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Computer Modelling Group Announces Year End Results


Computer Modelling Group Announces Year End Results

CALGARY, ALBERTA -- (Marketwired) -- 05/23/13 -- Computer Modelling Group Ltd. ("CMG" or the "Company") (TSX:CMG) is very pleased to report our financial results for the fiscal year ended March 31, 2013.

MANAGEMENT'S DISCUSSION AND ANALYSIS

This Management's Discussion and Analysis ("MD&A") for Computer Modelling Group Ltd. ("CMG," the "Company," "we" or "our"), presented as at May 22, 2013, should be read in conjunction with the audited consolidated financial statements and related notes of the Company for the years ended March 31, 2013 and 2012. Additional information relating to CMG, including our Annual Information Form, can be found at www.sedar.com. The financial data contained herein have been prepared in accordance with International Financial Reporting Standards ("IFRS") and, unless otherwise indicated, all amounts in this report are expressed in Canadian dollars and rounded to the nearest thousand.

CORPORATE PROFILE

CMG is a computer software technology company serving the oil and gas industry. The Company is a leading supplier of advanced processes reservoir modelling software with a blue chip client base of international oil companies and technology centers in over 50 countries. The Company also provides professional services consisting of highly specialized support, consulting, training, and contract research activities. CMG has sales and technical support services based in Calgary, Houston, London, Caracas, Dubai and Bogota. CMG's Common Shares are listed on the Toronto Stock Exchange ("TSX") and trade under the symbol "CMG".


 
ANNUAL PERFORMANCE                                                          
                                                                            
($ thousands, unless otherwise                                              
 stated)                       March 31, 2013 March 31, 2012 March 31, 2011 
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance licenses           54,555         42,858         32,709 
Perpetual licenses                      8,406         12,724         11,045 
----------------------------------------------------------------------------
Software licenses                      62,961         55,582         43,754 
Professional services                   5,659          5,452          8,073 
----------------------------------------------------------------------------
Total revenue                          68,620         61,034         51,827 
Operating profit                       34,290         31,604         25,677 
Operating profit (%)                       50%            52%            50%
EBITDA(1)                              35,829         32,831         26,714 
Net income for the year                24,822         23,391         17,166 
Cash dividends declared and                                                 
 paid                                  27,905         20,499         16,971 
Total assets                           83,421         74,892         58,689 
Total shares outstanding               38,129         37,307         36,427 
Trading price per share at                                                  
 March 31                               21.09          15.90          12.98 
Market capitalization at March                                              
 31                                   804,130        593,170        472,820 
----------------------------------------------------------------------------
Per share amounts - ($/share)                                               
Earnings per share - basic               0.66           0.63           0.48 
Earnings per share - diluted             0.64           0.62           0.47 
Cash dividends declared and                                                 
 paid                                    0.74          0.555           0.47 
----------------------------------------------------------------------------
(1) EBITDA is defined as net income before adjusting for depreciation       
expense, finance income, finance costs, and income and other taxes.         
See "Non-IFRS Financial Measures".                                          
                                                                            
QUARTERLY PERFORMANCE                                                       
                                                                            
                                  Fiscal 2012(1)              Fiscal 2013(2)
($ thousands, unless                                                        
 otherwise stated)       Q1     Q2     Q3     Q4     Q1     Q2     Q3     Q4
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance                                                         
 licenses             8,997  9,308 12,056 12,497 13,179 12,012 14,004 15,359
Perpetual licenses    5,391  1,596  2,321  3,416  2,070  2,671  1,365  2,300
----------------------------------------------------------------------------
Software licenses    14,388 10,904 14,377 15,913 15,249 14,683 15,369 17,659
Professional                                                                
 services             1,551  1,078  1,521  1,302  1,216  1,390  1,433  1,620
----------------------------------------------------------------------------
Total revenue        15,939 11,982 15,898 17,215 16,465 16,073 16,802 19,279
Operating profit      9,092  5,226  8,093  9,193  8,105  8,032  8,276  9,877
Operating profit (%)     57     44     51     53     49     50     49     51
EBITDA                9,366  5,508  8,414  9,543  8,423  8,425  8,687 10,294
Profit before income                                                        
 and other taxes      9,240  6,096  8,184  9,104  8,577  7,703  8,556 10,314
Income and other                                                            
 taxes                2,577  1,778  2,394  2,484  2,487  2,342  2,437  3,061
Net income for the                                                          
 period               6,663  4,318  5,790  6,620  6,090  5,361  6,119  7,253
Cash dividends                                                              
 declared and paid    7,519  4,053  4,079  4,848  9,736  6,020  6,050  6,099
----------------------------------------------------------------------------
Per share amounts -                                                         
 ($/share)                                                                  
Earnings per share -                                                        
 basic                 0.18   0.12   0.16   0.18   0.16   0.14   0.16   0.19
Earnings per share -                                                        
 diluted               0.18   0.11   0.15   0.17   0.16   0.14   0.16   0.19
Cash dividends                                                              
 declared and paid    0.205   0.11   0.11   0.13   0.26   0.16   0.16   0.16
----------------------------------------------------------------------------
(1) Q1, Q2, Q3 and Q4 of fiscal 2012 include $0.3 million, $0.04 million,   
$2.6 million and $2.7 million, respectively, in revenue that pertains to    
usage of CMG's products in prior quarters.                                  
                                                                            
