchase order
is signed. Delivery occurs over the term of the arrangement as described further
below. The Company considers a fee to be fixed and determinable when it is for a
measurable  amount and  receivable  over a period not to exceed  twelve  months.
Finally,  the Company  assesses  collectibility  relative  to  customer  payment
histories,  credit  checks,  the  nature  of the  customer  and  other  relevant
information.  As the Company's contractual arrangements provide for the delivery
of multiple elements,  the Company evaluates whether  vendor-specific  objective
evidence  ("VSOE")  exists to allow for the  allocation of the  arrangement  fee
between  the  undelivered  elements  and  the  delivered  elements  for  revenue
recognition  purposes.  To  date,  as the  period  provided  for in  contractual
arrangements  for the provision of unspecified  upgrades is consistent  with the
license  period,  the Company has not been able to  identify  VSOE and  allocate
revenue between delivered and undelivered elements. Accordingly, set-up fees are
recognized  ratably over the term of the  contract,  commencing  upon  completed
delivery of the implementation and integration services. License fees, which are
contingent  upon customer  usage,  are  recognized on an accrual basis as earned
over the life of the contract.

Direct and  incremental  costs  incurred with respect to the set-up  contractual
arrangements  have been deferred as deferred  set-up  expense and are recognized
ratably  over the term of the  contract  consistent  with  that for the  related
revenue recognition.

Accounts Receivable

The  Company  carries  its  accounts  receivable  at  cost  less a  reserve  for
unrealized  foreign exchange losses and less an allowance for doubtful accounts.
On  a  periodic  basis,  the  Company  evaluates  its  accounts  receivable  and
establishes  an allowance for doubtful  accounts.  The allowance is based on the
circumstances of each customer  relationship  together with an assessment of the
history of past write-offs and collections.  The allowance for doubtful accounts
generally  relates to unpaid  license  fees  including  amounts that may be owed
under minimum license obligations pursuant to the Company's license agreements.

Goodwill

The valuation of goodwill is based on the value of the  reporting  unit to which
goodwill is  attributed.  To the extent that the valuation  exceeds the net book
value of the related  reporting  unit, no  write-down is necessary.  Goodwill is
tested for impairment  annually,  or more frequently if events or  circumstances
indicate that the asset might be impaired.


                                      -30-
<PAGE>

Accounting Policy to be Adopted - Stock-based Compensation

Effective  November 1, 2004,  the Company  has elected to  retroactively  adopt,
without  restatement,  the new  Canadian  accounting  standards  for stock based
compensation  to employees.  In  accordance  with these  standards,  the Company
recognizes,  at the grant date, the compensation  costs of stock options granted
to employees and directors,  measured at fair value and expensed over the period
of the employee  related service,  with a corresponding  increase to contributed
surplus. Upon the exercise of the option,  consideration  received together with
the amount  previously  recognized  in  contributed  surplus is  recorded  as an
increase to share capital.  The Company will record a retroactive  adjustment of
$431  thousand  representing  the  estimated  value of stock  options  issued to
employees  in 2003 and 2004 which will be charged  to deficit  and  credited  to
contributed surplus on November 1, 2004.

Future Income Taxes

Income tax assets relate to the Company's  future tax benefits  which arise from
loss carry  forwards and research and  development  costs.  The valuation of tax
assets  is based on the  amount  of tax  benefits  available  combined  with the
determination  as to when the tax benefits  will be realized and the tax rate in
effect at that time. At October 31, 2004 the Company had $1,044,964 of available
Canadian tax  benefits to be utilized in future years should the Company  remain
profitable.  The tax  assets are based on  Managements'  best  estimates  of the
timing of the recovery of these assets.

Risks and Uncertainties

Chartwell  operates in a rapidly  changing  environment  that involves  numerous
risks and  uncertainties,  many of which are beyond our  control and which could
have a material affect on our business, revenue, operating results and financial
condition.   The  following  discussion  highlights  some  of  these  risks  and
uncertainties.

Government Regulation

Our licensees are subject to applicable laws in the  jurisdictions in which they
operate. Some jurisdictions have introduced  regulations  attempting to restrict
or prohibit Internet gaming,  while other  jurisdictions have taken the position
that  Internet  gaming  is  legal  and /or  are in the  process  of  considering
legislation to regulate Internet gaming. As companies and consumers  involved in
Internet gaming are located around the world,  including our licensees and their
players,  there is uncertainty  regarding the future  legislative  landscape for
Internet gaming. There is a risk that proposed  legislation  supporting Internet
gaming may not be passed or existing legislation  supporting Internet gaming may
be changed.  Changes to the regulatory  framework could have an adverse material
affect on the Company's revenue and financial condition.

Competition

Some  of  the  Company's   competitors  have  significantly  greater  financial,
technical and marketing and sales resources and they may be able to respond more
quickly to changes in customer needs. In addition, these competitors may be able
devote a greater number of resources to the  enhancement,  promotion and sale of
their games and gaming  systems.  Our success is dependant on our ability to win
our share of sales  against  these  larger  competitors.  Failure to do so could
result in an  adverse  material  effect on the  Company's  revenue,  results  of
operation and financial condition.

Dependence on Market Growth

The  online  gaming  market has  experienced  and is  expected  to  continue  to
experience  significant  growth.  There can be no assurance that the, market for
the Company's  gaming  solutions  will  continue to grow,  that  customers  will
continue  to  adopt  the  Company's  solutions,  or  that  the  Company  will be
successful in selling into new and existing markets.  If the market in which the
Company's  products  compete fail to grow,  or grow more slowly that the Company
currently anticipates,  the Company's business,  operating results and financial
condition could be materially adversely affected.


                                      -31-
<PAGE>

Renewal of Software License Agreements

Substantially  all of the Company's revenue is of a recurring nature in the form
of software  license  fees.  Licensees  pay an ongoing fee for the licensing and
support of the Company's  software under a software licensing  agreement,  which
typically  has a three to five year  term.  The  license  fee,  or  royalty,  is
calculated as a percentage  of each  licensee's  level of activity.  There is no
assurance  that the  company  will be able to  renew  agreements  with  existing
clients  or that the  Company  will be able to renew  agreements  under  similar
financial  and other  terms.  Failure  to renew  agreements  or failure to renew
agreements  under  similar  financial  and other terms could have a  significant
adverse  effect  on the  Company's  revenue,  operating  results  and  financial
condition.

Failure to Manage Growth Successfully

The  company's  business  has  grown  rapidly  in  the  last  three  years.  The
accelerated  growth of the Company's  revenue  places a strain on managerial and
financial resources. In addition, the Company's recent expansion has resulted in
a  substantial  growth  in  the  number  of  its  employees,  the  scope  of its
infrastructure and the geographic area of its operation,  resulting in increased
responsibility for existing and new management personnel.  The Company's ability
to successfully manage this growth depends in large part upon our ability to:

     o    retain and attract qualified management

     o    attract  and  retrain  technical  personnel  to  continue  to  develop
          reliable solutions that respond to evolving customer needs and;

     o    retrain,  attract and train sales and marketing personnel to create an
          expanding  presence  in  the  rapidly  growing   marketplace  for  the
          Company's products.

Chartwell's  inability  to  achieve  any of  these  objectives  could  harm  the
Company's business, financial condition and operating results.

Dependence on Key Personnel

The success of the Company is largely  dependant on the  performance  of its key
management and technical personnel. Competition for highly skilled technical and
management personnel is intense.  Failure to retain key employees and to attract
and retain  additional  key employees  with the  necessary  skills could have an
adverse material effect upon the Company's growth and profitability.

Lengthy Sales Cycle

The Company's sales cycle, beginning with an interested customer and culminating
in entering into a commercial agreement with the customer, typically ranges from
6 to 12 months and may be longer.  This lengthy sales cycle limits the Company's
ability to forecast the timing of new sales in a specific quarter. Any extension
in the  length  of the sales  cycle  could  have a  material  adverse  effect on
revenues and financial condition.

Risks Associated with Currency Fluctuations

The majority of the Company's revenue is realized in foreign  currencies,  while
the  majority of the  Company's  expenses  are  incurred  in  Canadian  dollars.
Fluctuations  in the  exchange  rate  between  the  Canadian  dollar  and  other
currencies,  particularly the U.S. dollar, may have a material adverse affect on
the Company's operating results and financial condition


                                      -32-
<PAGE>

Critical Accounting Policies & Estimates

Currency Translation & Inflation

The Company  operates  internationally,  with 100% of its revenue  derived  from
non-Canadian  sources.  Under our  licensing  agreements,  the  majority  of our
revenues  will be received in U.S.  dollars.  Consequently,  the Company will be
faced  with  currency  fluctuations.  We do not  currently  engage  in  currency
hedging. Product development, sales, marketing and administration is carried out
through our Canadian operations in Canadian dollars, our functional currency.

We do not anticipate  that inflation will have a material  adverse affect on our
future  operations.  Our material  obligations are fixed based on capital leases
and real property leases.

Research and Development, Patents and Licenses

The Company's policy is to continuously  perform research and development on new
products or versions of products.  We also research new technologies that relate
to our  products  and use them to improve our products  where  appropriate.  The
Company utilizes a licensing model with its customers, which provides protection
from unauthorized use. Our source code is not made available to licensees and we
utilize various security measures to prevent any unauthorized copying or viewing
of our source  code.  Research  and  development  expenditures  are  included as
"Software Development" in our financial statements and are fully expensed in the
periods they are  incurred  unless such costs meet the criteria for deferral and
amortization under Canadian generally accepted accounting principles.

OUTLOOK

Fiscal 2004 was a year of significant  growth and  profitability  for Chartwell.
The  Company  concluded  the  year  with a 66.5%  growth  in  revenue,  achieved
profitability  in four  successive  quarters and generated $0.24 in earnings per
diluted share and cash flow of $2.5 million.  Profitability was achieved without
sacrificing or minimizing our product and business development initiatives.

During 2004, the Company continued to invest in product  development,  sales and
marketing  and  infrastructure  to  support  the growth of the  business.  These
initiatives  continue  to drive  significant  revenue  opportunities  within the
installed  base  and in new  vertical  markets.  The  rollout  of the  Company's
community  based  products,  planned for the third  quarter of 2005,  mobile and
kiosk games will  provide  additional  sources of revenue  that did not exist in
2004. In addition,  the Company's  significant  corporate  business  development
presence in Europe will  continue to drive more sales  opportunities  and extend
our marketing capabilities.

In fiscal 2005 the Company will  continue to expand its  international  customer
base of brand name  licensees by providing  products  that are market driven and
provide incremental revenue for our clients and accordingly for Chartwell.

     B.   Liquidity and capital resources.

See Item 5.A.

     C.   Research and development, patents and licenses, etc.

The Company's  policy is to  continuously  perform  research and  development to
develop new products or versions of products.  We also research new technologies
that  relate  to our  products  and  use  them to  improve  our  products  where
appropriate.  The  Company  does not patent its  products  or  technologies  but
utilizes a licensing  model with its customers,  which provides  protection from
unauthorized  use. Our source code is not made  available  to  licensees  and we
utilize various security measures to prevent any unauthorized copying or viewing
of our source  code.  Research  and  development  expenditures  are  included as
"Software Development" in our financial statements and are fully expensed in the
periods they are  incurred  unless such costs meet the criteria for deferral and
amortization under Canadian generally accepted accounting principles. For fiscal
2004  these  expenditures   amounted  to  $4,417,981,   for  fiscal  2003  these
expenditures  amounted  to  $3,288,164  and for fiscal  2002  expenditures  were
$2,648,223.


                                      -33-
<PAGE>

     D.   Trend information.

Since the end of the last  fiscal  year the  company  released a new  version of
casino  software.  Our  recurring  license  fee revenue  generated  86% of total
software  revenue and should  continue to increase as a percentage of the total.
The Company has added  several new clients since the end of the last fiscal year
and existing clients are being upgraded to the new version.

     E.   Off balance sheet arrangements.

The Company has no off balance sheet arrangements.

     F.   Tabular disclosure of contractual obligations.

The following table lists as of October 31, 2004 information with respect to our
material contractual obligations.

<TABLE>
                                                                       Payments due by period
Contractual Obligations                               Total         Less       1- 3 years    3 - 5 years   More than
                                                                    than 1                                 5 years
                                                                    year
                                                        $              $           $             $            $
<S>                                               <C>             <C>          <C>           <C>           <C>
Long-Term Debt Obligations                                -             -           -              -            -
Capital (Finance) Lease Obligations                  41,684        17,249       24,435             -            -
Operating Lease Obligations                       1,724,072       376,967      706,035       616,362       24,708
Purchase Obligations                                      -             -            -             -            -
Other Long-Term Liabilities Reflected on the              -             -            -             -            -
Company's Balance Sheet under the GAAP of the
primary financial statements

Total                                             1,765,756       394,216      730,470       616,362       24,708
</TABLE>



1. Capital  leases were  incurred to purchase  office  equipment.  There was one
lease  outstanding  at October  31, 2004 with  monthly  principal  and  interest
payments of $1,437.41 and termination date of August, 2005.

2. Operating lease  obligations  were incurred to lease  facilities in Vancouver
and Calgary, Canada and London, U.K.


--------------------------------------------------------------------------------
Location                                 Lease Expiry           Total Payments
--------------------------------------------------------------------------------
Chartwell House                          November, 2009         $1,507,230
750 -  11th Street SW, Suite 400
Calgary, Alberta, Canada, T2P 3N7
--------------------------------------------------------------------------------
1166 Albirni Street, Suite 1400          December, 2008         $   81,922
Vancouver, BC, Canada, V6E 3Z3
--------------------------------------------------------------------------------
Chartwell Games Corp.                    November, 2009         $   134,920
8 The Square, Stockley park
Heathrow, Uxbridge, England U.K.
--------------------------------------------------------------------------------

     G.   Safe harbour.

Certain  statements  contained  in  the  foregoing  Results  of  Operations  and
elsewhere  in  this  Form  20-F  constitute  forward-looking   statements.  Such
forward-looking  statements  involve  a  number  of  known  and  unknown  risks,
uncertainties and other factors which may cause the actual results,  performance
or  achievements  of the  Company  to be  materially  different  from any future
results,   performance   or   achievements   expressed   or   implied   by  such
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date the statements
were made and readers are advised to consider such forward-looking statements in
light of the risks set forth in the Item 3.D. above.



                                      -34-
<PAGE>

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

     A.   Directors and senior management.

All of our directors are elected  annually by the  shareholders  and hold office
until the next annual general meeting of shareholders or until their  successors
are duly  elected  and  qualified,  unless  they  sooner  resign  or cease to be
directors in accordance with our Articles.  The Registrant's last annual regular
general meeting was held on March 22, 2005. Our executive officers are appointed
by and serve at the pleasure of the Board of Directors.

As at March  31,  2005,  the  following  are the  names  and  municipalities  of
residence of our directors and officers,  their  positions and offices and their
principal occupations during the last five years.

<TABLE>
---------------------------------------------------------------------------------------------------------
Name and               Office held with the    Principal Occupation
Municipality of        Company
Residence
---------------------------------------------------------------------------------------------------------
<S>                    <C>                     <C>
Darold H. Parken**     President, Chief        President and Chief Executive Officer of the Company.
Calgary, AB            Executive Officer and   Prior thereto, Barrister & Solicitor, Parken & Company
                       Director since          since February, 1989.  Prior thereto, partner with Burnet,
                       October 26, 1994        Duckworth & Palmer, Barristers and Solicitors.
---------------------------------------------------------------------------------------------------------
Rene G. Carrier*       Director since June     President, Euro American Capital Corporation Inc. (a
Vancouver, BC          27, 1991                private investment company).  Prior thereto, Vice
                                               President of Pacific International Securities Inc. (a
                                               brokerage firm) from 1982 to 1991.
---------------------------------------------------------------------------------------------------------
Darcy E. Krogh**       Vice President,         Vice President, Business Development of the Company.
Vancouver, BC          Business Development    Prior thereto, stock broker with several Canadian
                       and Director since      investment dealers for 18 years.
                       June 7, 1999
---------------------------------------------------------------------------------------------------------
Donald Gleason         Vice President,         Vice President, Operations and Chief Financial Officer of
Calgary, AB            Operations, Chief       the Company.  Prior thereto, Chief Financial Officer of
                       Financial Officer       Agrimax Ltd., Agrimax Corporation and AGX Sulphur Ltd.
                       since June 9, 2003      from May 2002 to May 2003.  Prior thereto, Chief Financial
                                               Officer of EFA Software Services Ltd.
---------------------------------------------------------------------------------------------------------
David V. Acorn         Vice President,         Vice President, Client and Product Management of the
Calgary, AB            Client and Product      Company.  Prior thereto, proprietor of eZ solutions (an
                       Management since June   Internet and e-commerce application development company)
                       15, 1999.               from May 1995 to June 1999.
---------------------------------------------------------------------------------------------------------
Roderick A. Ferguson*  Director since July     Partner,  Fasken  Martineau  DuMoulin LLP,  Barristers  and
Calgary, AB            10, 2001.               Solicitors  since  2004.  Prior  thereto,  Partner,  Heenan
                                               Blaikie LLP, Barristers and Solicitors since 2001 and prior
                                               thereto, Partner, Burnet Duckworth & Palmer, Barristers
                                               and Solicitors.
---------------------------------------------------------------------------------------------------------
Andrew Smith           Vice President,         Vice  President,  Software  Development and Chief Technical
Calgary, AB            Software Development    Officer.  Prior  thereto,  Senior  Software  Architect  and
                       and Chief Technical     Project  Manager  for  Burnt  Sand   Solutions,   a  public
                       Officer since July      e-business solutions integration firm.
                       10, 2000
---------------------------------------------------------------------------------------------------------
</TABLE>


                                      -35-
<PAGE>

<TABLE>
---------------------------------------------------------------------------------------------------------
Name and               Office held with the    Principal Occupation
Municipality of        Company
Residence
---------------------------------------------------------------------------------------------------------
<S>                    <C>                     <C>

Peter H. Kinash*       Director since March    CFO of Guest-Tek  Interactive  Entertainment Inc. from July
Calgary, AB            23, 2004.               12,  2004 to  August  31,  2004.  From  September,  2001 to
                                               present, consultant and advisor on financial matters to emerging
                                               and established technology companies, including serving as
                                               part-time CFO of Replicon Inc. from November, 2002 to present.
                                               Prior thereto, CFO to Wi-LAN Inc. from January, 2000 to August,
                                               2001 and Partner with KPMG LLP from September 1990 to January,
                                               2000.
---------------------------------------------------------------------------------------------------------
Terence Shaunessy      Director since March    President,  Shaunessy & Co.  Ltd.,  Investment  Counsel and
Calgary, AB            22, 2005.               Portfolio  Management  since  2001,  prior  thereto,   Vice
                                               President, Institutions, HSBC Asset Management since 1999,
                                               prior thereto, President and Managing Director, Gordon Capital
                                               Corp.
---------------------------------------------------------------------------------------------------------
Notes:
*   Audit Committee Member
**  Compensation Committee Member
</TABLE>


The following provides a brief biographical description of the officers and
senior management of the Company:

Darold H.  Parken, B.A., LL.B.
President and Chief Executive Officer
Mr. Parken received his Bachelor of Arts Degree in Economics from the University
of  Calgary in 1977 and his  Bachelor  of Laws  Degree  from the  University  of
Calgary in 1980. From 1980 to 1990, Mr. Parken  practiced  corporate  securities
law with a major  Canadian  law firm of which he was a  partner.  He has  public
company  management  experience  and a wide range of  experience in the areas of
corporate finance, mergers and acquisitions.

