Catuity Reports Second Quarter Results; Company on Schedule with Restructuring and Strategic Growth Plan.

DETROIT -- Catuity, Inc. (NASDAQ: CTTY; ASX: CAT), a provider of point-of-sale software and services to retailers and their partners, including processors, today announced its second quarter results and reported on the progress the company has made in executing the strategic growth plan outlined in May.

For the quarter ended June 30, 2004, Catuity reported revenue of $135,000 with a net loss of $1,140,000 or $0.10 per share. This compares to revenue for the quarter ended June 30, 2003 of $1,666,000 with a net loss of $15,000. For the six months ended June 30, 2004, Catuity reported revenue of $614,000 with a net loss of $1,743,000 or $0.15 per share, compared to revenue of $3,141,000 and net income of $290,000 or $.03 per share one year ago.

The decline in revenue was anticipated and was principally due to the company's largest customers' decision to discontinue deployment of smart chip technology. As a result, software development and licensing revenue from this project was discontinued in this period.

Catuity had $4.082 million in cash at the end of June and 11.7 million shares outstanding, according to the Form 10-Q filed today with the Securities and Exchange Commission.

Company Outlines Progress in Strategic Growth Plan and Company Restructuring

In May of 2004, Catuity outlined a specific plan to broaden the company's products and services around the many technology and business building opportunities at the retail point of sale. The company also told shareholders it would no longer pursue the stalled U.S. smart card market and would focus on the real time loyalty opportunity with merchants that have fully integrated systems and on existing point of sale business service requirements for which retailers, merchant services companies and financial institutions have existing budgets.

Michael V. Howe, President and CEO of Catuity, reported that to date the company has executed a number of key steps in the furtherance of these plans. He noted: "Catuity has shifted its focus from being a software company that must create the market for its product to becoming a provider of integrated systems and services for the point of sale (POS)." He cited the following specific benchmarks for the company's progress since May:

--Initial delivery of the Catuity Advanced Loyalty System (CALS) software - a merchant focused loyalty system. This system provides loyalty points based on the total amount spent or specific products purchased (SKU's) by the consumer and allows customers to redeem these points at the point of sale. Catuity plans to release additional functionality of this software during the August-October period. These versions will add more features to the CALS system including gift cards, frequency, coupon and discount programs, as well as reporting and settlement features.

--On June 18, the company announced that it hired two key executives from Vitesse Worldwide, Inc. and acquired the rights to their methodology for point of sale device conversions. That transaction has expanded the company's ability to sell IT services around the point of sale. The new team is establishing relationships with financial institutions, merchants and merchant services organizations and is developing short-term revenue opportunities. Many of these customers are also be prospects for Catuity's integrated loyalty systems.

--Catuity has restructured its sales organization to reflect its new focus. Ron Elmore, an enterprise software industry veteran and consultant, is nearing completion on work to restructure the sales process and identify sales opportunities that have the potential to generate revenue in 2005. Scott Aicher, Vice President, will oversee the company's focus on key vertical markets including petroleum, convenience stores, pharmacy chains and small to mid-sized retail stores.

--The company has had material discussions with a number of companies that have expressed interest in purchasing or signing regional licenses outside North America for the company's Cat X loyalty technology and related patents. This software, which was designed principally for smart cards, is attracting interest from companies in markets that are heavily involved with EMV migration, particularly in the Asia Pacific, Middle East and European regions where smart cards are more widely accepted than in North America.

--In May, Catuity indicated that part of its growth strategy would be to explore potential merger candidates that would be cash-flow positive to the company in 2005. To date, the Company in conjunction with its M & A advisor has been actively screening and talking with possible merger candidates that meet the Company's specific criteria.

"We believe there is a significant opportunity to assist retailers and their merchant services providers in evaluating their POS systems and providing specific recommendations and applications and then implementing these solutions" said Howe. "Catuity can help retailers maximize the revenue potential and reduce the costs of their systems."

About Catuity

Catuity, Inc. is a full-service IT provider of POS-focused applications for retailers, processors, financial institutions and their partners across North America. Catuity's loyalty software is currently used on thousands of points of sale throughout the U.S. More information on Catuity is available at its website: http://www.catuity.com.

In conjunction with the provisions of the "Safe Harbor" section to the Private Securities Litigation Reform Act of 1995, this release may contain forward-looking statements pertaining to future anticipated projected plans, performance and developments, as well as other statements relating to future operations. All such forward-looking statements are necessarily only estimates of future results and there can be no assurance that actual results will not materially differ from expectations. Further information on potential factors that could affect Catuity, Inc. is included in the Company's Form 10-K, which is filed with the U.S. Securities & Exchange Commission.