(2) Q1, Q2, Q3 and Q4 of fiscal 2013 include $2.1 million, $0.2 million,    
$1.8 million and $2.6 million, respectively, in revenue that pertains to    
usage of CMG's products in prior quarters.                                  

Highlights

During the year ended March 31, 2013, as compared to the prior fiscal year, CMG:


 
--  Increased annuity/maintenance revenue by 27%              
--  Increased operating profit by 8%              
--  Increased spending on research and development by 18%              
--  Increased EBITDA by 9%              
--  Increased total dividends declared and paid by 33% 
--  Realized earnings per share of $0.66, representing a 5% increase
 

 
Revenue                                                                     
                                                                            
For the three months ended March 31,      2013      2012  $ change % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Software licenses                       17,659    15,913     1,746       11%
Professional services                    1,620     1,302       318       24%
----------------------------------------------------------------------------
Total revenue                           19,279    17,215     2,064       12%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Software license revenue - % of total                                       
 revenue                                    92%       92%                   
Professional services - % of total                                          
 revenue                                     8%        8%                   
----------------------------------------------------------------------------
                                                                            
For the year ended March 31,              2013      2012  $ change % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Software licenses                       62,961    55,582     7,379       13%
Professional services                    5,659     5,452       207        4%
----------------------------------------------------------------------------
Total revenue                           68,620    61,034     7,586       12%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Software license revenue - % of total                                       
 revenue                                    92%       91%                   
Professional services - % of total                                          
 revenue                                     8%        9%                   
----------------------------------------------------------------------------

CMG's revenue is comprised of software license sales, which provide the majority of the Company's revenue, and fees for professional services.

Total revenue increased by 12% for the three months ended March 31, 2013, compared to the same period of the previous fiscal year, mainly due to an increase in software license sales driven by the growth in annuity/maintenance license sales. Professional services also contributed to the overall growth in our quarterly total revenue.

Similarly, total revenue increased by 12% in the year ended March 31, 2013, compared to the previous fiscal year, primarily as a result of the increase in software license sales led by the increase in annuity/maintenance revenue, and a slight increase in fees for professional services earned during the current fiscal year.

SOFTWARE LICENSE REVENUE

Software license revenue is made up of annuity/maintenance license fees charged for the use of the Company's software products which is generally for a term of one year or less and perpetual software license sales, whereby the customer purchases the-then-current version of the software and has the right to use that version in perpetuity. Annuity/maintenance license fees have historically had a high renewal rate and, accordingly, provide a reliable revenue stream while perpetual license sales are more variable and unpredictable in nature as the purchase decision and its timing fluctuate with the customers' needs and budgets. The majority of CMG's customers who have acquired perpetual software licenses subsequently purchase our maintenance package to ensure ongoing product support and access to current versions of CMG's software.


 
For the three months ended March 31,        2013     2012 $ change % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance licenses              15,359   12,497    2,862       23%
Perpetual licenses                         2,300    3,416   (1,116)     -33%
----------------------------------------------------------------------------
Total software license revenue            17,659   15,913    1,746       11%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance as a % of total                                         
 software license revenue                     87%      79%                  
Perpetual as a % of total software                                          
 license revenue                              13%      21%                  
----------------------------------------------------------------------------
                                                                            
For the year ended March 31,                2013     2012 $ change % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance licenses              54,555   42,858   11,697       27%
Perpetual licenses                         8,406   12,724   (4,318)     -34%
----------------------------------------------------------------------------
Total software license revenue            62,961   55,582    7,379       13%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance as a % of total                                         
 software license revenue                     87%      77%                  
Perpetual as a % of total software                                          
 license revenue                              13%      23%                  
----------------------------------------------------------------------------

Total software license revenue grew by 11% in the three months ended March 31, 2013, compared to the same period of the previous fiscal year, due to the increase in annuity/maintenance license revenue offset by a decrease in perpetual sales. Similarly, total software license revenue grew by 13% for the year ended March 31, 2013, compared to the previous fiscal year, as a result of the increase in annuity/maintenance revenue stream offset by the decrease in perpetual license sales.