Donald Gleason, CGA
Vice President, Operations and Chief Financial Officer
Mr.  Gleason has held senior  level  positions  in the areas of  operations  and
finance with multinational software development and technology related companies
for the past 19 years. His most recent work experience in the technology  sector
was in developing and  implementing  the financial  plan for a growth  oriented,
internationally  focused provider of automated trading,  clearing and settlement
software for the  international  capital  markets.  In addition Mr.  Gleason had
direct management  responsibilities for leading the finance and operations teams
in the areas of human  resources,  customer  support,  due diligence  related to
mergers and acquisitions and strategic investments.

Darcy E. Krogh, B.A.
Vice President, Business Development
Mr.  Krogh joined  Chartwell's  board and  management  team in June,  1999.  His
responsibilities  include  strategic  planning,   corporate  finance,  expanding
operations,  mergers and acquisitions. Mr. Krogh has experience as an investment
advisor and stock  broker.  Prior to joining  Chartwell,  Mr.  Krogh was a stock
broker for 18 years with several Canadian investment dealers.

David V. Acorn
Vice President, Client and Product Management
Mr. Acorn  received his Honours  diploma in Internet  Object  Oriented  Software
Engineering  from  the  Southern  Alberta  Institute  of  Technology.  He has an
extensive  background in Internet and  e-commerce  development  and design.  Mr.
Acorn  has  management  experience  in  the  Information   Technology  industry,
specializing in Web development and owning and operating his own Web development
company  from 1995 to 1999.  His  responsibilities  in the  Company  include the
management  of  software,  graphics  and  Web  strategies.  He  leads  a team of
programmers,  designers  and  artists  responsible  for the  development  of the
Company's products and services.


                                      -36-
<PAGE>

Andrew Smith
Vice President, Software Development and Chief Technical Officer
Mr. Smith  responsibilities  include systems design,  technical architecture and
technical  direction.  He has comprehensive and extensive  software  development
experience  as well as over ten years in  project  management.  Prior to joining
Chartwell, Mr. Smith was Senior Software Architect and Project Manager for Burnt
Sand  Solutions,  a public  e-business  solutions  integration  firm.  Mr. Smith
received his Bachelor of Science  (Computer  Science) degree from the University
of Calgary in 1986.

None of our directors or executive officers has any family relationship with any
other officer or director of the Company.

     B.   Compensation.

Independent  directors of the  Corporation are compensated for their services as
directors,  each receive $2,500 per quarter and $500 for each meeting  attended.
Directors  are  entitled  to  reimbursement  for  reasonable  travel  and  other
out-of-pocket expenses incurred in connection with attendance at meetings of the
Board of Directors.  The Board of Directors  makes separate  remuneration to any
director  undertaking  services on behalf of us other than  services  ordinarily
required of a director.

We grant stock options to directors, executive officers and employees. See "Item
6.E - Share Ownership - Stock Option Plan".

Executive Officers

The following table sets forth certain  information  regarding the  compensation
paid to Chartwell's Chief Executive Officer and the other executive  officers of
Chartwell  who had total  annual  salary and bonus  exceeding  $100,000  for the
fiscal  year  ended  October  31,  2004  (collectively,   the  "Named  Executive
Officers").

<TABLE>
                                         Compensation Summary Table
                                                 Annual                                    Long-Term
Name and Principal           Year         Salary        Bonus         Other            Stock      All Other
Occupation                                                                            Options
                                                                                      Granted
<S>                          <C>         <C>            <C>           <C>            <C>          <C>
Darold H. Parken(1)          2004        $105,000       $2,000         nil              nil          nil
President and Chief          2003        $105,000       $2,000         nil              nil          nil
Executive Officer            2002        $105,000       $2,000         nil              nil          nil

Darcy E. Krogh, Vice         2004        $165,000       $2,000         nil              nil          nil
President, Business          2003        $165,000       $2,000         nil              nil          nil
Development                  2002        $165,000       $2,000         nil              nil          nil

Donald Gleason, Chief        2004        $122,000       $2,000         nil              nil          nil
Financial Officer &          2003        $ 68,625       $2,000         nil            100,000        nil
V.P. Operations

David Acorn, Vice            2004        $125,000       $2,000         nil              nil          nil
President Client and         2003        $118,750       $2,000         nil              nil          nil
Product Management           2002        $100,000       $ 500          nil              nil          nil

Andrew Smith, Vice           2004        $150,000       $2,000         nil              nil          nil
President Software           2003        $142,708       $2,000         nil              nil          nil
Development & CTO            2002        $125,000       $2,000         nil              nil          nil

Notes:
(1)  A law firm in which Mr. Parken is principal received fees and disbursements
     for legal  services  of $60,000  during  the last  completed  fiscal  year,
     $60,000 in fiscal 2003 and $60,000 in fiscal 2002.
</TABLE>


                                      -37-
<PAGE>

Options Exercised and Granted During the Fiscal Year Ended October 31, 2004

The following Named Executive Officers exercised options during the year ended
Octobers 31, 2004


    Name            Number of Stock Options      Price         Date of Exercise
                         Exercised
--------------------------------------------------------------------------------
Darcy E. Krogh           100,000                 $1.06         March 22, 2004
Andrew Smith               5,000                 $1.06        September 4, 2004
David V. Acorn             9,400                 $1.17        October 29, 2004


Termination of Employment, Changes in Responsibility and Employment Contracts

Chartwell has no  compensatory  plan or arrangement  in respect of  compensation
received or that may be received by any Named  Executive  Officer in Chartwell's
most  recently  completed or current  fiscal year to compensate  such  executive
officer in the event of the termination of employment (resignation,  retirement,
change of control) or in the event of a change in  responsibilities  following a
change in control.

Aggregate cash  compensation  paid to directors and senior management for fiscal
2004 was $711,500.

No amounts  have been set aside or accrued by us during  fiscal  2003 to provide
pension  retirements or similar benefits for our directors or executive officers
pursuant to any plan provided for or contributed to by us.

We have no plans or arrangements in respect of remuneration received or that may
be received by our  executive  officers in the current year to  compensate  such
officers in the event of termination of employment (as a result of  resignation,
retirement,  change of  control)  or a change of  responsibilities  following  a
change of control, where the value of such compensation exceeds $60,000 U.S. per
executive officer.

None of our  directors or executive  officers  received  other  compensation  in
excess of the lesser of US$25,000 or 10% of such  officer's  cash  compensation,
and all  directors  and executive  officers,  as a group,  did not receive other
compensation  which exceeded  US$25,000 times the number of persons in the group
or 10% of group compensation.

Except as set out  above,  we have no  material  bonus or profit  sharing  plans
pursuant  to  which  cash  or  non-cash  compensation  is or may be  paid to our
directors or executive officers.

     C.   Board practices.

Members of the Board of  Directors  are  elected by the holders of our Shares to
represent  the  interests  of all  shareholders.  The Board of  Directors  meets
quarterly to review significant developments affecting the Registrant and to act
on matters requiring Board approval.  Although the Board of Directors  delegates
many matters to others, it reserves certain powers and functions to itself.

The only standing  committees of our Board of Directors are the Audit Committee,
the Governance and Compliance Committee and the Compensation Committee.


                                      -38-
<PAGE>

Audit Committee

The Audit Committee of the Registrant's Board of Directors currently consists of
the following directors:

     o    Rene Carrier
     o    Rod Ferguson
     o    Peter Kinash

The functions of the Audit Committee include the review and recommendation to
the Board of Directors of the annual and interim financial statements and
related management's discussion and analysis of results. The Audit Committee has
Fdirect communication channels with internal personnel responsible for financial
statement preparation and with the Company's auditors. The Committee also meets
with the auditors independent of Management. Additional responsibilities include
monitoring the audit function, recommending the appointment of auditors,
reviewing and approving all non-audit services provided by the auditors to
Company, reviewing any auditors' reports to Management, and reviewing internal
controls and procedures relating to financial reporting and compliance with
material policies and laws.

Compensation Committee

The Compensation  Committee of the Board of Directors  currently consists of the
following directors:

     o    Darold H. Parken
     o    Darcy Krogh

The Compensation Committee is responsible for reviewing, on an annual basis, The
Company's compensation policies,  practices and overall compensation philosophy,
including  the granting of stock  options to employees and the adequacy and form
of Directors'  compensation.  The Committee also  discusses  personnel and human
resources matters including recruitment and development and reviews and approves
all salary  increases,  with the exception of increases  for certain  members of
senior management.

None of our directors or executive  officers are parties to any  arrangement  or
understanding  with any other  person  pursuant  to which  said  individual  was
elected as a director or officer of the Registrant.

Governance and Compliance Committee

     o    The Company has  recently  established  a  Governance  and  Compliance
          Committee.  The mandate of the  Committee  is to review the  Company's
          corporate governance practices and provide reports and recommendations
          to the Board.

The  Governance  and  Compliance  Committee of the Board of Directors  currently
consists of the following directors:

     o    Roderick A. Ferguson
     o    Peter H. Kinash

Disclosure Committee

The  Disclosure  Committee of the Board of Directors  currently  consists of the
following directors:

     o    Darold H. Parken
     o    Darcy Krogh
     o    Roderick A. Ferguson

The mandate of the Disclosure Committee is as set out below.

     o    Determination of material information
     o    Establishing primary principles of disclosure policy
     o    Designation of Company spokespersons



                                      -39-
<PAGE>

     o    Establishing and monitoring timing and procedures for disclosure
     o    Review of Chartwell website content
     o    Establishing  and monitoring  rules of  communications  with financial
          analysts and investors
     o    Approving forward looking information release
     o    Approving earnings guidance information
     o    Reviewing analysts' reports or models
     o    Responding to market rumors
     o    Maintaining confidentiality and restrictions on trading

None of our  directors  and/or  executive  officers  has been the subject of any
order, judgment, or decree of any governmental agency or administrator or of any
court of competent  jurisdiction,  revoking or suspending for cause any license,
permit or other  authority of such person or of any corporation of which he is a
director and/or executive  officer,  to engage in the securities  business or in
the sale of a particular  security or temporarily or permanently  restraining or
enjoining  any such  person  or any  corporation  of which he is an  officer  or
director from engaging in or continuing any conduct,  practice, or employment in
connection with the purchase or sale of securities, or convicting such person of
any felony or  misdemeanor  involving a security or any aspect of the securities
business or of theft or of any felony.

There are no arrangements or understandings among any of the directors regarding
their election as director.

     D.   Employees.

The  Company  had 93  employees  and  contractors  as at March  31,  2005 in the
following departments:

     o    Software Development, Product Development and Client Support: 76
     o    Sales: 4
     o    General Administration: 7
     o    Management: 6

Of the total of 93 employees and  contractors,  89 are based in Canada and 4 are
based in London, U.K.

Our employees are not members of any labor union or organization.

     E.   Share ownership.

Beneficial Ownership of Directors and Senior Management

The following table lists, as of March 31, 2005, Directors and Senior Management
of the Company who  beneficially  owned our voting  securities and any amount of
our voting  securities owned by the Directors and Senior  Management as a group,
based on 18,647,089 common shares outstanding at March 31, 2005.

<TABLE>
                                                   Amount of Beneficial       Percent of
Title of Class       Name of Beneficial Owner            Ownership              Class
----------------     ------------------------      --------------------       ----------
<S>                  <C>                            <C>                     <C>
Common               Darold H. Parken (1)                  838,100                 4.49%
Common               Darcy E. Krogh (2)                     35,000                 0.18%
Common               Rene G. Carrier                        74,500                 0.39%
Common               David V. Acorn (3)                      9,400                 0.05%
Common               Roderick A. Ferguson (4)               15,000                 0.08%
Common               Andrew Smith (5)                          nil                 0.00%
</TABLE>


                                      -40-
<PAGE>

<TABLE>
                                                   Amount of Beneficial       Percent of
Title of Class       Name of Beneficial Owner            Ownership              Class
----------------     ------------------------      --------------------       ----------
<S>                  <C>                            <C>                     <C>

Common               Donald Gleason (6)                     21,333                 0.11%
Common               Lee Richardson (7)                        nil                 0.00%
Common               Peter Kinash (8)                          nil                 0.00%
Common               Terence Shaunessy                        5,000                0.02%

1)   Includes options (exercisable within 60 days of March 31, 2005) to purchase
     250,000 common shares at a price of $1.06 per share, expiring September 17,
     2005; and options to purchase 300,000 common shares at a price of $1.06 per
     share, expiring April 22, 2006.

2)   Includes options (exercisable within 60 days of March 31, 2005) to purchase
     100,000 common shares at a price of $1.06 per share, expiring September 17,
     2005.

3)   Includes options (exercisable within 60 days of March 31, 2005) to purchase
     40,600 common  shares at a price of $1.06 per share,  expiring June 6, 2005
     and options to purchase 33,333 common shares at a price of $1.05 per share,
     expiring June 4, 2008.

4)   Includes options (exercisable within 60 days of March 31, 2005) to purchase
     35,000  common  shares at a price of $1.63 per  share,  expiring  April 18,
     2007.

5)   Includes options (exercisable within 60 days of March 31, 2005) to purchase
     55,000 common shares at a price of $1.06 per share, expiring July 10, 2005;
     and options to purchase 50,000 common shares at a price of $2.00 per share,
     expiring September 5, 2006.

6)   Includes options (exercisable within 60 days of March 31, 2005) to purchase
     33,333 common shares at a price of $1.05 per share, expiring June 5, 2005.

7)   Includes options (exercisable within 60 days of March 31, 2005) to purchase
     66,667 common shares at a price of $2.58, expiring February 28, 2009.

8)   Includes options (exercisable within 60 days of March 31, 2005) to purchase
     16,666 common shares at a price of $3.00, expiring March 22, 2009.
</TABLE>


Stock Option Plan

Stock  Options  to  purchase  securities  from the  Registrant  are  granted  to
Directors,  Officers,  employees and  consultants of the Registrant on terms and
conditions  acceptable  to the  regulatory  authorities  in Canada,  notably the
Toronto  Stock  Exchange  ("the  TSX").  The Stock  Option Plan  approved by the
Shareholders  of the Company on July 31, 2000 was repealed and replaced by a new
Stock Option Plan which was approved by our  shareholders  at an Annual  General
Meeting held on April 28, 2004.  Options under the Stock Option Plan are granted
by the Compensation Committee of the Board of Directors.

Under the Stock Option Plan, stock options for up to 3,264,000 common shares may
be granted from time to time,  provided  that stock  options in favor of any one
individual may not exceed 10% of the total issued and outstanding common shares.
No stock option  granted under the stock option program is  transferable  by the
optionee  other than by will or the laws of descent and  distribution,  and each
stock option is  exercisable  during the  lifetime of the optionee  only by such
optionee.

The exercise  price of all stock options  granted under the stock option program
must be at least  equal to the fair market  value of such  common  shares on the
date of grants, less the permitted discount under the TSX policies and


                                      -41-
<PAGE>

the maximum  term of each stock  option may not exceed five years.  The exercise
prices for stock options are determined in accordance with TSX guidelines.

On June 5, 2001,  we repriced  certain  employee  stock options with an original
exercise price ranging from $1.77 to $4.20, to a new exercise price ranging from
$1.06 to $1.17 per share.