CMG's annuity/maintenance license revenue increased by 23% and 27% during the three months and year ended March 31, 2013, respectively, compared to the same periods of last year. These increases were driven by sales to new and existing clients as well as an increase in maintenance revenue tied to perpetual sales generated in the current and previous fiscal years.

All of our regions experienced strong growth in annuity/maintenance revenue during both the three months and year ended March 31, 2013, for the reasons described above, but the most significant growth came from our Canadian market.

Our annuity/maintenance revenue is impacted by the revenue recognition on a multi-year contract for which revenue recognition criteria are fulfilled only at the time of the receipt of funds (see the discussion about revenue earned in the current period that pertains to usage of products in prior quarters above the "Quarterly Software License Revenue" graph). The variability of the amounts of the payments received and the timing of such payments may skew the comparison of the recorded annuity/maintenance revenue amounts between periods. The amounts received from this particular client and recognized during the three months ended March 31, 2013, are not significantly different from the amounts received and recognized in the same period of the previous fiscal year. If we were to adjust our annuity/maintenance license revenue, by removing revenue from this one customer from the years ended March 31, 2013 and 2012, we would see that the annuity/maintenance sales have grown by 29% instead of 27%.

Given our long-standing relationship with this client, and their on-going use of our licenses, we expect to continue to receive payments under this arrangement; however, the amount and timing are uncertain and will continue to be recorded on a cash basis, which may introduce some variability in our reported quarterly and annual annuity/maintenance revenue results.

Our annuity/maintenance license sales, representing our recurring revenue stream, have continued to experience consecutive quarterly increases over the past several fiscal years, with a double-digit growth experienced during each of the quarters in the current fiscal year as compared to the respective quarters of the previous fiscal year.

We can observe from the table below that the exchange rates between the US and Canadian dollars during the three months and year ended March 31, 2013, compared to the same periods of the previous fiscal year, had only a slight positive impact on our reported annuity/maintenance revenue.

Perpetual license sales decreased by 33% for the three months ended March 31, 2013, compared to the same period of the previous fiscal year, due to fewer perpetual sales being realized in the United States and Eastern Hemisphere markets in the current quarter.

Perpetual license sales for the year ended March 31, 2013, decreased by 34% compared to the previous fiscal year. In the first quarter of the previous fiscal year, we reported an amount associated with a multi-million dollar perpetual contract in the Eastern Hemisphere which contributed significantly to the revenue growth in the previous fiscal year.

Software licensing under perpetual sales is a significant part of CMG's business, but may fluctuate significantly between periods due to the uncertainty associated with the timing and the location where sales are generated. For this reason, even though we expect to achieve a certain level of aggregate perpetual sales on an annual basis, we expect to observe fluctuations in the quarterly perpetual revenue amounts throughout the fiscal year.

We can observe from the table below that the exchange rates between the US and Canadian dollars during the three months and year ended March 31, 2013, compared to the same periods of the previous fiscal year, had only a slight positive impact on our reported perpetual license revenue.

The following table summarizes the US dollar denominated revenue and the weighted average exchange rate at which it was converted to Canadian dollars:


 
For the three months ended March                                            
 31,                                        2013    2012 $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
US dollar annuity/maintenance                                               
 license sales                     US$    10,777   8,986    1,791        20%
Weighted average conversion rate           1.006   0.994                    
----------------------------------------------------------------------------
Canadian dollar equivalent         CDN$   10,838   8,934    1,904        21%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
US dollar perpetual license sales  US$     1,475   3,281   (1,806)      -55%
Weighted average conversion rate           1.015   1.001                    
----------------------------------------------------------------------------
Canadian dollar equivalent         CDN$    1,497   3,285   (1,788)      -54%
----------------------------------------------------------------------------
                                                                            
For the year ended March 31,                2013    2012 $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
US dollar annuity/maintenance                                               
 license sales                     US$    35,138  29,146    5,992        21%
Weighted average conversion rate           1.003   0.993                    
----------------------------------------------------------------------------
Canadian dollar equivalent         CDN$   35,231  28,954    6,277        22%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
US dollar perpetual license sales  US$     5,634  12,425   (6,791)      -55%
Weighted average conversion rate           1.004   0.977                    
----------------------------------------------------------------------------
Canadian dollar equivalent         CDN$    5,657  12,142   (6,485)      -53%
----------------------------------------------------------------------------

REVENUE BY GEOGRAPHIC SEGMENT


 
For the three months ended March 31,       2013     2012 $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
Annuity/maintenance revenue                                                 
  Canada                                  5,805    4,213    1,592        38%
  United States                           2,799    2,337      462        20%
  South America                           3,399    3,307       92         3%
  Eastern Hemisphere(1)                   3,356    2,640      716        27%
----------------------------------------------------------------------------
                                         15,359   12,497    2,862        23%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Perpetual revenue                                                           
  Canada                                    803      204      599       294%
  United States                             331      753     (422)      -56%
  South America                             232      177       55        31%
  Eastern Hemisphere                        934    2,282   (1,348)      -59%
----------------------------------------------------------------------------
                                          2,300    3,416   (1,116)      -33%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total software license revenue                                              
  Canada                                  6,608    4,417    2,191        50%
  United States                           3,130    3,090       40         1%
  South America                           3,631    3,484      147         4%
  Eastern Hemisphere                      4,290    4,922     (632)      -13%
----------------------------------------------------------------------------
                                         17,659   15,913    1,746        11%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
For the year ended March 31,               2013     2012 $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
Annuity/maintenance revenue                                                 
  Canada                                 21,708   15,946    5,762        36%
  United States                          10,558    8,528    2,030        24%
  South America                          10,169    8,536    1,633        19%
  Eastern Hemisphere(1)                  12,120    9,848    2,272        23%
----------------------------------------------------------------------------
                                         54,555   42,858   11,697        27%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Perpetual revenue                                                           
  Canada                                  2,344      655    1,689       258%
  United States                             993    1,746     (753)      -43%
  South America                             741    1,468     (727)      -50%
  Eastern Hemisphere                      4,328    8,855   (4,527)      -51%
----------------------------------------------------------------------------
                                          8,406   12,724   (4,318)      -34%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total software license revenue                                              
  Canada                                 24,052   16,601    7,451        45%
  United States                          11,551   10,274    1,277        12%
  South America                          10,910   10,004      906         9%
  Eastern Hemisphere                     16,448   18,703   (2,255)      -12%
----------------------------------------------------------------------------
                                         62,961   55,582    7,379        13%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Includes Europe, Africa, Asia and Australia.                            

On a geographic basis, total software license sales increased across all regions with the exception of the Eastern Hemisphere market which experienced overall decreases of 13% and 12% during the three months and year ended March 31, 2013, respectively, compared to the same periods of the previous fiscal year, due to lower perpetual sales. The most significant growth came from our annuity/maintenance license sales, with increases experienced across all regions for the three months and year ended March 31, 2013, compared to the same periods of the previous fiscal year.

The Canadian market (representing 38% of year-to-date total software revenue) experienced strong increases in annuity/maintenance license sales during the three months and year ended March 31, 2013, compared to the same periods of the previous fiscal year. These increases were supported by the sales to both new and existing clients. Perpetual sales also experienced increases during both the current quarter and year-to-date. The Canadian market continues to be the leader in generating total software license revenue and, particularly, in generating the recurring annuity/maintenance revenue as evidenced by the quarterly year-over-year increases of 17%, 32%, 37% and 37% recorded during Q4 2012, Q1 2013, Q2 2013, and Q3 2013, respectively. This growth trend has continued into the fourth quarter of the current fiscal year with the recorded increase of 38%.

The US market (representing 18% of year-to-date total software revenue) also grew annuity/maintenance license sales during the three months and year ended March 31, 2013, compared to the same periods of the previous fiscal year, driven by sales to new and existing clients. Fewer perpetual license sales were made during the three months and year ended March 31, 2013, compared to the same periods of the previous fiscal year. Similar to the Canadian market, we have continued to see successive increases in the annuity/maintenance license sales in the US as evidenced by the quarterly year-over-year increases of 26%, 20%, 24% and 32% recorded during Q4 2012, Q1 2013, Q2 2013, and Q3 2013, respectively. This growth trend has continued into the fourth quarter of the current fiscal year with the recorded increase of 20%.