Refer  to the  Notes  to  the  Consolidated  Financial  Statements  for  further
information regarding stock options.


ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

     A.   Major shareholders.

We are  currently a  publicly-held  corporation,  with our common shares held by
residents of Canada,  the United States and other countries.  To the best of our
knowledge, we are not controlled, directly or indirectly, by another corporation
or any government, as at March 31, 2005. Except as otherwise set forth below, no
person or corporation or other entity owns, directly or indirectly,  or controls
more than 5% of our common  shares,  the only class of  securities  with  voting
rights.

<TABLE>
--------------------------------------------------------------------------------------------
Identity of Persons or Group         Number of Common Shares Owned       Percentage of Class
<S>                                            <C>                              <C>
Oak Bay Investments                            1,000,000                        5.36%
--------------------------------------------------------------------------------------------
</TABLE>

The major shareholders do not have different voting rights than other holders of
our common  shares,  and there are no  arrangements,  known to us which may at a
subsequent date result in a change in control of the corporation.

     B.   Related party transactions.

Except  for the  ownership  of our  securities  and the  compensation  described
herein, none of our directors, executive officers, holders of ten percent of our
outstanding  Shares, or any associate or affiliate of such person,  have, to our
knowledge, had a material interest,  direct or indirect, during the three fiscal
years ended  October 31, 2002,  2003 and 2004,  or in any  proposed  transaction
which may materially affect us.

Steven Latham, a former director of Chartwell,  owes the company $29,907 without
interest on a demand note. This loan is payable upon demand. This arrangement is
not on similar terms as arrangements we would otherwise negotiate with unrelated
third parties. The loans to Stephen Latham were grabted in April, 1998 and June,
1999.

Darold  Parken,  a director  and the  President of  Chartwell,  owes the company
$151,235 as of January 31,  2005.  Interest on the  promissory  note issued with
respect to Company stock  options that he exercised is set at 6% annually.  This
loan is  payable  upon  demand.  This  arrangement  is not on  similar  terms as
arrangements we would otherwise negotiate with unrelated third parties. The loan
to Darold Parken was granted in April, 2001.Interests of experts and counsel.

Not applicable.

ITEM 8. FINANCIAL INFORMATION

     A.   Consolidated statements and other financial information.

See Item 17 for a list of the financial  statements filed as part of this Annual
Report.

We are  aware of no  pending  or  threatened  legal  proceedings  to  which  the
Corporation is a party, or of which any of its properties is the subject.


                                      -42-
<PAGE>

We have never  declared  or paid any cash  dividends  on our common  shares.  We
currently expect to retain future earnings, if any, for use in the operation and
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future.

     B.   Significant changes.

On December  7, 2004 the Company  closed a private  placement  consisting  of 2,
365,592  common  shares  which  were  sold at a price of $4.65 per share for net
proceeds of approximately $10.3 million before underwriter  expenses and related
Company legal  expenses.  The  underwriters  were granted  141,936  compensation
options  exercisable at an exercise price of $5.10 per common share for a period
of 18 months from the date of the closing of the private  placement.  All of the
securities  sold  pursuant to the private  placement are subject to a four month
hold period.  Net proceeds of the financing  will be used for general  corporate
purposes.

There have been no other significant subsequent events since October 31, 2004 to
the date of this Annual Report.

ITEM 9. THE OFFER AND LISTING

     A.   Offer and listing details.

Our Common Shares are listed for trading on the Toronto Stock  Exchange  ("TSX")
under the symbol  "CWH:TSX" The following tables set forth the reported high and
low  closing bid prices of the  Corporation's  Common  Shares on the  designated
exchanges for (a) the five most recent fiscal years;  (b) each quarterly  period
for the past two fiscal  years and (c) for the last six months  ending March 31,
2004.

                                       TSX

Fiscal Year ended October 31               High                    Low
----------------------------               ----                    ---

                2000                       7.50                    1.50
                2001                       2.60                    0.75
                2002                       2.05                    0.67
                2003                       1.80                    0.71
                2004                       4.36                    1.60



Quarter Ended                              High                    Low
-------------                              ----                    ---

October 31, 2004                           4.36                    3.37
July 31, 2004                              3.75                    3.07
April 30, 2004                             3.95                    2.45
January 31, 2004                           2.45                    1.60
October 31, 2003                           1.80                    0.99
July 31, 2003                              1.25                    0.95
April 30, 2003                             1.40                    0.90
January 31, 2003                           1.15                    0.71



Month                                      High                    Low
-----                                      ----                    ---

March, 2005                                9.25                    8.72
February, 2005                             9.35                    7.00
January, 2005                              6.90                    5.97
December, 2004                             6.70                    4.90
November, 2004                             5.40                    4.25
October, 2004                              4.36                    3.70


                                      -43-
<PAGE>

The closing price of our Common Shares on March 31, 2005 was $8.75 on the TSX.

     B.   Plan of distribution.

Not applicable.

     C.   Markets.

Our Common Shares are listed for trading on the Toronto Stock  Exchange  ("TSX")
under the symbol "CWH:TSX."

     D.   Selling shareholders.

Not applicable.

     E.   Dilution.

Not applicable.

     F.   Expenses of the issue.

Not applicable.

ITEM 10. ADDITIONAL INFORMATION

     A.   Share Capital.

Not applicable.

     B.   Memorandum and articles of association.

Purposes

We are a  corporation  continued  from  British  Columbia  to Alberta  under the
Business  Corporations  Act  (Alberta)  on  December  18,  1995.  There  are  no
restrictions on the business which we may carry on. The Corporation's objectives
and purposes are not  described in its  Articles of  Continuance  or  constating
documents.  The  Corporation  is  governed  by  the  Business  Corporations  Act
(Alberta),  (the "Act"). Under the Act the Corporation is not required to define
or state its  objectives  and purposes,  rather,  it is granted an  unrestricted
right to carry on business.

Conflicts
---------

Pursuant to the Corporation's  Articles, a director or officer who is a party to
a  material  contract  or  proposed  material  contract,  or who has a  material
interest  in any  person  who is a party  to a  material  contract  or  proposed
material  contract  with the  Corporation  or a subsidiary  must  disclose  such
interest.  Subject to the  provisions  of the Act, a director will not by reason
only of his office be  accountable to the  Corporation  or to the  Corporation's
shareholders   for  any  profit  or  gain  realized  from  such  a  contract  or
transaction,  and such contract or  transaction  will not be void or voidable by
reason only of the director's interest therein, of the Corporation provided that
the  required  declaration  and  disclosure  of interest is properly  made,  the
contract or  transaction  is  approved  by the  directors  or  shareholders,  if
necessary,  and it was fair and reasonable to the Corporation at the time it was
approved  and, if required by the Act,  the director  refrains  from voting as a
director on the contract or transaction. Under the Act, such a director must not
vote on any resolution to approve the contract unless the contract is:

An arrangement by way of security for money lent to or obligations undertaken by
him, or by a body corporate in which he has an interest,  for the benefit of the
Corporation or an affiliate of the Corporation;


                                      -44-
<PAGE>

     (a)  a contract  relating  primarily  to his  remuneration  as a  director,
          officer,  employee or agent of the  Corporation or an affiliate of the
          Corporation;

     (b)  a contract for indemnity or insurance under the Act; or

     (c)  a contract with an affiliate of the Corporation.

These  rules  would allow the full board to vote on  compensation  of  directors
generally,  but would  require a  director  to  abstain  on a vote  relating  to
compensation unique to him.

Quorum
------

The  quorum  for the  transaction  of  business  at any  meeting of its board of
directors  must consist of a majority of the  directors  holding  office or such
greater number of directors as the Corporation's board determines.

Borrowing Powers
----------------

Pursuant to the  Corporation's  Articles of Continuance dated December 18, 1995,
its  directors may without the  authorization  of its  shareholders,  (a) borrow
money on in such manner and amount, on such security, from such sources and upon
such terms and  conditions  as they see fit;  (b) issue bonds,  debentures,  and
other debt  obligations  either  outright or as security  for any  liability  or
obligation of the Corporation or any other person; (c) mortgage, charge, whether
by way of specific or floating charge, or give other security on the undertaking
or on the whole or any part of the property and assets of the Corporation,  both
present and future; and (d) give financial assistance to any person, directly or
indirectly,  by way of loan, guarantee, the provision of security, or otherwise.
The  Corporation's  directors  may also, by  resolution,  delegate the borrowing
powers  referred to above to one of its  directors,  a committee of directors or
one of its officers.

Directors' Qualifications
-------------------------

Pursuant to the Act, the  Corporation's  directors  must be at least 18 years of
age and are not required to hold shares issued by the Corporation.

The Corporation's Articles of Continuance provide that the Board of Directors
shall consist of a minimum of three and a maximum of six Directors. The Board of
Directors may, between annual meetings, appoint one or more additional directors
to serve until the next annual meeting, but the number of additional directors
shall not at any time exceed 1/3 of the number of directors who held office at
the expiration of the last annual meeting of the corporation.

Common Shares
-------------

The  authorized  share  capital of the Company  consists of  100,000,000  Common
Shares,  without  par value.  The  holders  of Common  Shares  are  entitled  to
dividends,  if as and when  declared  by the  directors,  to one vote per Common
Share at  meetings  of the holders of Common  Shares of the  Company  and,  upon
liquidation,  to receive such assets of the Company as are  distributable to the
holders of the Common Shares.

The common shares have no preemptive or conversion rights or other  subscription
rights.  There are no  redemption or sinking fund  provisions  applicable to the
common shares. All outstanding common shares are fully paid and non-assessable.

According to the Act, the Corporation may not declare or pay a dividend if there
are reasonable grounds for believing that:

     (a)  before or after the payment of the  dividend it would be unable to pay
          its liabilities as they become due; and


                                      -45-
<PAGE>

     (b)  the realizable  value of its assets would be less than its liabilities
          plus its stated  capital.  The  Corporation  cannot  predict  what the
          realizable  value of its assets or the amount of its liabilities  will
          be in the future.

Amendment of Articles
---------------------

Under the Act, the Corporation's  directors, or shareholders who are entitled to
vote at its annual  meeting of  shareholders,  may make a proposal  to amend its
Articles of  Incorporation.  A resolution to amend its Articles of Incorporation
must be passed by a majority  of not less than  two-thirds  of the votes cast by
the Corporation's shareholders who vote in respect of the resolution. In certain
cases, where they are affected  differently from other shareholders,  a class or
series of shares will be entitled to a separate  vote on a proposal to amend the
Corporation's Articles.

Annual Meeting
--------------

The Corporation's directors must call an annual meeting of shareholders no later
than 15 months after its last preceding annual meeting of shareholders,  and may
at any time call a special  meeting  of  shareholders.  A notice of the time and
place of a meeting  of  shareholders  must be sent not less than 21 days and not
more than 50 days before the meeting and must be sent to each shareholder who is
entitled to vote, to each director and to its auditor.

The  Corporation's  directors may fix a date,  that is not less than 21 days and
not more than 50 days before the meeting, as a record date for the determination
of the shareholders  entitled to notice of the meeting.  If a record date is not
fixed,  the record date must be the close of  business  on the date  immediately
preceding the date on which notice is given, or if notice is not given, the date
on which the meeting is held.

All business  transacted at a special meeting of  shareholders  and all business
transacted at an annual meeting of  shareholders,  except  consideration  of the
financial statements and auditors report, fixing the number of directors for the
following  year,  election of  directors  and  re-appointment  of the  incumbent
auditor is deemed to be special business.  A notice of a meeting of shareholders
at which  special  business  is to be  transacted  must state the nature of that
business in sufficient detail to allow the Corporation's  shareholders to form a
reasonable  judgment on that business and the text of any special  resolution to
be submitted to the meeting.

The only  persons  entitled to be present at a meeting of its  shareholders  are
those  persons who are entitled to vote  thereat,  the directors and auditors of
the Corporation  and others who,  although not entitled to vote, are entitled or
required  under any  provision  of the Act or the  articles to be present at the
meeting.  Any  other  person  will be  admitted  only on the  invitation  of the
chairman of the meeting or with the consent of the meeting.

Limitations on Ownership of Securities
--------------------------------------

There are no limitations  on the right to own securities  imposed by foreign law
or by the Articles of Continuance or other constituent documents.

Change of Control
-----------------

Except  for the  restrictions  set out above  that  attach to the  Corporation's
shares, there are no provisions in the Corporation's  Articles of Continuance or
other  constituent  documents  that  would  delay,  defer or prevent a change of
control and that would  operate  only with respect to a merger,  acquisition  or
corporate restructuring involving the Corporation.

Shareholder Ownership Disclosure
--------------------------------

The Corporation's constituent documents do not contain provisions that govern an
ownership  threshold  above which its  shareholder  ownership must be disclosed.
However,  we are governed by the  Securities Act (Alberta) and under that Act, a
person or company  that  becomes an  "insider"  (as that term is defined in such
FAct), must file a report with the applicable  securities  commission disclosing
any direct or indirect beneficial ownership or control or direction


                                      -46-
<PAGE>

over  the   Corporation's   securities.   An  "insider"   includes  all  of  the
Corporation's directors and senior officers, every director or senior officer of
a company that is itself an insider of the  Corporation,  all its  subsidiaries,
any person or  corporation  that,  beneficially  owns,  directly or  indirectly,
voting  securities of the Corporation,  exercises  control or direction over its
voting securities, or beneficially owns, directly or indirectly,  certain voting
securities of the  Corporation  and exercises  control or direction over certain
voting  securities  of the  Corporation  that  carry more than 10% of the voting
rights attached to all of its voting  securities,  excluding  voting  securities
held by a person or company as underwriter in the course of a distribution.

Capital Changes
---------------

The Corporation's  Articles of Incorporation and other constituent  documents do
not  contain  provisions  that  govern  changes  in its  capital  that  are more
stringent than those required by Canadian securities laws.

     C.   Material Contracts.

There are no contracts other than normal course of business agreements.

     D.   Exchange controls.

Exchange Controls and Investment Canada Act

Canada has no system of exchange controls. There are no exchange restrictions on
borrowing from foreign  countries nor on the remittance of dividends,  interest,
royalties and similar payments, management fees, loan repayments,  settlement of
trade debts,  or the  repatriation  of capital.  Any such  remittances to United
States residents,  however,  may be subject to a withholding tax pursuant to the
Canadian  Income Tax Act as modified by the reciprocal tax treaty between Canada
and the United States. See "Item 10E., Taxation".

The Investment Canada Act (the "Act"),  enacted on June 20, 1985, requires prior
notification  to the  Government  of Canada on the  "acquisition  of control" of
Canadian   businesses  by   non-Canadians,   as  defined  in  the  Act.  Certain
acquisitions  of control,  discussed  below,  are reviewed by the  Government of
Canada.  The  term  "acquisition  of  control"  is  defined  as any  one or more
non-Canadian  persons  acquiring all or substantially  all of the assets used in
the Canadian  business,  or the  acquisition  of the voting shares of a Canadian
corporation  carrying on the Canadian  business or the acquisition of the voting
interests of an entity  controlling  or carrying on the Canadian  business.  The
acquisition  of the  majority  of the  outstanding  shares  is  deemed  to be an
"acquisition  of  control"  of a  corporation.  The  acquisition  of less than a
majority,  but  one-third  or more,  of the voting  shares of a  corporation  is
presumed to be an  "acquisition  of control" of a  corporation  unless it can be
established that the purchaser will not control the corporation.

Investments  requiring  notification  and review are all direct  acquisitions of
Canadian  businesses  with  assets  of  CDN$5,000,000  or more  (subject  to the
comments  below on WTO  investors),  and all indirect  acquisitions  of Canadian
businesses  (subject to the comments below on WTO investors) with assets of more
than  CDN$50,000,000 or with assets of between  CDN$5,000,000 and CDN$50,000,000
which  represent  more  than  50%  of  the  value  of  the  total  international
transaction.  In addition, specific acquisitions or new businesses in designated
types of business  activities  related to Canada's cultural heritage or national
identity could be reviewed if the  Government of Canada  considers that it is in
the public interest to do so.

The Act was amended with the  implementation  of the Agreement  establishing the
World Trade  Organization  ("WTO") to provide for special review  thresholds for
"WTO  investors",  as defined in the Act. "WTO investor"  generally means (i) an
individual,  other than a Canadian,  who is a national of a WTO member (such as,
for example,  the United States), or who has the right of permanent residence in
relation to that WTO member, (ii) governments of WTO members, and (iii) entities
that are not  Canadian  controlled,  but which are WTO investor  controlled,  as
determined by rules specified in the Act. The special review  thresholds for WTO
investors do not apply,  and the general rules  described above do apply, to the
acquisition  of control of certain  types of  businesses  specified  in the Act,
including a business that is a "cultural  business".  If the WTO investor  rules
apply, an investment in the shares of the Company by or from a WTO investor will
be reviewable  only if it is an investment to acquire control of the Company and
the value of the assets of the  Company is equal to or greater  than a specified
amount (the "WTO


                                      -47-
<PAGE>

Review  Threshold").  The WTO Review Threshold is adjusted annually by a formula
relating to increases in the nominal gross domestic product of Canada.  The 2004
WTO Review Threshold is CDN$237,000,000.

If any  non-Canadian,  whether or not a WTO  investor,  acquires  control of the
Company by the  acquisition of shares,  but the transaction is not reviewable as
described above, the non-Canadian is required to notify the Canadian  government
and  to  provide  certain  basic  information  relating  to  the  investment.  A
non-Canadian,  whether  or not a WTO  investor,  is also  required  to provide a
notice to the government on the establishment of a new Canadian business. If the
business of the Company is then a prescribed type of business  activity  related
to  Canada's  cultural  heritage  or  national  identity,  and if  the  Canadian
government considers it to be in the public interest to do so, then the Canadian
government may give notice in writing within 21 days requiring the investment to
be reviewed.

For  non-Canadians  (other  than WTO  investors),  an  indirect  acquisition  of
control,  by the  acquisition of voting  interests of an entity that directly or
indirectly controls the Company, is reviewable if the value of the assets of the
Company is then  CDN$50,000,000  or more. If the WTO investor rules apply,  then
this requirement does not apply to a WTO investor,  or to a person acquiring the
entity from a WTO  investor.  Special  rules  specified  in the Act apply if the
value of the  assets of the  Company is more than 50% of the value of the entity
so acquired.  By these special rules, if the non-Canadian  (whether or not a WTO
investor) is acquiring control of an entity that directly or indirectly controls
the company,  and the value of the assets of the Company and all other  entities
carrying on business in Canada, calculated in the manner provided in the Act and
the regulations under the Act, is more than 50% of the value,  calculated in the
manner provided in the Act and the  regulations  under the Act, of the assets of
all entities, the control of which is acquired,  directly or indirectly,  in the
transition of which the acquisition of control of the Company forms a part, then
the  thresholds  for a direct  acquisition  of control as  discussed  above will
apply, that is, a WTO Review Threshold of  CDN$237,000,000,  (in 2004) for a WTO
investor or a threshold of  CDN$5,000,000  for a  non-Canadian  other than a WTO
investor. If the value exceeds that level, then the transaction must be reviewed
in the same manner as a direct  acquisition of control by the purchase of shares
of the Company.

If an investment is reviewable, an application for review in the form prescribed
by the regulations is normally required to be filed with the Director  appointed
under the Act (the  "Director")  prior to the  investment  taking  place and the
investment may not be  consummated  until the review has been  completed.  There
are, however, certain exceptions.  Applications concerning indirect acquisitions
may be filed up to 30 days after the investment is consummated and  applications
concerning reviewable investments in culture-sensitive sectors are required upon
receipt of a notice for review.  In addition,  the Minister (a person designated
as such  under the Act) may  permit an  investment  to be  consummated  prior to
completion  of the  review,  if he is  satisfied  that delay  would  cause undue
hardship to the acquiror or jeopardize the  operations of the Canadian  business
that is  being  acquired.  The  Director  will  submit  the  application  to the
Minister,  together with any other information or written  undertakings given by
the acquiror and any representation submitted to the Director by a province that
is likely to be significantly affected by the investment.

The Minister will then  determine  whether the investment is likely to be of net
benefit to Canada,  taking into  account  the  information  provided  and having
regard to certain  factors of assessment  where they are  relevant.  Some of the
factors to be considered  are (i) the effect of the  investment on the level and
nature of economic  activity in Canada,  including the effect on employment,  on
resource  processing,  and on the utilization of parts,  components and services
produced in Canada;  (ii) the effect of the  investment  on exports from Canada;
(iii) the degree and  significance of participation by Canadians in the Canadian
business and in any industry in Canada of which it forms a part; (iv) the effect
of  the  investment  on  productivity,   industrial  efficiency,   technological
development, product innovation and product variety in Canada; (v) the effect of
the investment on competition within any industry or industries in Canada;  (vi)
the  compatibility  of the  investment  with national  industrial,  economic and
cultural policies taking into  consideration  industrial,  economic and cultural
objectives enunciated by the government or legislature of any province likely to
be significantly  affected by the investment;  and (vii) the contribution of the
investment to Canada's ability to compete in world markets.

The Act sets certain time limits for the  Director and the  Minister.  Within 45
days after a completed  application has been received,  the Minister must notify
the acquiror that (a) he is satisfied that the investment is likely to be of net
benefit to Canada,  or (b) he is unable to complete his review, in which case he
shall have 30 additional days to complete his review (unless the acquiror agrees
to a longer period), or (c) he is not satisfied that the investment is likely to
be of net benefit to Canada.

Where the Minister has advised the acquiror  that he is not  satisfied  that the
investment is likely to be of net benefit to Canada,  the acquiror has the right
to make  representations  and submit  undertakings within 30 days of the date of
the


                                      -48-
<PAGE>

notice (or any further  period that is agreed upon  between the acquiror and the
Minister). On the expiration of the 30 day period (or the agreed extension), the
Minister must quickly  notify the acquiror (i) that he is now satisfied that the
investment  is  likely  to be of net  benefit  to  Canada or (ii) that he is not
satisfied that the  investment is likely to be of net benefit to Canada.  In the
latter  case,  the  acquiror  may not  proceed  with the  investment  or, if the
investment  has already been  consummated,  must divest itself of control of the
Canadian business.

The Act provides civil remedies for non-compliance with any provision. There are
also  criminal  penalties  for  breach of  confidentiality  or  providing  false
information.

     E.   Taxation.

U.S. Federal Income Tax Consequences

The following is a summary of the anticipated  material U.S.  federal income tax
consequences  to a U.S.  Holder (as defined  below) arising from and relating to
the acquisition, ownership, and disposition of Common Shares.

This summary is for general information purposes only and does not purport to be
a  complete  analysis  or  listing  of all  potential  U.S.  federal  income tax
consequences  that may apply to a U.S.  Holder  as a result of the  acquisition,
ownership,  and disposition of Common Shares. In addition, this summary does not
take into account the individual facts and  circumstances of any particular U.S.
Holder  that  may  affect  the  U.S.  federal  income  tax  consequences  of the
acquisition,  ownership,  and  disposition of Common Shares.  Accordingly,  this
summary is not  intended to be, and should not be  construed  as,  legal or U.S.
federal  income tax advice with  respect to any U.S.  Holder.  Each U.S.  Holder
should consult its own financial advisor, legal counsel, or accountant regarding
the U.S.  federal,  U.S. state and local,  and foreign tax  consequences  of the
acquisition, ownership, and disposition of Common Shares.

Scope of this Disclosure

Authorities
-----------

This  summary is based on the  Internal  Revenue  Code of 1986,  as amended (the
"Code"), Treasury Regulations (whether final, temporary, or proposed), published
rulings  of the  Internal  Revenue  Service  ("IRS"),  published  administrative
positions of the IRS, the  Convention  Between  Canada and the United  States of
America with  Respect to Taxes on Income and on Capital,  signed  September  26,
1980, as amended (the "Canada-U.S.  Tax  Convention"),  and U.S. court decisions
that are  applicable  and, in each case, as in effect and  available,  as of the
date of this Annual  Report.  Any of the  authorities  on which this  summary is
based  could be changed in a material  and adverse  manner at any time,  and any
such change  could be applied on a  retroactive  basis.  This  summary  does not
discuss the potential  effects,  whether adverse or beneficial,  of any proposed
legislation that, if enacted, could be applied on a retroactive basis.

U.S. Holders
------------

For purposes of this summary,  a "U.S.  Holder" is a beneficial  owner of Common
Shares that, for U.S. federal income tax purposes, is (a) an individual who is a
citizen  or  resident  of the  U.S.,  (b) a  corporation,  or any  other  entity
classified  as a  corporation  for U.S.  federal  income tax  purposes,  that is
created or  organized in or under the laws of the U.S. or any state in the U.S.,
including  the District of Columbia,  (c) an estate if the income of such estate
is subject to U.S.  federal  income tax regardless of the source of such income,
or (d) a trust if (i) such  trust has  validly  elected  to be treated as a U.S.
person for U.S.  federal  income tax  purposes  or (ii) a U.S.  court is able to
exercise primary  supervision over the  administration  of such trust and one or
more U.S.  persons have the  authority to control all  substantial  decisions of
such trust.

Non-U.S. Holders
----------------

For  purposes of this  summary,  a "non-U.S.  Holder" is a  beneficial  owner of
Common Shares other than a U.S.  Holder.  This summary does not address the U.S.
federal income tax consequences of the acquisition,  ownership,  and disposition
of Common  Shares to non-U.S.  Holders.  Accordingly,  a non-U.S.  Holder should
consult its own financial advisor,  legal counsel,  or accountant  regarding the
U.S. federal, U.S. state and local, and foreign tax


                                      -49-
<PAGE>

consequences  (including  the potential  application of and operation of any tax
treaties) of the acquisition, ownership, and disposition of Common Shares.

U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed
---------------------------------------------------------------------------

This summary does not address the U.S.  federal income tax  consequences  of the
acquisition,  ownership,  and disposition of Common Shares to U.S.  Holders that
are subject to special  provisions under the Code,  including the following U.S.
Holders:  (a)  U.S.  Holders  that  are  tax-exempt   organizations,   qualified
retirement  plans,   individual   retirement  accounts,  or  other  tax-deferred
accounts; (b) U.S. Holders that are financial institutions, insurance companies,
real estate  investment  trusts,  or regulated  investment  companies;  (c) U.S.
Holders that are broker-dealers, dealers, or traders in securities or currencies
that elect to apply a mark-to-market  accounting  method;  (d) U.S. Holders that
have a "functional  currency" other than the U.S. dollar;  (e) U.S. Holders that
are liable for the alternative minimum tax under the Code; (f) U.S. Holders that
own  Common  Shares  as  part of a  straddle,  hedging  transaction,  conversion
transaction,  constructive  sale, or other  arrangement  involving more than one
position;  (g) U.S.  Holders that acquired  Common Shares in connection with the
exercise of employee  stock options or otherwise as  compensation  for services;
(h) U.S.  Holders that hold Common  Shares other than as a capital  asset within
the meaning of Section 1221 of the Code; or (i) U.S. Holders that own,  directly
or indirectly,  10% or more, by voting power or value, of the outstanding shares
of the Company.  U.S.  Holders that are subject to special  provisions under the
Code,  including U.S. Holders described  immediately above, should consult their
own financial advisor,  legal counsel or accountant  regarding the U.S. federal,
U.S.  state  and  local,  and  foreign  tax  consequences  of  the  acquisition,
ownership, and disposition of Common Shares.

If an entity that is classified as partnership  (or  "pass-through"  entity) for
U.S.  federal income tax purposes holds Common Shares,  the U.S.  federal income
tax consequences to such partnership (or "pass-through" entity) and the partners
of such  partnership (or owners of such  "pass-through"  entity)  generally will
depend on the activities of the partnership (or  "pass-through"  entity) and the
status of such partners (or owners). Partners of entities that are classified as
partnerships (or owners of "pass-through"  entities) for U.S. federal income tax
purposes should consult their own financial advisor, legal counsel or accountant
regarding  the  U.S.   federal  income  tax  consequences  of  the  acquisition,
ownership, and disposition of Common Shares.

Tax Consequences Other than U.S. Federal Income Tax Consequences Not Addressed
------------------------------------------------------------------------------

This summary does not address the U.S. state and local,  U.S. federal estate and
gift, or foreign tax consequences to U.S. Holders of the acquisition, ownership,
and  disposition  of Common  Shares.  Each U.S.  Holder  should  consult its own
financial  advisor,  legal counsel,  or accountant  regarding the U.S. state and
local,  U.S.  federal  estate and gift,  and  foreign  tax  consequences  of the
acquisition,    ownership,    and    disposition   of   Common   Shares.    (See
"Taxation--Canadian Federal Income Tax Considerations" below).


U.S.  Federal  Income  Tax  Consequences  of  the  Acquisition,  Ownership,  and
Disposition of Common Shares

Distributions on Common Shares
------------------------------

     General Taxation of Distributions

A  U.S.   Holder  that  receives  a   distribution,   including  a  constructive
distribution,  with respect to the Common Shares will be required to include the
amount of such distribution in gross income as a dividend (without reduction for
any Canadian  income tax withheld from such  distribution)  to the extent of the
current or accumulated "earnings and profits" of the Company. To the extent that
a distribution exceeds the current and accumulated "earnings and profits" of the
Company,  such  distribution  will be treated (a) first, as a tax-free return of
capital to the extent of a U.S. Holder's tax basis in the Common Shares and, (b)
thereafter,  as gain from the sale or exchange of such Common Shares.  (See more
detailed discussion at "Disposition of Common Shares" below).

     Reduced Tax Rates for Certain Dividends

For taxable years  beginning after December 31, 2002 and before January 1, 2009,
a dividend paid by the Company  generally will be taxed at the  preferential tax
rates applicable to long-term capital gains if (a) the Company is a


                                      -50-
<PAGE>

"qualified  foreign  corporation"  (as  defined  below),  (b)  the  U.S.  Holder
receiving  such  dividend  is an  individual,  estate,  or  trust,  and (c) such
dividend is paid on Common Shares that have been held by such U.S. Holder for at
least  61  days  during  the  121-day  period   beginning  60  days  before  the
"ex-dividend  date" (i.e., the first date that a purchaser of such Common Shares
will not be entitled to receive such dividend).

The Company generally will be a "qualified  foreign  corporation"  under Section
1(h)(11)  of the  Code  (a  "QFC")  if (a)  the  Company  is  incorporated  in a
possession  of the U.S.,  (b) the  Company is eligible  for the  benefits of the
Canada-U.S.  Tax Convention, or (c) the Common Shares are readily tradable on an
established securities market in the U.S. However, even if the Company satisfies
one or more of such  requirements,  the Company  will not be treated as a QFC if
the Company is a "passive foreign investment company" (as defined below) for the
taxable  year  during  which the Company  pays a dividend  or for the  preceding
taxable year. In 2003, the U.S.  Department of the Treasury (the "Treasury") and
the IRS announced  that they intended to issue  Treasury  Regulations  providing
procedures for a foreign corporation to certify that it is a QFC. Although these
Treasury  Regulations  were not issued in 2004,  the  Treasury  and the IRS have
confirmed  their intention to issue these Treasury  Regulations.  It is expected
that  these  Treasury   Regulations  will  obligate  persons  required  to  file
information  returns to report a distribution with respect to a foreign security
issued  by a  foreign  corporation  as a  dividend  from a QFC  if  the  foreign
corporation  has, among other things,  certified under penalties of perjury that
the foreign  corporation was not a "passive foreign investment  company" for the
taxable year during which the foreign  corporation  paid the dividend or for the
preceding taxable year.

As discussed  below, the Company does not believe that it was a "passive foreign
investment  company" for the taxable year ended  October 31, 2004,  and does not
expect that it will be a "passive  foreign  investment  company" for the taxable
year ending October 31, 2005. (See more detailed discussion at "Additional Rules
that May Apply to U.S. Holders" below).  However, there can be no assurance that
the IRS will not challenge the determination  made by the Company concerning its
"passive  foreign  investment  company" status or that the Company will not be a
"passive foreign investment company" for the current or any future taxable year.
Accordingly, although the Company believes that it should be a QFC, there can be
no  assurances  that the IRS will not challenge  the  determination  made by the
Company  concerning  its QFC  status,  that  the  Company  will be a QFC for the
current or any future  taxable year, or that the Company will be able to certify
that it is a QFC in accordance with the  certification  procedures issued by the
Treasury and the IRS.

If the Company is not a QFC, a dividend  paid by the  Company to a U.S.  Holder,
including a U.S. Holder that is an individual,  estate, or trust, generally will
be taxed at  ordinary  income tax rates (and not at the  preferential  tax rates
applicable to long-term capital gains). The dividend rules are complex, and each
U.S.  Holder  should  consult  its own  financial  advisor,  legal  counsel,  or
accountant regarding the dividend rules.

     Distributions Paid in Foreign Currency

The amount of a distribution paid to a U.S. Holder in foreign currency generally
will be  equal  to the  U.S.  dollar  value  of such  distribution  based on the
exchange  rate  applicable on the date of receipt.  A U.S.  Holder that does not
convert foreign  currency  received as a distribution  into U.S.  dollars on the
date of receipt  generally will have a tax basis in such foreign  currency equal
to the U.S. dollar value of such foreign currency on the date of receipt. Such a
U.S. Holder  generally will recognize  ordinary income or loss on the subsequent
sale or  other  taxable  disposition  of such  foreign  currency  (including  an
exchange for U.S. dollars).

     Dividends Received Deduction

Dividends  paid on the Common  Shares  generally  will not be  eligible  for the
"dividends  received  deduction."  The  availability  of the dividends  received
deduction  is subject to complex  limitations  that are beyond the scope of this
discussion,  and a U.S.  Holder  that is a  corporation  should  consult its own
financial advisor, legal counsel, or accountant regarding the dividends received
deduction.


                                      -51-
<PAGE>

Disposition of Common Shares
----------------------------

A U.S.  Holder  will  recognize  gain  or  loss on the  sale  or  other  taxable
disposition  of  Common  Shares in an amount  equal to the  difference,  if any,
between  (a) the  amount  of cash  plus the fair  market  value of any  property
received  and (b) such U.S.  Holder's  tax basis in the  Common  Shares  sold or
otherwise  disposed of. Any such gain or loss  generally will be capital gain or
loss, which will be long-term capital gain or loss if the Common Shares are held
for more than one year.  Gain or loss recognized by a U.S. Holder on the sale or
other taxable  disposition  of Common Shares  generally will be treated as "U.S.
source" for purposes of applying the U.S.  foreign tax credit  rules.  (See more
detailed discussion at "Foreign Tax Credit" below).