South America (representing 17% of year-to-date total software revenue) experienced only a slight increase of 3% in annuity/maintenance revenue during the three months ended March 31, 2013, compared to the same period of the previous fiscal year, and a more significant increase of 19% during the year ended March 31, 2013, compared to the previous fiscal year. The revenue recognition in our South American region is affected by the revenue recorded on the long-term contract for which revenue is recognized on a cash basis (see the discussion about revenue earned in the current period that pertains to usage of products in prior quarters above the "Quarterly Software License Revenue" graph). Payments received from this particular client and recognized in the current quarter are similar to payments received and recognized in the fourth quarter of the previous fiscal year, not having a significant effect on the comparability of the quarterly revenue amounts. However, if we were to adjust annuity/maintenance revenue recorded for the years ended March 31, 2013 and 2012 for the described amounts, we would notice that the year-to-date revenue actually increased by 25% instead of 19%. The increase in annuity/maintenance revenue for the three months and year ended March 31, 2013, compared to the same periods of the previous fiscal year, were mainly due to sales to both new and existing clients. The increase in annuity/maintenance license sales was offset by a decrease in perpetual license sales during the year ended March 31, 2013.

Eastern Hemisphere (representing 26% of the year-to-date total software revenue) grew annuity/maintenance license sales during both the three months and year ended March 31, 2013, compared to the same periods of the previous fiscal year. Perpetual license sales decreased in both the three months and year ended March 31, 2013, compared to the same periods of the previous fiscal year. Year-to-date perpetual sales decreased as a result of the large perpetual sale made during the first quarter of the previous fiscal year which contributed significantly to revenue growth in the previous fiscal year.

Movements in perpetual sales across regions are indicative of the unpredictable nature of the timing and location of perpetual license sales. Overall, our recurring annuity/maintenance revenue base continues to be strong and growing across all regions. We will continue to focus our efforts on increasing our license sales to both existing and new clients and, supported by our product suite offering and our customer-oriented approach, we will endeavor to continue expanding our market share globally.

As footnoted in the Quarterly Performance table, in the normal course of business, CMG may complete the negotiation of certain annuity/maintenance contracts and/or fulfill revenue recognition requirements within a current quarter that includes usage of CMG's products in prior quarters. This situation particularly affects contracts negotiated with countries that face increased economic and political risks leading to revenue recognition criteria being satisfied only at the time of the receipt of cash. The dollar magnitude of such contracts may be significant to the quarterly comparatives of our annuity/maintenance revenue stream and, to provide a normalized comparison, we specifically identify the revenue component where revenue recognition is satisfied in the current period for products provided in previous quarters.

To view accompanying graph, visit the following link: http://media3.marketwire.com/docs/2013Q4chart.jpg

DEFERRED REVENUE


 
                                   2013     2012     2011 $ change % change 
($ thousands)                                                               
----------------------------------------------------------------------------
Deferred revenue at:                                                        
June 30                                   18,779   15,326    3,453       23%
September 30                              18,241   14,600    3,641       25%
December 31                               15,510   14,746      764        5%
March 31                         25,289   21,693             3,596       17%
----------------------------------------------------------------------------

CMG's deferred revenue consists primarily of amounts for pre-sold licenses. Our annuity/maintenance revenue is deferred and recognized on a straight-line basis over the life of the related license period, which is generally one year or less. Amounts are deferred for licenses that have been provided and revenue recognition reflects the passage of time.

The increase in deferred revenue year-over-year as at June 30, September 30, December 31, and March 31 is reflective of the growth in annuity/maintenance license sales. The variation within the year is due to the timing of renewals of annuity and maintenance contracts that are skewed to the beginning of the calendar year which explains the increase in deferred revenue balance at fiscal year-end compared to the ending balances at June 30, September 30 and December 31. Our fourth quarter corresponds to the beginning of the fiscal year for most oil and gas companies, representing a time when they enter a new budget year and sign/renew their contracts.

Deferred revenue at March 31, 2013 increased by 17% compared to the prior fiscal year due to both renewal of the existing and signing of the new software licenses and maintenance contracts in the quarter. The increase in the current quarter did not match the growth in annuity/maintenance revenue due to the variation in renewal terms on two contracts and the non-renewal of two licensing agreements that amounted to approximately $700,000 of annual annuity/maintenance license revenue.

PROFESSIONAL SERVICES REVENUE

CMG recorded professional services revenue of $1.6 million for the three months ended March 31, 2013, representing an increase of $0.3 million compared to the same period of the previous fiscal year, due to an increase in project activities by our clients and the associated consulting activities in the current quarter. Professional services for the year ended March 31, 2013 amounted to $5.7 million compared to $5.5 million recorded in the previous fiscal year, representing a $0.2 million increase. The year-to-date revenue related to consulting activities actually increased by $0.5 million; however, this increase was offset by the inclusion of a $0.3 million grant in the professional services revenue in the first quarter of the previous fiscal year, which was received from the CMG Reservoir Simulation Foundation ("Foundation CMG") for the DRMS project. The grant was fulfilled during that same quarter; hence, no additional amounts related to the grant have been subsequently recorded as professional services.

Professional services revenue consists of specialized consulting, training, and contract research activities. CMG performs consulting and contract research activities on an ongoing basis, but such activities are not considered to be a core part of our business and are primarily undertaken to increase our knowledge base and hence expand the technological abilities of our simulators in a funded manner, combined with servicing our customers' needs. In addition, these activities are undertaken to market the capabilities of our suite of software products with the ultimate objective to increase software license sales. Our experience is that consulting activities are variable in nature as both the timing and dollar magnitude of work are dependent on activities and budgets within client companies.


 
Expenses                                                                    
                                                                            
For the three months ended March 31,        2013     2012 $ change % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Sales, marketing and professional                                           
 services                                  4,140    3,333      807       24%
Research and development                   3,456    2,994      462       15%
General and administrative                 1,806    1,695      111        7%
----------------------------------------------------------------------------
Total operating expenses                   9,402    8,022    1,380       17%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Direct employee costs(i)                   7,507    6,349    1,158       18%
Other corporate costs                      1,895    1,673      222       13%
----------------------------------------------------------------------------
                                           9,402    8,022    1,380       17%
----------------------------------------------------------------------------
                                                                            
For the year ended March 31,                2013     2012 $ change % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Sales, marketing and professional                                           
 services                                 15,473   13,036    2,437       19%
Research and development                  12,517   10,629    1,888       18%
General and administrative                 6,340    5,765      575       10%
----------------------------------------------------------------------------
Total operating expenses                  34,330   29,430    4,900       17%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Direct employee costs(i)                  27,309   23,376    3,933       17%
Other corporate costs                      7,021    6,054      967       16%
----------------------------------------------------------------------------
                                          34,330   29,430    4,900       17%
----------------------------------------------------------------------------
(i) Includes salaries, bonuses, stock-based compensation, benefits,         
 commissions, and professional development.                                 

CMG's total operating expenses increased by 17% for both the three months and year ended March 31, 2013, compared to the same periods of the previous fiscal year, due to increases in both direct employee and other corporate costs.

DIRECT EMPLOYEE COSTS

As a technology company, CMG's largest area of expenditure is for its people. Approximately 80% of the total operating expenses in the year ended March 31, 2013 related to staff costs, compared to 79% recorded in the comparative period of last year. Staffing levels for the current fiscal year grew in comparison to the previous fiscal year to support our continued growth. At March 31, 2013, CMG's staff complement was 173 employees and consultants, up from 149 employees as at March 31, 2012. Direct employee costs increased during the three months and year ended March 31, 2013, compared to the same periods of the previous fiscal year due to staff additions, increased levels of compensation, commissions and related benefits.

OTHER CORPORATE COSTS

Other corporate costs increased by 13% for the three months ended March 31, 2013 compared to the same period of the previous fiscal year, mainly due to computer-related purchases and the increase in direct costs associated with professional services.

Other corporate costs increased by 16% for the year ended March 31, 2013, compared to the previous fiscal year, mainly due to inclusion of the costs associated with CMG's biennial technical symposium which took place during the first quarter of the current fiscal year. The remaining increase is attributable to the costs associated with the expansion of our office space, which are comprised of additional office rent, increased computing resources and increased depreciation associated with capital spending on the new space.