Preferential tax rates apply to long-term capital gains of a U.S. Holder that is
an individual,  estate, or trust.  There are currently no preferential tax rates
for long-term  capital gains of a U.S. Holder that is a corporation.  Deductions
for capital  losses and net capital  losses are subject to complex  limitations.
For a U.S. Holder that is an individual, estate, or trust, capital losses may be
used to offset capital gains and up to U.S.$3,000 of ordinary income.  An unused
capital loss of a U.S. Holder that is an individual,  estate, or trust generally
may be carried forward to subsequent  taxable years, until such net capital loss
is exhausted.  For a U.S.  Holder that is a  corporation,  capital losses may be
used to offset  capital  gains,  and an unused  capital  loss  generally  may be
carried  back three years and carried  forward five years from the year in which
such net capital loss is recognized.

Foreign Tax Credit
------------------

A U.S. Holder who pays (whether directly or through withholding) Canadian income
tax with  respect to  dividends  paid on the  Common  Shares  generally  will be
entitled,  at the election of such U.S. Holder, to receive either a deduction or
a credit for such Canadian  income tax paid.  Generally,  a credit will reduce a
U.S.  Holder's U.S. federal income tax liability on a  dollar-for-dollar  basis,
whereas a deduction will reduce a U.S.  Holder's income subject to U.S.  federal
income tax.  This  election is made on a  year-by-year  basis and applies to all
foreign taxes paid (whether  directly or through  withholding)  by a U.S. Holder
during a year.

Complex  limitations  apply to the  foreign tax  credit,  including  the general
limitation  that the  credit  cannot  exceed the  proportionate  share of a U.S.
Holder's U.S.  federal  income tax liability  that such U.S.  Holder's  "foreign
source" taxable income bears to such U.S. Holder's  worldwide taxable income. In
applying this limitation,  a U.S. Holder's various items of income and deduction
must be classified,  under complex rules,  as either  "foreign  source" or "U.S.
source." In addition,  this limitation is calculated  separately with respect to
specific categories of income (including "passive income," "high withholding tax
interest,"  "financial  services  income,"  "general  income," and certain other
categories of income).  Dividends paid by the Company  generally will constitute
"foreign  source" income and generally  will be categorized as "passive  income"
or, in the case of certain U.S. Holders,  "financial  services income." However,
for taxable  years  beginning  after  December 31, 2006,  the foreign tax credit
limitation  categories are reduced to "passive income" and "general income" (and
the other  categories  of income,  including  "financial  services  income," are
eliminated).  The foreign tax credit  rules are  complex,  and each U.S.  Holder
should consult its own financial advisor, legal counsel, or accountant regarding
the foreign tax credit rules.

Information Reporting; Backup Withholding Tax
---------------------------------------------

Payments  made  within  the  U.S.,  or by a U.S.  payor  or U.S.  middleman,  of
dividends  on,  and  proceeds  arising  from  certain  sales  or  other  taxable
dispositions  of,  Common  Shares  generally  will  be  subject  to  information
reporting and backup  withholding  tax, at the rate of 28%, if a U.S. Holder (a)
fails to furnish such U.S. Holder's correct U.S. taxpayer  identification number
(generally on Form W-9), (b) furnishes an incorrect U.S. taxpayer identification
number,  (c) is notified by the IRS that such U.S. Holder has previously  failed
to properly  report  items  subject to backup  withholding  tax, or (d) fails to
certify,  under  penalty of perjury,  that such U.S.  Holder has  furnished  its
correct U.S.  taxpayer  identification  number and that the IRS has not notified
such U.S. Holder that it is subject to backup  withholding  tax.  However,  U.S.
Holders that are  corporations  generally  are excluded  from these  information
reporting and backup  withholding tax rules. Any amounts withheld under the U.S.
backup withholding tax rules will be allowed as a credit against a U.S. Holder's
U.S.  federal  income tax liability,  if any, or will be refunded,  if such U.S.
Holder  furnishes  required  information  to the IRS.  Each U.S.  Holder  should
consult its own financial advisor,  legal counsel,  or accountant  regarding the
information reporting and backup withholding tax rules.


                                      -52-
<PAGE>

Additional Rules that May Apply to U.S. Holders

If the  Company is a  "controlled  foreign  corporation"  or a "passive  foreign
investment  company"  (each as defined  below),  the preceding  sections of this
summary  may not  describe  the U.S.  federal  income tax  consequences  to U.S.
Holders of the acquisition, ownership, and disposition of Common Shares.

Controlled Foreign Corporation
------------------------------

The Company generally will be a "controlled  foreign  corporation" under Section
957 of the Code (a  "CFC") if more  than 50% of the  total  voting  power or the
total  value of the  outstanding  shares of the  Company is owned,  directly  or
indirectly,  by  citizens  or  residents  of the  U.S.,  domestic  partnerships,
domestic corporations,  domestic estates, or domestic trusts (each as defined in
Section 7701(a)(30) of the Code), each of which own, directly or indirectly, 10%
or more of the total  voting power of the  outstanding  shares of the Company (a
"10% Shareholder").

If the Company is a CFC, a 10% Shareholder  generally will be subject to current
U.S.  federal  income tax with  respect to (a) such 10%  Shareholder's  pro rata
share of the  "subpart F income"  (as defined in Section 952 of the Code) of the
Company  and (b) such 10%  Shareholder's  pro rata share of the  earnings of the
Company  invested in "United States  property" (as defined in Section 956 of the
Code).  In addition,  under Section 1248 of the Code, any gain recognized on the
sale or other taxable  disposition of Common Shares by a U.S.  Holder that was a
10% Shareholder at any time during the five-year period ending with such sale or
other taxable disposition  generally will be treated as a dividend to the extent
of the  "earnings  and  profits" of the Company  that are  attributable  to such
Common Shares.  If the Company is both a CFC and a "passive  foreign  investment
company" (as defined below), the Company generally will be treated as a CFC (and
not  as a  "passive  foreign  investment  company")  with  respect  to  any  10%
Shareholder.

The Company does not believe that it has  previously  been,  or currently  is, a
CFC.  However,  there can be no assurance that the Company will not be a CFC for
the current or any future taxable year.

Passive Foreign Investment Company
----------------------------------

The Company  generally  will be a "passive  foreign  investment  company"  under
Section 1297 of the Code (a "PFIC") if, for a taxable  year,  (a) 75% or more of
the gross income of the Company for such  taxable year is passive  income or (b)
50% or more of the assets held by the Company either  produce  passive income or
are held for the production of passive income, based on the fair market value of
such assets (or on the adjusted tax basis of such assets,  if the Company is not
publicly  traded and either is a "controlled  foreign  corporation"  or makes an
election). "Passive income" includes, for example, dividends,  interest, certain
rents and royalties,  certain gains from the sale of stock and  securities,  and
certain gains from commodities transactions.

For  purposes of the PFIC income test and assets test  described  above,  if the
Company  owns,  directly  or  indirectly,  25% or more of the total value of the
outstanding shares of another foreign  corporation,  the Company will be treated
as if it (a) held a  proportionate  share of the  assets of such  other  foreign
corporation  and (b) received  directly a  proportionate  share of the income of
such other  foreign  corporation.  In addition,  for purposes of the PFIC income
test and asset test  described  above,  "passive  income"  does not  include any
interest,  dividends,  rents,  or royalties  that are received or accrued by the
Company from a "related  person" (as defined in Section  954(d)(3) of the Code),
to the extent such items are  properly  allocable  to the income of such related
person that is not passive income.

If the Company is a PFIC,  the U.S.  federal income tax  consequences  to a U.S.
Holder of the  acquisition,  ownership,  and  disposition  of Common Shares will
depend on whether  such U.S.  Holder makes an election to treat the Company as a
"qualified  electing  fund"  or  "QEF"  under  Section  1295 of the Code (a "QEF
Election")  or a  mark-to-market  election  under  Section  1296 of the  Code (a
"Mark-to-Market  Election").  A U.S.  Holder  that  does not  make  either a QEF
Election or a  Mark-to-Market  Election will be referred to in this summary as a
"Non-Electing U.S. Holder."

Under Section 1291 of the Code, any gain recognized on the sale or other taxable
disposition  of Common  Shares,  and any  "excess  distribution"  (as defined in
Section  1291(b)  of the  Code)  paid on the  Common  Shares,  must  be  ratably
allocated to each day in a  Non-Electing  U.S.  Holder's  holding period for the
Common Shares. The amount of any such gain or excess  distribution  allocated to
prior years of such  Non-Electing  U.S.  Holder's  holding period for the Common
Shares  generally will be subject to U.S.  federal income tax at the highest tax
applicable to ordinary


                                      -53-
<PAGE>

income in each such prior year. A Non-Electing  U.S.  Holder will be required to
pay interest on the resulting tax liability for each such prior year, calculated
as if such tax liability had been due in each such prior year.

A U.S.  Holder that makes a QEF  Election  generally  will not be subject to the
rules of Section 1291 of the Code discussed above.  However,  a U.S. Holder that
makes a QEF Election  generally  will be subject to U.S.  federal  income tax on
such U.S.  Holder's pro rata share of (a) the "net capital gain" of the Company,
which will be taxed as long-term  capital gain to such U.S. Holder,  and (b) and
the "ordinary  earnings" of the Company,  which will be taxed as ordinary income
to such U.S.  Holder. A U.S. Holder that makes a QEF Election will be subject to
U.S.  federal  income tax on such  amounts  for each  taxable  year in which the
Company is a PFIC,  regardless of whether such amounts are actually  distributed
to such U.S. Holder by the Company.

A U.S. Holder that makes a Mark-to-Market Election generally will not be subject
to the rules of Section 1291 of the Code discussed above. A U.S. Holder may make
a Mark-to-Market  Election only if the Common Shares are "marketable  stock" (as
defined  in  Section   1296(e)  of  the  Code).  A  U.S.  Holder  that  makes  a
Mark-to-Market  Election will include in gross income,  for each taxable year in
which the Company is a PFIC,  an amount equal to the excess,  if any, of (a) the
fair market value of the Common Shares as of the close of such taxable year over
(b) such U.S. Holder's tax basis in such Common Shares. A U.S. Holder that makes
a Mark-to-Market  Election will,  subject to certain  limitations,  be allowed a
deduction  in an amount equal to the excess,  if any, of (a) such U.S.  Holder's
adjusted  tax basis in the Common  Shares over (b) the fair market value of such
Common Shares as of the close of such taxable year.

The  Company  does not  believe  that it was a PFIC for the  taxable  year ended
October  31,  2004,  and does not expect  that it will be a PFIC for the taxable
year ending October 31, 2005. There can be no assurance,  however,  that the IRS
will not challenge the  determination  made by the Company  concerning  its PFIC
status or that the  Company  will not be a PFIC for the  current  or any  future
taxable year.

The PFIC  rules  are  complex,  and each  U.S.  Holder  should  consult  its own
financial advisor, legal counsel, or accountant regarding the PFIC rules and how
the PFIC rules may  affect  the U.S.  federal  income  tax  consequences  of the
acquisition, ownership, and disposition of Common Shares.


Canadian Federal Income Tax Considerations

The summary  below is  restricted to the case of a holder (a "Holder") of one or
more  common  shares who for the  purposes of the Income Tax Act  (Canada)  (the
"Act") is a non-resident of Canada,  holds his common shares as capital property
and deals at arm's length with the Company.

     Dividends

A Holder will be subject to Canadian  withholding tax ("Part XIII Tax") equal to
25%, or such lower rate as may be available  under an applicable tax treaty,  of
the gross  amount  of any  dividend  paid or  deemed to be paid on these  common
shares.  Under the 1995 Protocol amending the Canada-U.S.  Income Tax Convention
(1980)  (the  "Treaty")  the rate of Part XIII Tax  applicable  to a dividend on
common shares paid to a Holder who is a resident of the United States is limited
to 15% reduced to 5% if the shareholder is a corporation  owning at least 10% of
the outstanding  common shares of the Company.  These treaty limits do not apply
to dividends  paid on common shares held by a holder  resident in the U.S. where
the holding is  effectively  connected  to a permanent  establishment  in Canada
through which a business is carried on. The Company will be required to withhold
the applicable  amount of Part XIII Tax from each dividend so paid and remit the
withheld amount  directly to the Receiver  General for Canada for the account of
the Holder.

     Disposition of Common Shares

A Holder who  disposes of a common  share,  including by deemed  disposition  on
death, will not be subject to Canadian tax on any capital gain (or capital loss)
thereby realized unless the common share constituted "taxable Canadian property"
as defined by the Act. A capital gain occurs when proceeds from the  disposition
of a share or other capital  property  exceeds the original cost. A capital loss
occurs when the proceeds from the disposition of a


                                      -54-
<PAGE>

share  are less  than the  original  cost.  Under  the Act,  a  capital  gain is
effectively  taxed  at a  lower  rate  as only  50% of the  gain is  effectively
included in the Holder's taxable income.

Generally,  a common share will not constitute  taxable  Canadian  property of a
Holder  unless he held the common  shares as  property  used or held by him in a
business  (other  than an  insurance  business)  carried on in Canada,  or he or
persons with whom he did not deal at arm's length alone or together held or held
options  to  acquire,  at any time  within  the  five  year  period  immediately
preceding the disposition, 25% or more of the shares of any class of the capital
stock of the  Company.  The  disposition  of a  common  share  that  constitutes
"taxable  Canadian  property"  of a Holder  could also result in a capital  loss
which can be used to reduce  taxable  income to the extent  that such Holder can
offset it against a capital  gain.  A capital  loss cannot be used to reduce all
taxable  income  (only that  portion of taxable  income  derived  from a capital
gain).

A Holder who is a resident of the United  States and  realizes a capital gain on
disposition  of  a  common  share  that  was  taxable  Canadian   property  will
nevertheless,  by virtue of the Treaty,  generally  be exempt from  Canadian tax
thereon  unless  (a) more than 50% of the value of the  common  share is derived
from, or forms an interest in, Canadian real estate, including rights to exploit
Canadian  minerals  and  resources,  (b) the  common  share  formed  part of the
business  property  of a permanent  establishment  that the Holder has or had in
Canada within the 12 months preceding  disposition,  or (c) the Holder (i) was a
resident of Canada at any time within the ten years  immediately  preceding  the
disposition  and for a total of 120 months during any consecutive 20 year period
ending before the disposition,  and (ii) owned the common share (or property for
which  it was  substituted  in a  rollover  transaction)  when he  ceased  to be
resident in Canada.

A Holder who is subject to Canadian tax in respect of a capital gain realized on
disposition  of a common  share must  include 50% of the capital  gain  (taxable
capital gain) in computing his taxable income earned in Canada.  The Holder may,
subject  to  certain  limitations,  deduct 50% of any  capital  loss  (allowable
capital loss) arising on disposition of taxable  Canadian  property from taxable
capital gains realized in the year of disposition in respect to taxable Canadian
property and, to the extent not so deductible,  from such taxable  capital gains
of any of the  three  preceding  years or of any  subsequent  year.  For  losses
carried  back to years  prior to 2000,  the amount is  adjusted  to reflect  the
former 75% inclusion  rate.  For losses  applied to capital  gains in 2000,  the
amount is adjusted to reflect the average inclusion rate for the year.

     F.   Dividends and paying agents.

Not applicable.

     G.   Statement by experts.

Not applicable.

     H.   Documents on display.

The Company is a reporting company under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and is a "foreign private issuer" as defined in the
Exchange  Act. A foreign  private  issuer is exempt from the  provisions  of the
Exchange Act which  prescribe the furnishing and content of proxy  statements to
shareholders  and  relating  to short swing  profits  reporting  and  liability.
Readers may review a copy of the Company's filings with the U.S.  Securities and
Exchange  Commission ("the "SEC"),  including  exhibits and schedules filed with
it, at the SEC's public reference  facilities in Room 1024, Judiciary Plaza, 450
Fifth Street,  N.W.,  Washington,  D.C. 20549. Readers may also obtain copies of
such  materials  from  the  Public  Reference  Section  of the SEC,  Room  1024,
Judiciary Plaza, 450 Fifth Street, N.W.,  Washington,  D.C. 20549, at prescribed
rates. Readers may call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. The SEC maintains a Web site  (http://www.sec.gov)  that
contains reports,  submissions and other information  regarding registrants that
file  electronically  with the SEC. The Company has only recently become subject
to the requirement to file  electronically  through the EDGAR system most of its
securities documents, including registration statements under the Securities Act
of 1933, as amended and  registration  statements,  reports and other  documents
under the Securities Exchange Act of 1934, as amended.


                                      -55-
<PAGE>

The Company is required to file financial  statements and other information with
all of the Securities  Commissions in Canada electronically through the Canadian
System for  Electronic  Document  Analysis and  Retrieval  (SEDAR)  which can be
viewed at www.sedar.com.

Copies of any documents referred to in this Annual Report and filed with the SEC
can be viewed at the Company's head office during normal business hours.

Documents referred to in this annual report may be viewed at the head office of
the Company.

     I.   Subsidiary information.

Not applicable.


ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our financial  results are quantified in Canadian  dollars and a majority of our
obligations  and  expenditures  with respect to our  operations  are incurred in
Canadian dollars,  while revenues are generally received in U.S. dollars. In the
past, we have raised equity funding  through the sale of securities  denominated
in Canadian dollars, and we may in the future raise additional equity funding or
financing  denominated  in  Canadian  dollars.  We  currently  do not believe we
currently  have  any  materially   significant  market  risks  relating  to  our
operations  resulting from foreign  exchange  rates.  However,  if we enter into
financing or other business arrangements  denominated in currency other than the
Canadian  dollar,  variations  in the  exchange  rate may give  rise to  foreign
exchange gains or losses that may be significant.

We  currently  have no  long-term  debt  obligations.  We do not  use  financial
instruments  for  trading  purposes  and  we are  not a  party  to any  leverage
derivatives.  In the event we experience  substantial  growth in the future, our
business  and results of  operations  may be  materially  affected by changes in
interest rates and certain other credit risk associated with our operations.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

     A.   Debt securities.

Not applicable.

     B.   Warrants and rights.

Not applicable.

     C.   Other securities.

Not applicable.

     D.   American depositary shares.

Not applicable.


                                      -56-
<PAGE>

                                     PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
         AND USE OF PROCEEDS

None.

ITEM 15. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company  maintains  disclosure  controls and procedures that are designed to
ensure that the information required to be disclosed in our Exchange Act reports
is  recorded,  processed,  summarized  and  reported  within  the  time  periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to management,  including the Company's Chief Executive Officer
and Chief Financial Officer, as appropriate, to allow timely decisions regarding
required  disclosure.  After  evaluating  the  effectiveness  of  the  Company's
disclosure  controls and procedures (as defined in Exchange Act Rules  13a-15(e)
and  15d-15(e))  as of the end of the period  covered by this report,  the Chief
Executive  Officer and Chief  Financial  Officer have  concluded that as of such
date,  the  Company's  disclosure  controls  and  procedure  were  adequate  and
effective to ensure that  material  information  relating to the Company and its
consolidated  subsidiaries  would be made known to them by others  within  those
entities.

Report on Internal Control Over Financial Reporting

There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these disclosure controls and procedures
during the fiscal  year,  including  any  significant  deficiencies  or material
weaknesses of internal controls that would require corrective action.

ITEM 16A.  AUDIT COMMITTEE FINANCIAL EXPERT

All of the members of the Audit Committee are financially literate and the Board
has  determined   that  Peter  H.  Kinash  of  the  Audit  Committee  meets  the
requirements of an "audit committee  financial expert" as defined in Item 16A of
Form  20-F.  Mr.  Kinash is  independent  in  accordance  with the  independence
requirements  for audit committee  members under the rules of the American Stock
Exchange

ITEM 16B.  CODE OF ETHICS

The Company  developed a code of ethics to reflect SEC rules and other  proposed
regulations,  which code of ethics was  adopted by the board of  directors.  The
Code of ethics  governs the actions of and is applicable to all of the directors
and officers of the Company and its subsidiaries, and their affiliates. The code
of ethics deals with the following issues:

     o    compliance with all the laws and regulations identified in the code of
          ethics;

     o    corporate opportunities and conflicts of interest;

     o    the quality of the public disclosures;


                                      -57-
<PAGE>

     o    the protection and appropriate use of the Company's properties;

     o    the protection of confidential information and property;

     o    fair behavior; and

     o    compliance with insider trading and corrupt practices legislation.

All interested investors may acquire a copy of our code of ethics free of charge
by written request.

There have been no waivers to the code of ethics since its adoption.

ITEM 16C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

KPMG acted as the  Company's  independent  auditor  for the fiscal  years  ended
October 31, 2004 and 2003.  The chart below sets forth the total  amount  billed
the  Company by KPMG for  services  performed  in the years  2004 and 2003,  and
breaks down these amounts by category of service in Cdn$:



----------------------------------------------------------------------
                                             Years ended October 31
----------------------------------------------------------------------
                                           2004                 2003
                                            $                    $
----------------------------------------------------------------------
Audit Fees:                               71,500               66,000
----------------------------------------------------------------------
Audit Related Fees:                                            14,900
----------------------------------------------------------------------
Tax Fees:                                 40,047               13,500
----------------------------------------------------------------------
All Other Fees:                               --                   --
----------------------------------------------------------------------
Total                                    111,547               94,400
----------------------------------------------------------------------


"Audit  Fees"  are the  aggregate  fees  billed  by KPMG  for the  audit  of the
Company's consolidated annual financial statements, reviews of interim financial
statements  and  attestation  services  that are  provided  in  connection  with
statutory and regulatory filings or engagements.

"Audit-Related Fees" are fees charged by KPMG for assurance and related services
that are  reasonably  related to the  performance  of the audit or review of the
Company's  financial  statements  and are not reported  under "Audit Fees." This
category comprises fees billed for independent  accountant review of the interim
financial statements and Management Discussion and Analysis, as well as advisory
services associated with the Company's financial reporting.

"Tax  Fees"  are  fees  for  professional  services  rendered  by  KPMG  for tax
compliance, tax advice on actual or contemplated transactions.


                                      -58-
<PAGE>

Audit Committee's pre-approval policies and procedures

The Audit Committee nominates and engages the independent  auditors to audit the
financial  statements,  and  approves  all audit,  audit-related  services,  tax
services and other services provided by KPMG. Any services provided by KPMG that
are not specifically included within the scope of the audit must be pre-approved
by the audit committee prior to any engagement. The audit committee is permitted
to approve  certain  fees for  audit-related  services,  tax  services and other
services  pursuant  to a de  minimus  exception  before  the  completion  of the
engagement.

ITEM 16D.  EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.

 Not Applicable.

ITEM 16E.  PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND
           AFFILIATED PURCHASERS.

None.


                                      -59-
<PAGE>

                                    PART III

ITEM 17. FINANCIAL STATEMENTS

Our financial  statements are stated in Canadian Dollars (Cdn$) and are prepared
in accordance with Canadian  Generally  Accepted  Accounting  Principles (GAAP),
which, in our case,  conforms in all material respects for the periods presented
with United  States GAAP,  except as disclosed in the footnotes to the financial
statements.

The financial  statements as required under Item No. 17 are attached  hereto and
found immediately following the text of this Annual Report.

         Audited Consolidated Financial Statements of Chartwell Technology Inc.
         for the fiscal years ended October 31, 2002, 2003 and 2004.




                                      -60-
<PAGE>



ITEM 18. FINANCIAL STATEMENTS

Not applicable.

ITEM 19. EXHIBITS

 Exhibit
 Number        Description
 ------        -----------
 1.1(1)        Certificate of Incorporation of Napier Explorations Inc.

 1.2(1)        Certificate  of Name  Change  from  Napier  Explorations  Inc. to
               Brockton Resources Inc., dated October 13, 1988

 1.3(1)        Special Resolution, dated July 21, 1992

 1.4(1)        Directors Resolution, dated November 4, 1992

 1.5(1)        Certificate  of Name  Change  from  Brockton  Resources  Inc.  to
               Chartwell Ventures Ltd., dated November 19, 1992

 1.6(1)        Certificate of Registration as an Extra-Provincial Corporation in
               Alberta, Chartwell Ventures Ltd., dated June 21, 1994

 1.7(1)        Certificate  of  Continuance  from  British  Columbia to Alberta,
               Chartwell Ventures Ltd., dated December 18, 1995

 1.8(1)        Certificate  of Name  Change  from  Chartwell  Ventures  Ltd.  to
               Chartwell Technology Inc., dated December 8, 1998

 1.9(1)        Amended Articles of Brockton Resources Inc.

 1.10(3)       Revised Company By-Laws, approved July 31, 2000 (previously filed
               as Exhibit 4.2)

 4.1(1)        Stock  Option  Plan,  dated June 22,  1998  (previously  filed as
               Exhibit 3.8)

 4.2(1)        Form of Software Licensing Agreement (previously filed as Exhibit
               3.14)

 4.3(1)        Contractual Rights and Software Purchase and Sale Agreement dated
               November 1, 1999 By and Among Chartwell  Technology Inc., Gateway
               Technology Inc. and Gaming Tech Corporation  (previously filed as
               Exhibit 3.15)

 4.4(2)        ????

 4.5(3)        Revised Stock Option Plan, dated June 23, 2000 (previously  filed
               as Exhibit 4.1)

 4.5           Revised Stock Option Plan, dated March 22, 2004

 8.1           List of subsidiaries

11.1           Code of Ethics

12.1           Certification of CEO required by Rule 13a-14(a) or Rule 15d-14(a)

12.2           Certification of CFO required by Rule 13a-14(a) or Rule 15d-14(a)



                                      -61-
<PAGE>

 Exhibit
 Number        Description
 ------        -----------
13.1           Certification  of CEO  pursuant  to 18  U.S.C.  Section  1350  as
               adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

13.2           Certification  of CFO  pursuant  to 18  U.S.C.  Section  1350  as
               adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
---------------

(1)  Previously filed on December 17, 1999
(2)  Previously filed on July 31, 2000.
(3)  Previously filed on April 19, 2001


                                      -63-
<PAGE>

                                   SIGNATURES


     Pursuant to the  requirements of Section 12 of the Securities  Exchange Act
of 1934, the  registrant  certifies  that it meets all of the  requirements  for
filing on Form 20-F and has duly caused  this Annual  Report to be signed on its
behalf by the undersigned, thereunto duly authorized.


Date:  May 16, 2005                By:  /s/ Don Gleason
                                        ----------------------------------------
                                        Don Gleason, Chief Financial Officer





                                      -63-
<PAGE>




kpmg







                      Consolidated Financial Statements of


                      CHARTWELL TECHNOLOGY INC.



                      Years ended October 31, 2004, 2003 and 2002.



<PAGE>


Auditors' Report to the shareholders

We have audited the consolidated  balance sheets of Chartwell Technology Inc. as
at October 31, 2004 and 2003 and the  consolidated  statements of operations and
deficit  and cash  flows for each of the years in the  three-year  period  ended
October 31, 2004.  These  financial  statements  are the  responsibility  of the
Corporation's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with Canadian  generally accepted auditing
standards.  Those standards  require that we plan and perform an audit to obtain
reasonable  assurance  whether  the  financial  statements  are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management, as well as evaluating the overall financial statement presentation.

In our opinion,  these consolidated  financial statements present fairly, in all
material  respects,  the financial position of the Corporation as at October 31,
2004 and 2003 and the results of its  operations  and its cash flows for each of
the years in the three year period  ended  October 31, 2004 in  accordance  with
Canadian generally accepted accounting principles.


/s/ KPMG LLP
KPMG LLP



Chartered Accountants

Calgary, Canada
December 21, 2004


<PAGE>


CHARTWELL TECHNOLOGY INC.
Consolidated Balance Sheets

As at October 31
(stated in Canadian dollars)

<TABLE>
-------------------------------------------------------------------------------------------------
                                                                    2004                  2003
-------------------------------------------------------------------------------------------------
<S>                                                          <C>                   <C>
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 (note 7)                              115,000              110,000
-------------------------------------------------------------------------------------------------
     Total current assets                                       11,752,548            7,475,886

Due from related parties (note 6)                                  178,961              190,512
Property and equipment (note 2)                                    431,824              338,969
Goodwill (note 4(c))                                               811,666                    -
Deferred software development costs (note 3)                       607,900              530,948
Deferred set-up expense                                             68,186              162,390
Notes receivable                                                   180,573                    -
Future income tax asset (note 7)                                   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 (note 4)                                     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

Commitments (note 9)
Subsequent event (note 12)
-------------------------------------------------------------------------------------------------
                                                             $  14,961,622         $  9,218,705
-------------------------------------------------------------------------------------------------
</TABLE>


See accompanying notes to consolidated financial statements.

On behalf of the Board:


Signed "Darold H. Parken"                       Signed "Rod A. Ferguson"
----------------------------                    ------------------------
     Director                                     Director



<PAGE>


CHARTWELL TECHNOLOGY INC.
Consolidated Statements of Operations and Deficit

Years ended October 31
(stated in Canadian dollars)


<TABLE>
-----------------------------------------------------------------------------------------------
                                                   2004              2003              2002
-----------------------------------------------------------------------------------------------
<S>                                           <C>               <C>               <C>
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 reduction (note 7)         (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)
-----------------------------------------------------------------------------------------------
</TABLE>



See accompanying notes to consolidated financial statements.



<PAGE>


CHARTWELL TECHNOLOGY INC.
Consolidated Statements of Cash Flows

Years ended October 31
(stated in Canadian dollars)


<TABLE>
--------------------------------------------------------------------------------------------------------
                                                           2004              2003              2002
--------------------------------------------------------------------------------------------------------
<S>                                                   <C>               <C>               <C>
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 reduction                          (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:
     Interest received                            $        123,228     $     101,464     $     290,462
     Interest paid                                          (2,048)           (1,955)           (2,201)
--------------------------------------------------------------------------------------------------------
</TABLE>


See accompanying notes to consolidated financial statements.


<PAGE>


CHARTWELL TECHNOLOGY INC.
Notes to Consolidated Financial Statements

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


Chartwell  Technology Inc. (the  "Company") is  incorporated  under the Business
Corporations Act (Alberta).  The Company specializes in the development of games
and entertainment  content for Internet and Intranet  deployment.  The Company's
software  products  and games are  designed  for use in  gaming,  entertainment,
advertising and promotional applications.


1.   Significant accounting policies:

     (a)  Basis of presentation:

          The  consolidated  financial  statements  include the  accounts of the
          Company and its wholly owned  subsidiaries,  Gateway  Technology  Inc.
          ("GTI"),  a United States company,  and Chartwell Games Corp.  ("CGC")
          (formerly  Gaming Tech  Corporation),  a Belize  company.  GTI is a US
          incorporated company,  which was acquired on November 1, 1998, and CGC
          was incorporated in Belize and commenced  operations November 1, 1999.
          The  accounting  policies  of  the  Company  are  in  accordance  with
          generally  accepted  accounting  principles  in  Canada  and  Canadian
          dollars  is  the  functional  currency.  Except  for  the  information
          disclosed  in  note  11  there  are no  material  differences  between
          Canadian and United States generally accepted accounting principles in
          these consolidated financial statements.

     (b)  Property and equipment:

          Property  and  equipment  are  recorded  at cost and  amortization  is
          provided for on a declining balance basis using the following rates:

          ----------------------------------------------------------------
          Capital assets under lease                                 30%
          Computer equipment                                         30%
          Furniture and equipment                                    20%
          ----------------------------------------------------------------

     (c)  Deferred software development costs:

          Research  costs  are  expensed  as  incurred.  Costs  related  to  the
          development  of software  are  expensed as incurred  unless such costs
          meet  the  criteria  for  deferral  and  amortization  under  Canadian
          generally  accepted  accounting   principles.   The  criteria  include
          identifiable  costs  attributable  to a clearly defined  product,  the
          establishment of technical feasibility, identification of a market for
          the  software,  the Company's  intent to market the software,  and the
          existence of adequate  resources to complete the project.  In the year
          ended  October 31,  2004,  the Company  deferred  $175,000 of software
          development  costs which will be amortized  over an  estimated  useful
          life of three years,  commencing in the year when commercial  sales of
          the products commence.  Capitalized  software development is evaluated
          in each reporting period to determine whether it continues to meet the
          criteria for continued deferral and amortization.



<PAGE>


CHARTWELL TECHNOLOGY INC.
Notes to Consolidated Financial Statements

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


1.   Significant accounting policies (continued):

     (d)  Foreign currency translation:

          Accounts  of  foreign   operations,   all  of  which  are   considered
          financially and operationally  integrated,  are translated to Canadian
          dollars  using  average  exchange  rates for the year for  revenue and
          expenses.  Monetary  assets  and  liabilities  are  translated  at the
          year-end current exchange rate and non-monetary assets and liabilities
          are translated  using  historical  rates of exchange.  Gains or losses
          resulting  from these  translation  adjustments  are  included  in net
          income.

          Transactions  in foreign  currencies are translated at rates in effect
          at the time of the  transaction.  Monetary  assets and liabilities are
          translated at current rates. Gains and losses are included in income.

     (e)  Revenue recognition:

          The Company  enters into  contractual  agreements  with licensees that
          provide  for the  provision  of  graphics,  web  design  and  software
          implementation  services, the licensing of software, and the provision
          of unspecified  software upgrades over the fixed term of the contract.
          Revenue under such contractual  arrangements is not recognized  before
          there exists persuasive evidence that an arrangement exists,  delivery
          has   occurred,   the  fee  is  fixed   and   determinable,   and  the
          collectibility  of  outstanding  amounts is considered  probable.  The
          Company considers  persuasive evidence to exist when a formal contract
          or  purchase  order is signed.  Delivery  occurs  over the term of the
          arrangement as described further below. The Company considers a fee to
          be fixed  and  determinable  when it is for a  measurable  amount  and
          receivable  over a period not to exceed twelve  months.  Finally,  the
          Company   assesses   collectibility   relative  to  customer   payment
          histories,  credit  checks,  the  nature  of the  customer  and  other
          relevant  information.   As  the  Company's  contractual  arrangements
          provide for the delivery of multiple  elements,  the Company evaluates
          whether  vendor-specific  objective  evidence ("VSOE") exists to allow
          for the  allocation  of the  arrangement  fee between the  undelivered
          elements and the delivered elements for revenue recognition  purposes.
          To date, as the period  provided for in contractual  arrangements  for
          the provision of unspecified  upgrades is consistent  with the license
          period,  the Company has not been able to identify  VSOE and  allocate
          revenue  between  delivered  and  undelivered  elements.  Accordingly,
          set-up  fees are  recognized  ratably  over the term of the  contract,
          commencing  upon  completed   delivery  of  the   implementation   and
          integration services. License fees, which are contingent upon customer
          usage,  are  recognized on an accrual basis as earned over the life of
          the contract.