RESEARCH AND DEVELOPMENT


 
                                                                            
For the three months ended March 31,     2013      2012  $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Research and development (gross)        3,906     3,444       462        13%
SR&ED credits                            (450)     (450)        -         0%
----------------------------------------------------------------------------
Research and development                3,456     2,994       462        15%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Research and development as a % of                                          
 total revenue                             18%       17%                    
----------------------------------------------------------------------------
                                                                            
For the year ended March 31,             2013      2012  $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Research and development (gross)       14,364    12,100     2,264        19%
SR&ED credits                          (1,847)   (1,471)     (376)       26%
----------------------------------------------------------------------------
Research and development               12,517    10,629     1,888        18%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Research and development as a % of                                          
 total revenue                             18%       17%                    
----------------------------------------------------------------------------
----------------------------------------------------------------------------

CMG maintains its belief that its strategy of growing long-term value for shareholders can only be achieved through continued investment in research and development. CMG works closely with its customers to provide solutions to complex problems related to proven and new advanced recovery processes.

The above research and development includes CMG's share of joint research and development costs associated with the DRMS project of $0.9 million and $3.1 million for the three months and year ended March 31, 2013, respectively, (2012 - $0.7 million and $2.7 million). See discussion under "Commitments, Off Balance Sheet Items and Transactions with Related Parties."

The increases of 13% and 19% in our gross spending on research and development for the three months and year ended March 31, 2013, respectively, demonstrate our continued commitment to advancement of our technology which is the focal part of our business strategy.

Research and development costs, net of research and experimental development ("SR&ED") credits, increased by 15% during the three months ended March 31, 2013, compared to the same period of the previous fiscal year, due to increased employee compensation costs, and costs associated with computing resources.

Research and development costs, net of SR&ED credits, increased by 18% during the year ended March 31, 2013, compared to the same period of the previous fiscal year, due to increased employee compensation costs, investment in computing resources and facilities costs associated with the newly leased office space. We also had an increase in SR&ED credits for the year ended March 31, 2013, compared to the same period of the previous fiscal year, driven mainly by the increases in our direct employee costs as well as the increase in the eligibility of our expenses for SR&ED credits.

DEPRECIATION


 
For the three months ended March 31,       2013     2012 $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Depreciation of property and                                                
 equipment, allocated to:                                                   
  Sales, marketing and professional                                         
   services                                 126      105       21        20%
  Research and development                  239      200       39        20%
  General and administrative                 52       45        7        16%
----------------------------------------------------------------------------
Total depreciation                          417      350       67        19%
----------------------------------------------------------------------------
                                                                            
For the year ended March 31,               2013     2012 $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Depreciation of property and                                                
 equipment, allocated to:                                                   
  Sales, marketing and professional                                         
   services                                 467      410       57        14%
  Research and development                  880      583      297        51%
  General and administrative                192      234      (42)      -18%
----------------------------------------------------------------------------
Total depreciation                        1,539    1,227      312        25%
----------------------------------------------------------------------------

The quarterly and year-to-date increases in depreciation, compared to the same periods of the previous fiscal year, reflect the increase in our asset base, mainly as a result of increased spending on computing resources and expansion of the office space in the third quarter of the previous fiscal year, and additional office space added in the second quarter of the current fiscal year.


 
Finance Income and Costs                                                    
                                                                            
For the three months ended March 31,      2013     2012  $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Interest income                            139      131         8         6%
Net foreign exchange gain                  298        -       298         - 
----------------------------------------------------------------------------
Total finance income                       437      131       306       234%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total finance costs (represented by                                         
 net foreign exchange loss)                  -     (220)      220      -100%
----------------------------------------------------------------------------
                                                                            
For the year ended March 31,              2013     2012  $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Interest income                            548      472        76        16%
Net foreign exchange gain                  311      548      (237)      -43%
----------------------------------------------------------------------------
Total finance income                       859    1,020      (161)      -16%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total finance costs (represented by                                         
 net foreign exchange loss)                  -        -         -         - 
----------------------------------------------------------------------------

Interest income increased in the three months and year ended March 31, 2013, compared to the same periods of the prior fiscal year, mainly due to investing larger cash balances.

CMG is impacted by the movement of the US dollar against the Canadian dollar as approximately 67% (2012 - 73%) of CMG's revenue for the year ended March 31, 2013 is denominated in US dollars, whereas only approximately 23% (2012 - 24%) of CMG's total costs are denominated in US dollars.


 
CDN$ to US$                             At March 31           Yearly average
----------------------------------------------------------------------------
                                                                            
2011                                         1.0290                   0.9813
2012                                         1.0009                   1.0106
2013                                         0.9846                   0.9963
----------------------------------------------------------------------------

CMG recorded a net foreign exchange gain of $0.3 million for both the three months and year ended March 31, 2013, compared to a $0.2 million net foreign exchange loss and a $0.5 million net foreign exchange gain recorded in the three months and year ended March 31, 2012, respectively.