          Direct  and  incremental  costs  incurred  with  respect to the set-up
          contractual arrangements have been deferred as deferred set-up expense
          and are  recognized  ratably over the term of the contract  consistent
          with that for the related revenue recognition.


<PAGE>


CHARTWELL TECHNOLOGY INC.
Notes to Consolidated Financial Statements

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


1.   Significant accounting policies (continued):

     (f)  Per share amounts:

          Basic per share  amounts are  calculated  using the  weighted  average
          number of  shares  outstanding  during  the  year.  Diluted  per share
          amounts are  calculated  based on the  treasury  stock  method,  which
          assumes  that any  proceeds  obtained on exercise of options  would be
          used to purchase  common shares at the average market price during the
          period.  The weighted  average  number of shares  outstanding  is then
          adjusted by the net change.

     (g)  Income taxes:

          The Company  follows the  liability  method of  accounting  for income
          taxes,  whereby future tax assets and  liabilities  are recognized for
          the future tax  consequences  attributable to differences  between the
          financial   statement   carrying   amounts  of  existing   assets  and
          liabilities  and their  respective  tax  bases.  Future tax assets and
          liabilities  are  measured  using  substantively   enacted  tax  rates
          expected to apply when the asset is realized or the liability settled.
          A valuation  allowance is recorded against future income tax assets if
          it is more  likely  than not that all or a portion of the assets  will
          not be realized.

     (h)  Stock-based compensation:

          Effective November 1, 2002, the Company adopted the Canadian standards
          for  accounting for  stock-based  compensation  and other  stock-based
          payments.  The new recommendations  require equity instruments awarded
          to employees and non-employees and the cost of the service received as
          consideration to be measured and recognized based on the fair value of
          the equity instruments issued. Compensation expense is recognized over
          the period of related employee service,  usually the vesting period of
          the equity instrument awarded. In addition,  the new standards require
          that equity  instruments  issued to non-employees be recorded at their
          fair value at the date they are earned. The new recommendations permit
          the measurement of  compensation  expense for stock options granted to
          employees  and directors  that are not direct  awards of stock,  stock
          appreciation  rights or otherwise call for settlement in cash or other
          assets by an alternative method and to provide pro forma disclosure of
          the financial results using the fair value method.

          The Company has elected to follow an alternative  method of accounting
          for stock options  awarded to employees and recognize no  compensation
          expense  when stock  options are  granted.  On November 1, 2004,  as a
          result of a change in accounting  standards,  the Company is no longer
          able to follow this alternate method and must recognize the fair value
          of options  issued to  employees  as an expense over the period of the
          related  employee  service.  The Company has elected to adopt this new
          policy  retroactively  without  restatement  of  prior  periods.  As a
          result,  $430,563,  representing  the estimated value of stock options
          issued to employees  in 2003 and 2004,  will be charged to deficit and
          credited to contributed surplus on November 1, 2004.



<PAGE>


CHARTWELL TECHNOLOGY INC.
Notes to Consolidated Financial Statements

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


1.   Significant accounting policies (continued):

     (i)  Use of estimates:

          The  preparation of  consolidated  financial  statements in conformity
          with generally accepted  accounting  principles requires management to
          make  estimates and  assumptions  that affect the reported  amounts of
          assets and disclosure of contingent assets and liabilities at the date
          of the consolidated  financial  statements and the reported amounts of
          revenue and expenses during the reporting period. Areas of significant
          estimate include the  recoverability of deferred software  development
          costs, amortization periods for property and equipment,  provision for
          doubtful  accounts,  the  realization  of future tax assets,  deferred
          set-up fee expenses,  and  stock-based  compensation.  Actual  results
          could  differ  from   management's   best   estimates  and  underlying
          assumptions as additional information becomes available in the future.

     (j)  Goodwill:

          Goodwill is the residual  amount that results when the purchase  price
          of an acquired  business  exceeds the sum of the amounts  allocated to
          the assets  acquired,  less liabilities  assumed,  based on their fair
          values.  Goodwill  is  allocated  as  of  the  date  of  the  business
          combination  to the  Company's  reporting  units that are  expected to
          benefit from the  synergies of the business  combination.  Goodwill is
          not  amortized  and  is  tested  for  impairment  annually,   or  more
          frequently  if events or changes in  circumstances  indicate  that the
          asset might be  impaired.  The  impairment  test is carried out in two
          steps. In the first step, the carrying amount of the reporting unit is
          compared with its fair value.  When the fair value of a reporting unit
          exceeds  its  carrying  amount,  goodwill  of the  reporting  unit  is
          considered  not to be impaired  and the second step of the  impairment
          test is unnecessary.  The second step is carried out when the carrying
          value amount of a reporting unit exceeds its fair value, in which case
          the implied fair value of the  reporting  unit's  goodwill is compared
          with its carrying amount to measure the amount of the impairment loss,
          if any. The implied fair value is determined in the same manner as the
          value of goodwill is determined in a business combination described in
          the preceding paragraph, using the fair value of the reporting unit as
          if it was the purchase  price.  When the carrying  amount of reporting
          unit  goodwill  exceeds the  implied  fair value of the  goodwill,  an
          impairment  loss is recognized in an amount equal to the excess and is
          presented  as a  separate  line item in the  statement  of  operations
          before extraordinary items and discontinued operations.

     (k)  Comparative figures:

          Certain comparative figures have been reclassified to conform with the
          current year financial statement presentation.

     (l)  Cash and short term investments:

          Cash  consists of bank  deposits.  Short-term  investments  consist of
          maturities of three months or less and are recorded at cost which does
          not differ materially from fair value.

2.   Property and equipment:

<TABLE>
     ---------------------------------------------------------------------------------------------
                                                                    Accumulated          Net book
     2004                                                Cost      amortization             value
     ---------------------------------------------------------------------------------------------
     <S>                                         <C>                <C>               <C>
     Property and equipment under lease          $     90,152       $   52,279        $   37,873
     Computer equipment                               732,740          514,523           218,217
     Furniture and equipment                          264,627           88,893           175,734
     ---------------------------------------------------------------------------------------------
                                                 $  1,087,519       $  655,695        $  431,824
     ---------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
     2003
     ---------------------------------------------------------------------------------------------
     <S>                                         <C>                <C>               <C>
     Property and equipment under lease          $     47,005       $   36,047        $   10,958
     Computer equipment                               730,773          447,361           283,412
     Furniture and equipment                           89,558           44,959            44,599
     ---------------------------------------------------------------------------------------------
                                                 $    867,336       $  528,367        $  338,969
     ---------------------------------------------------------------------------------------------
</TABLE>


3.   Deferred software development costs:

     ---------------------------------------------------------------------------
                                                      2004              2003
     ---------------------------------------------------------------------------
     Software development costs                  $ 1,230,097       $ 1,055,097

     Less:  accumulated amortization                (622,197)         (524,149)
     ---------------------------------------------------------------------------
     Net book value                              $   607,900       $   530,948
     ---------------------------------------------------------------------------


<PAGE>

CHARTWELL TECHNOLOGY INC.
Notes to Consolidated Financial Statements

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


4.   Share capital:

     (a)  Authorized:

          100,000,000 common shares without par value

     (b)  Issued:

<TABLE>
          ------------------------------------------------------------------------------------------------
                                                                            Number
                                                                         of shares               Amount
          ------------------------------------------------------------------------------------------------
         <S>                                                            <C>                <C>
          Balance, October 31, 2001                                      15,628,501        $  14,511,135

               Issued for cash on exercise of stock options                 189,200              121,088
          ------------------------------------------------------------------------------------------------
          Balance, October 31, 2002                                      15,817,701           14,632,223

               Issued for cash on exercise of stock options                 145,000              152,500
               Issued as finders fee                                         25,000               25,000
          ------------------------------------------------------------------------------------------------
          Balance, October 31, 2003                                      15,987,701           14,809,723

               Issued for cash on exercise of stock options                 701,932              855,799
               Release of shares from escrow                                      -              836,666
               Shares cancelled from escrow and returned to treasury       (666,667)                   -
          ------------------------------------------------------------------------------------------------
          Balance, October 31, 2004                                      16,022,966        $  16,502,188
          ------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>

CHARTWELL TECHNOLOGY INC.
Notes to Consolidated Financial Statements

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


4.   Share capital (continued):

     (c)  Release of escrowed shares and goodwill:

          On  November  1,  1998,  the  Company  acquired  all of the issued and
          outstanding   shares  of   Gateway   Technology   Inc.   ("GTI")   for
          consideration  of  1,000,000  common  shares.  Under  the terms of the
          Purchase  Agreement,  the  shares  were  placed  in  escrow  and  were
          releasable  from time to time as one escrowed  share for each $1.00 of
          cash  flow  generated  by GTI  subsequent  to its  acquisition  by the
          Company.  Shares  remaining  in escrow at October  31, 2003 were to be
          returned  to the  Company  and  cancelled.  The  escrowed  shares were
          considered  contingent   consideration  and  valued  at  $nil  in  the
          financial statements at November 1, 1998.

          At October 31, 2003  application was made to the TSX Venture  Exchange
          for the release of 333,333 shares in accordance  with the terms of the
          escrow agreement.  On February 12, 2004 the Exchange provided approval
          for the  release of the shares and on April 27,  2004 the shares  were
          released  from escrow.  The release of the shares have been  accounted
          for as an  additional  cost of the purchase of GTI,  equal to the fair
          value of the shares on February  12, 2004 of $836,666.  The  remaining
          666,667 shares were cancelled and returned to treasury.

          The additional  consideration of $836,666 has been assigned to license
          contracts  acquired,  in the  amount  of  $25,000  and  the  remaining
          $811,666 to goodwill.  The contracts  expired in 2001 and the assigned
          consideration of $25,000 was written off as a current period expense.

          On August 18,  2004  application  was made to the  Alberta  Securities
          Commission  for the release of 955,400 shares held in escrow on behalf
          of the principles of the Company and others,  subject to the direction
          and  determination  of the  regulatory  authorities in the Province of
          Alberta.  On  October  5,  2004  consent  was  given  by  the  Alberta
          Securities  Commission  to the release of all shares held  pursuant to
          that agreement

          375,000  shares  remain in escrow on behalf of the  principals  of the
          Company  and are subject to the  direction  and  determination  of the
          securities regulatory authorities in the Province of British Columbia.

     (d)  Stock option plan:

          The  Company  has a stock  option  plan for its  directors,  officers,
          employees and key consultants  whereby an amount of options to acquire
          a maximum of 3,264,000  shares may be granted subject to certain terms
          and conditions.  Stock option vesting privileges are at the discretion
          of the Board.  The exercise price for stock options granted is no less
          than the quoted market price on grant date.



<PAGE>

CHARTWELL TECHNOLOGY INC.
Notes to Consolidated Financial Statements

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


4.   Share capital (continued):

     (e)  Continuity of options issued under the plan:

          A summary of the status of the plan as of October 31,  2004,  2003 and
          2002 and the changes during the years is presented below:

<TABLE>
         --------------------------------------------------------------------------------------------------------
                                            October 31,                October 31,                 October 31,
         --------------------------------------------------------------------------------------------------------
                                                   2004                       2003                        2002
                                   ---------------------       ---------------------       ----------------------
                                                Weighted                    Weighted                    Weighted
                                                 average                     average                     average
                                                exercise                    exercise                    exercise
                                     Shares        price        Shares         price         Shares        price
         --------------------------------------------------------------------------------------------------------
        <S>                        <C>             <C>        <C>          <C>            <C>          <C>
         Outstanding, beginning
           of year                 2,616,100       $ 1.19     2,388,866    $    1.21      2,011,566    $    1.15
         Granted                     600,000       $ 2.45       503,900         1.08        426,400         1.54
         Exercised                  (701,932)      $ 1.22      (145,000)        1.05              -            -
         Forfeited                  (158,334)      $ 1.31      (131,666)        1.38        (49,100)        1.80
         --------------------------------------------------------------------------------------------------------
         Outstanding, end of
           year                    2,355,834       $ 1.49     2,616,100    $    1.19      2,388,866    $    1.21
         --------------------------------------------------------------------------------------------------------
</TABLE>


     (f)  Summary of the balances of options issued under the plan:

<TABLE>
         ------------------------------------------------------------------------------------------------------
                                              Options Outstanding                       Options Exercisable
         ------------------------------------------------------------------------------------------------------
                                                      Weighted
                                                       average        Weighted                        Weighted
                                                     remaining         average                         average
         Range of                                  contractual        exercise                        exercise
         exercise prices               Number     life (years)           price           Number          price
         ------------------------------------------------------------------------------------------------------
        <S>                         <C>            <C>              <C>              <C>              <C>
         $ 1.00-1.50                1,530,067            1.7        $    1.06        1,230,975        $   1.07
           1.51-2.00                  250,767            2.2             1.72          173,596            1.77
           2.01-2.50                  175,000            3.6             2.35           50,000            2.09
            2.51-3.00                 400,000            4.3             2.63           37,500            2.58
         ------------------------------------------------------------------------------------------------------
         $ 1.00-3.00                2,355,834            2.3        $    1.49        1,492,071        $   1.22
         ------------------------------------------------------------------------------------------------------
</TABLE>

          The weighted  average grant date fair value of stock  options  granted
          during 2004 was $1.55.



<PAGE>


CHARTWELL TECHNOLOGY INC.
Notes to Consolidated Financial Statements

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


4.   Share capital (continued):

     (g)  Per share amounts:

          The weighted  average  number of shares  outstanding  for the year was
          14,249,151 (2003 - 13,504,890;  2002 - 13,485,109).  Diluted shares of
          16,709,931 for 2004 reflect the dilutive effect of the exercise of the
          options  outstanding.   Diluted  loss  per  share  was  not  disclosed
          separately in 2002 as the exercise of options  outstanding  would have
          had an  anti-dilutive  effect  on net  loss  per  share.  Contingently
          returnable and issuable  shares held in escrow have been excluded from
          the calculations.


5.   Stock-based compensation:

     The Company has calculated the fair value of stock options  granted in 2004
     to  employees,  directors,  and  officers  using the Black  Scholes  option
     pricing model,  assuming a dividend yield of 0%, a risk-free  interest rate
     of 4%, weighted average expected  volatility of 67%, and an expected option
     life of 5 years. Had compensation expense been determined based on the fair
     value of the 2004  employee  stock option  awards at the grant  dates,  the
     Company's net income and loss per share for 2004 would have been changed to
     the following pro forma amounts:

<TABLE>
      ----------------------------------------------------------------------------------
      2004                                          As reported            Pro Forma
      ----------------------------------------------------------------------------------
      <S>                                          <C>                  <C>
      Net income                                    $   4,021,781        $   3,671,031
      ----------------------------------------------------------------------------------
      Net income per share:
          Basic                                     $        0.28        $        0.26
          Diluted                                   $        0.24        $        0.22
      ----------------------------------------------------------------------------------
</TABLE>


<TABLE>
      ----------------------------------------------------------------------------------
      2003                                          As reported            Pro Forma
      ----------------------------------------------------------------------------------
     <S>                                           <C>                  <C>
      Net income                                    $   1,681,538        $   1,601,725
      ----------------------------------------------------------------------------------
      Net income per share:
          Basic                                     $        0.12        $        0.12
          Diluted                                   $        0.12        $        0.12
</TABLE>

     Of the  600,000  stock  options  granted in 2004,  125,000  were  issued to
     consultants. The estimated fair value of those options of $102,572 has been
     charged to operations.



<PAGE>

CHARTWELL TECHNOLOGY INC.
Notes to Consolidated Financial Statements

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


6.   Related party transactions:

     For the year ended  October 31, 2004,  the Company  incurred  legal fees of
     $60,000 (2003 - $60,000;  2002 - $60,000) and  consulting  fees of $165,000
     (2003 - $165,000;  2002 - $162,000) to certain  directors of the Company in
     the normal  course of business.  These  transactions  were  measured at the
     exchange amount and recorded in general and administrative expenses.

     Amounts due from related  parties of $178,961 (2003 - $190,512)  consist of
     amounts due from certain  Company  officers,  directors and  employees.  Of
     these amounts,  $29,907 is non-interest bearing,  unsecured and with no set
     terms of repayment. The remaining $149,054 bears 6% interest, is secured by
     189,200 common shares of the Company and has no set terms of repayment.



<PAGE>

CHARTWELL TECHNOLOGY INC.
Notes to Consolidated Financial Statements

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


7.   Income taxes:

     Income tax  recovery  differs  from the amount  that would be  computed  by
     applying  the basic  combined  Canadian  federal and  provincial  statutory
     income tax rate to the net income (loss) for the year.  The reasons for the
     differences are as follows:

<TABLE>
     ----------------------------------------------------------------------------------------------------
                                                             2004              2003               2002
     ----------------------------------------------------------------------------------------------------
     <S>                                             <C>               <C>                <C>
     Net income (loss) before income taxes            $  3,606,817      $  1,051,538       $ (1,320,807)
     ----------------------------------------------------------------------------------------------------
     Combined Canadian federal and provincial
       statutory rate                                        34.4%             37.2%              39.7%

     Computed provision (recovery)                    $  1,240,746      $    391,173       $   (524,360)
     Non-tax-based amortization                                  -            40,945             43,653
     Difference in foreign tax rates, net of
       foreign property accrual income                    (218,301)            8,743             35,596
     (Realization) benefit of future tax assets
       not recognized                                     (444,602)         (451,767)           436,825
     Stock-based compensation                               35,284                 -                  -
     Non deductible expenses                                16,873            10,906              8,287
     Reduction of valuation allowance                   (1,044,964)         (630,000)                 -
     ----------------------------------------------------------------------------------------------------
     Actual recovery                                  $   (414,964)     $   (630,000)      $          -
     ----------------------------------------------------------------------------------------------------
</TABLE>

     The  adjustment  in respect of  differences  in foreign tax rates  includes
     amounts  arising  from the  differences  in taxable  income in the  various
     jurisdictions in which the Company operates.

     The  components of the Company's net future income tax asset at October 31,
     2004 and 2003 are as follows:

<TABLE>
     ------------------------------------------------------------------------------------------
     2004                                         Canada       United States            Total
     ------------------------------------------------------------------------------------------
     <S>                                    <C>                <C>                <C>
     Non-capital/net operating losses       $          -       $     19,393       $    19,393
     Property and equipment                      114,097                  -           114,097
     Share issue costs                               297                  -               297
     Resource deductions                          75,785                  -            75,785
     Deferred development costs                  658,860                  -           658,860
     Deferred revenue                            238,545                  -           238,545
     Deferred set-up expense                     (42,620)                 -           (42,620)
     ------------------------------------------------------------------------------------------
                                               1,044,964             19,393         1,064,357

     Less: valuation allowance                         -            (19,393)          (19,393)
     ------------------------------------------------------------------------------------------
                                            $  1,044,964       $          -       $ 1,044,964
     ------------------------------------------------------------------------------------------
</TABLE>



<PAGE>


CHARTWELL TECHNOLOGY INC.
Notes to Consolidated Financial Statements

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


7.   Income taxes (continued):

<TABLE>
     ------------------------------------------------------------------------------------------
     2003                                         Canada       United States            Total
     ------------------------------------------------------------------------------------------
     <S>                                    <C>                <C>                <C>
     Non-capital/net operating losses         $     64,930       $   20,995        $    85,925
     Property and equipment                         81,337                -             81,337
     Share issue costs                              57,140                -              57,140
     Resource deductions                            78,039                -              78,039
     Deferred development costs                  1,284,846                -           1,284,846
     Deferred revenue                              465,508                -             465,508
     Deferred set-up expense                       (72,647)               -             (72,647)
------------------------------------------------------------------------------------------------
                                                 1,959,153           20,995           1,980,148

     Less: valuation allowance                  (1,329,153)         (20,995)         (1,350,148)
------------------------------------------------------------------------------------------------
                                              $    630,000       $        -        $    630,000
------------------------------------------------------------------------------------------------
</TABLE>

     At October 31, 2004, the Company has non-capital  loss  carry-forwards  for
     Canadian  income tax  purposes  of $nil  (2003 -  $187,550)  available  for
     deduction  against future years' taxable income.  In addition,  the Company
     has net  operating  losses  carry-forward  for  United  States  income  tax
     purposes of approximately  $57,038 (2003 - $61,750) available for deduction
     against future year's taxable income.  These losses expire between 2018 and
     2019.


8.   Financial instruments:

     The  Company's   financial   instruments   consist  of  cash,   short  term
     investments,   accounts  receivable,  amounts  due  from  related  parties,
     accounts payable and accrued liabilities and capital lease obligations. The
     fair  value of  these  financial  instruments  approximate  their  carrying
     values.  It is  management's  opinion  that the  Company is not  exposed to
     significant  interest and or credit risk. The Company's credit risk lies in
     its  accounts  receivable  where the balance is due from a small  number of
     customers.  The Company's short term investments  consist of investments in
     low risk,  fixed  interest,  corporate and government  bonds. A substantial
     portion of the Company's revenue is exposed to currency fluctuations.



<PAGE>


CHARTWELL TECHNOLOGY INC.
Notes to Consolidated Financial Statements

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


9.   Commitments:

     Leases:

     Future  minimum annual  payments under  operating and capital leases are as
     follows:

     ----------------------------------------------------------------------
     2005                                                        $ 394,216
     2006                                                        $ 406,878
     2007                                                        $ 323,593
     2008                                                        $ 316,520
     2009                                                        $ 299,840
     Thereafter                                                  $  24,708
     ----------------------------------------------------------------------


10.  Segmented information:

     The Company has aggregated its Canadian and Belize operating  segments into
     one reporting  segment as management has determined  that the nature of the
     operations  in each segment  meets the  aggregation  criteria  specified by
     Canadian accounting standards.

     The  Company's  software  set-up and  license  fees are from  domestic  and
     foreign entities and originate from the following countries of operation:

<TABLE>
     --------------------------------------------------------------------------------------
     2004                                   Canada             Belize                Total
     --------------------------------------------------------------------------------------
     <S>                              <C>               <C>                  <C>
     Software set-up fees             $          -      $     798,343        $     798,343
     Software license fees            $    204,154      $  11,064,340        $  11,268,494
     Total assets                     $  7,186,451      $   7,775,171        $  14,961,622
     --------------------------------------------------------------------------------------
</TABLE>


<TABLE>
     --------------------------------------------------------------------------------------
     2003
     --------------------------------------------------------------------------------------
     <S>                              <C>               <C>                  <C>
     Software set-up fees             $          -      $     919,892        $     919,892
     Software license fees            $    227,538      $   6,072,797        $   6,300,335
     Total assets                     $  7,731,868      $   1,486,837        $   9,218,705
     --------------------------------------------------------------------------------------
</TABLE>


<TABLE>
     --------------------------------------------------------------------------------------
     2002
     --------------------------------------------------------------------------------------
     <S>                              <C>               <C>                  <C>
     Software set-up fees             $     51,832      $     844,728        $     896,560
     Software license fees            $    231,071      $   2,415,695        $   2,646,766
     Total assets                     $  4,660,842      $   2,290,995        $   6,951,837
     --------------------------------------------------------------------------------------
</TABLE>

     During the year ended October 31, 2004, four licensees (2003 - four; 2002 -
     three),  each of which provided more than 10% of the Company's  total sales
     revenue,  accounted for 79.4% (2003 - 72.6%; 2002 - 68.5%) of the Company's
     2004 total sale revenue.



<PAGE>

CHARTWELL TECHNOLOGY INC.
Notes to Consolidated Financial Statements

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


11.  Differences in generally accepted accounting  principles between Canada and
     the United States:

     The financial  statements  have been  prepared in accordance  with Canadian
     generally accepted accounting principles ("Canadian GAAP"). Any differences
     in United States generally accepted accounting  principles ("U.S. GAAP") as
     they pertain to the Company's financial  statements are not material except
     as follows:

     (a)  Reconciliation of Canadian GAAP to U.S. GAAP net income (loss):

          The effect on the net income (loss) for each of the years in the three
          year period ended October 31, 2004 of the differences between Canadian
          GAAP and U.S. GAAP is summarized as follows:

<TABLE>
         ------------------------------------------------------------------------------------------------------
                                                                           Years ended October 31,
                                                              ------------------------------------------------
                                                                       2004              2003             2002
         ------------------------------------------------------------------------------------------------------
         <S>                                                 <C>               <C>              <C>
         Net income (loss) for the year as reported
         in accordance with Canadian GAAP                     $   4,021,781     $   1,681,538    $  (1,320,807)

         Compensation (expense) reduction - repricing
           of stock options                                      (2,474,811)         (228,900)          95,820

         Compensation expense - escrowed shares                    (289,862)                -                -

         Software development costs                                (175,000)         (530,948)               -

         Amortization of software development costs                  98,049                 -                -

         Stock based compensation expense:
           APB 25                                                         -                 -           (7,981)
           FAS 123                                                        -                 -         (105,119)
         ------------------------------------------------------------------------------------------------------
         Net income (loss) - U.S. GAAP                            1,180,157           921,690       (1,338,087)

         Deficit, beginning of year - U.S. GAAP                  (9,449,247)      (10,370,937)      (9,032,850)
         ------------------------------------------------------------------------------------------------------
         Deficit, end of year - U.S. GAAP                     $  (8,269,090)    $  (9,449,247)   $ (10,370,937)
         ------------------------------------------------------------------------------------------------------
         Net income (loss) per share:
           Basic                                              $        0.08     $        0.07    $       (0.10)
           Diluted                                            $        0.07     $        0.07    $       (0.10)
         --------------------------------------------------------------------------------------------------------
</TABLE>

          For U.S. GAAP  purposes,  the amounts of interest  income would not be
          included in the subtotal of revenue.



<PAGE>

CHARTWELL TECHNOLOGY INC.
Notes to Consolidated Financial Statements

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


11.  Differences in generally accepted accounting  principles between Canada and
     the United States (continued):

     (a)  Reconciliation  of  Canadian  GAAP  to U.S.  GAAP  net  income  (loss)
          (continued):

          The components of comprehensive income are as follows:

<TABLE>
         -----------------------------------------------------------------------------------------------
                                                             2004              2003               2002
         -----------------------------------------------------------------------------------------------
        <S>                                         <C>                <C>              <C>
         Net income (loss) - U.S. GAAP               $  1,180,157       $   921,690      $  (1,338,087)

         Other comprehensive (loss) income:
              Change in fair value of available
                for sale securities                        59,166            (1,365)           (85,426)

         -----------------------------------------------------------------------------------------------
         Comprehensive income (loss)                 $  1,239,323       $   920,325      $  (1,423,513)
         -----------------------------------------------------------------------------------------------
</TABLE>


          Balance  sheet items which vary in  conformity  with U.S. GAAP and SEC
          requirements:

<TABLE>
         ---------------------------------------------------------------------------------------
                                                                     2004                 2003
         ---------------------------------------------------------------------------------------
        <S>                                                <C>                  <C>
         Assets:
           Deferred software development costs              $           -        $           -
         ---------------------------------------------------------------------------------------
                                                            $           -        $           -
         ---------------------------------------------------------------------------------------
         Shareholders' equity:
              Accumulated other comprehensive income        $           -        $     (59,166)
              Deficit                                          (8,269,090)          (9,449,247)
         ---------------------------------------------------------------------------------------
                                                           $   (8,269,090)       $  (9,508,413)
         ---------------------------------------------------------------------------------------
</TABLE>

          There are no variations between the carrying values of liabilities and
          those amounts measured using U.S. GAAP.





<PAGE>

CHARTWELL TECHNOLOGY INC.
Notes to Consolidated Financial Statements

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


11.  Differences in generally accepted accounting  principles between Canada and
     the United States (continued):

     (b)  Stock based compensation:

          The Company  applies the  intrinsic  value-based  method of accounting
          prescribed by  Accounting  Principles  Board  ("APB")  Opinion No. 25,
          "Accounting   for   Stock   Issued   to   Employees",    and   related
          interpretations,  in  accounting  for  its  stock  options  issued  to
          employees,  directors  and  officers of the  Company  for  purposes of
          reconciliation  to U.S. GAAP. As such,  compensation  expense would be
          recorded on the date of grant only if the current  market price of the
          underlying   stock  exceeded  the  exercise   price.   SFAS  No.  123,
          "Accounting for Stock-Based Compensation",  established accounting and
          disclosure  requirements using a fair value-based method of accounting
          for stock-based  employee  compensation  plans. As allowed by SFAS No.
          123,  the  Company  has  elected to  continue  to apply the  intrinsic
          value-based  method of accounting  described above and has adopted the
          disclosure  requirements  of SFAS No.  123.  Stock  options  issued to
          consultants  and other third  parties are  accounted for at their fair
          values in  accordance  with SFAS No.  123 which is  consistent  to the
          policy  applied for Canadian  GAAP  purposes  since  November 1, 2002.
          During 2004,  there were 125,000  options  granted to  consultants  or
          other third parties  (2003 - nil; 2001 - 100,000).  There was $102,572
          (2003 - $nil; 2002 - $105,119)  charged to income for those options in
          2004.

          All options  granted to date have been fixed and granted to employees,
          directors and officers of the Company.  The Company has calculated the
          fair value of stock options  granted  using the Black  Scholes  option
          pricing model with the following weighted-average assumptions:

         ---------------------------------------------------------------------
                                                 2004        2003       2002
         ---------------------------------------------------------------------
         Risk free interest rate                   4%          4%         5%
         Expected Volatility                      67%         99%        72%
         Expected option life (in years)            5           5          5
         Dividend yield                            0%          0%         0%
         ---------------------------------------------------------------------




<PAGE>

CHARTWELL TECHNOLOGY INC.
Notes to Consolidated Financial Statements

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


11.  Differences in generally accepted accounting  principles between Canada and
     the United States (continued):

     (b)  Stock based compensation (continued):

          Had the Company  determined  employee  compensation costs based on the
          fair value at the date of grant for its stock  options under SFAS 123,
          net earnings in accordance with US GAAP would have been as reported in
          the  following  table.  The Company has not  recognized  in income any
          amount under SFAS 123 for stock-based employee  compensation  expense.
          These pro forma earnings reflect  compensation cost amortized over the
          vesting periods of the options.

<TABLE>
         ---------------------------------------------------------------------------------------------------
                                                                       Years ended October 31,
                                                   ---------------------------------------------------------
                                                           2004                  2003                  2002
         ---------------------------------------------------------------------------------------------------
         <S>                                       <C>                   <C>                  <C>
         Net income (loss) - U.S. GAAP:
           As reported                             $  1,180,157          $    921,690         $  (1,338,087)
           Pro forma                                  3,181,738               799,014            (1,703,077)
         ---------------------------------------------------------------------------------------------------
         Net income (loss) per share:
           As reported - basic                     $        .08          $       0.07         $       (0.10)
                       - diluted                   $        .07          $       0.07         $       (0.10)

           Pro forma   - basic                     $        .22          $       0.06         $       (0.13)
                       - diluted                   $        .19          $       0.06         $       (0.13)
         ---------------------------------------------------------------------------------------------------
</TABLE>


     (c)  Escrowed shares:

          In accordance with securities regulations 1,330,400 common shares with
          respect to prior public offerings were placed in escrow with an escrow
          agent pursuant to escrow agreements. Under the terms of the agreements
          the shares were to be released upon  application by the Company and at
          the discretion of securities regulators.

          On October 5, 2004,  955,400  common  Shares were released from escrow
          and compensation,  of which 252,700 were released to an officer and to
          a  director  of the  Company.  Compensation  expense of  $289,862  was
          recorded  for the fair value of the shares  issued to the  officer and
          director.



<PAGE>

CHARTWELL TECHNOLOGY INC.
Notes to Consolidated Financial Statements

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


11.  Differences in generally accepted accounting  principles between Canada and
     the United States (continued):

     (d)  Additional disclosures under U.S. GAAP:

          (i)  The Company follows SFAS 130 regarding  comprehensive  income for
               purposes of  reconciliation  to U.S. GAAP. Under U.S. GAAP, items
               defined as, other comprehensive income are separately  classified
               in the financial  statements and the accumulated balance of other
               comprehensive   income   (loss)   is   reported   separately   in
               shareholders'  equity on the balance  sheet.  For the three years
               ended  October  31, 2004 there are no items  classified  as other
               comprehensive  income, with the exception of a change in the fair
               value of available  for sale  securities  of $59,166 for the year
               ended October 31, 2004 (2003 - $(1,365); 2002 - $57,801).

          (ii) The  375,000  common  shares  held in escrow  for the year  ended
               October 31, 2004 (2003 - 1,663,733 and 2002 - 2,330,400) have not
               been included in the calculation of basic or diluted earnings per
               share as they are  contingently  releasable and as doing so would
               be  anti-dilutive.  This is the same  treatment as under Canadian
               GAAP.

          (iii)In 2001,  1,330,800  stock options were  repriced.  In accordance
               with the intrinsic  value method of accounting for stock options,
               an expense of $702,660 was  recognized  in the year of repricing.
               In fiscal 2004 and 2003 these stock  options have been  accounted
               for using variable price  accounting,  resulting in an expense of
               $2,474,811 in 2004 and an expense of $228,900 in 2003. An expense
               recapture of $95,820 was  realized in 2002.  At October 31, 2004,
               680,600 (2003 - 1,089,000) of those options, with exercise prices
               ranging between $1.06 and $1.17 per share,  remained unexercised,
               and expire between January, 2005 and November, 2005.

          (iv) Under  U.S.  GAAP,   deferred  software   development  costs  are
               accounted  for under SFAS 86,  Accounting  for Costs of  Computer
               Software to be Sold, Leased or Otherwise Marketed, which requires
               the  expensing  of all amounts  incurred to the date of technical
               feasibility.   Under  Canadian  GAAP,  these  amounts  have  been
               capitalized as they meet all of the required criteria.

12.  Subsequent event:

     On December 7, 2004 the Company  closed a private  placement  consisting of
     2,365,592  common  shares which were sold at a price of $4.65 per share for
     net proceeds of $10,340,002 before underwriter expenses and related Company
     legal expenses.  The underwriters were granted 141,936 compensation options
     exercisable  at an exercise price of $5.10 per common share for a period of
     18 months from the date of the closing of the private placement. All of the
     securities  sold  pursuant to the private  placement  are subject to a four
     month hold  period.  Net  proceeds  of  financing  will be used for general
     corporate purposes.