The weakening of the Canadian dollar during the fourth quarter of the current fiscal year, contributed positively to the valuation of our US-denominated working capital for the three months ended March 31, 2013 compared to the same period of the previous fiscal year. On the other hand, the fluctuation in the exchange rates between the Canadian and the US dollars during the current fiscal year, has contributed negatively to the valuation of our US-denominated working capital for the year ended March 31, 2013, compared to the same period of the previous fiscal year.

Income and Other Taxes

CMG's effective tax rate for the year ended March 31, 2013 is reflected as 29.38% (2012 - 28.30%), whereas the prevailing Canadian statutory tax rate is now 25.0%. This is primarily due to a combination of the non-tax deductibility of stock-based compensation expense and the benefit of foreign withholding taxes being realized only as a tax deduction as opposed to a tax credit.

The benefit recorded in CMG's books on the SR&ED investment tax credit program impacts deferred income taxes. The investment tax credit earned in the current fiscal year is utilized by CMG to reduce income taxes otherwise payable for the current fiscal year and the federal portion of this benefit bears an inherent tax liability as the amount of the credit is included in the subsequent year's taxable income for both federal and provincial purposes. The inherent tax liability on these investment tax credits is reflected in the year the credit is earned as a non-current deferred tax liability and then, in the following fiscal year, is transferred to income taxes payable.


 
Operating Profit and Net Income                                             
                                                                            
For the three months ended March 31,     2013      2012  $ change  % change 
($ thousands, except per share                                              
 amounts)                                                                   
----------------------------------------------------------------------------
                                                                            
Total revenue                          19,279    17,215     2,064        12%
Operating expenses                     (9,402)   (8,022)   (1,380)       17%
----------------------------------------------------------------------------
Operating profit                        9,877     9,193       684         7%
                                                                            
Operating profit as a % of total                                            
 revenue                                   51%       53%                    
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Net income for the period               7,253     6,620       633        10%
                                                                            
Net income for the period as a % of                                         
 total revenue                             38%       38%                    
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Earnings per share ($/share)             0.19      0.18      0.01         6%
----------------------------------------------------------------------------
                                                                            
For the year ended March 31,             2013      2012  $ change  % change 
($ thousands, except per share                                              
 amounts)                                                                   
----------------------------------------------------------------------------
                                                                            
Total revenue                          68,620    61,034     7,586        12%
Operating expenses                    (34,330)  (29,430)   (4,900)       17%
----------------------------------------------------------------------------
Operating profit                       34,290    31,604     2,686         8%
                                                                            
Operating profit as a % of total                                            
 revenue                                   50%       52%                    
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Net income for the period              24,822    23,391     1,431         6%
                                                                            
Net income for the period as a % of                                         
 total revenue                             36%       38%                    
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Earnings per share ($/share)             0.66      0.63      0.03         5%
----------------------------------------------------------------------------

Operating profit as a percentage of total revenue for the three months and year ended March 31, 2013 was at 51% and 50%, respectively, compared to 53% and 52% recorded in the same periods of the previous fiscal year. While our total revenue grew by 12%, our operating expenses grew by 17%, having a slight negative impact on our operating profit. Our high levels of operating profit as a percentage of revenue demonstrate our ability to continue to effectively manage our costs.

Net income for the period as a percentage of revenue remained consistent at 38% for the three months ended March 31, 2013, compared to the same period of the previous fiscal year.

Net income for the period as a percentage of revenue decreased to 36% for the year ended March 31, 2013, compared to 38% for the previous fiscal year, mainly as a result of recording a lower net foreign exchange gain and slightly higher tax expense in the current fiscal year.

We have continued to maintain our profitability by focusing our efforts on increasing license sales while, at the same time, effectively controlling our operating costs. Managing these variables will continue to be imperative to our future success.


 
EBITDA                                                                      
                                                                            
For the three months ended March 31,     2013      2012  $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Net income for the period               7,253     6,620       633        10%
Add (deduct):                                                               
  Depreciation                            417       350        67        19%
  Finance income                         (437)     (131)     (306)      234%
  Finance costs                             -       220      (220)     -100%
  Income and other taxes                3,061     2,484       577        23%
----------------------------------------------------------------------------
EBITDA                                 10,294     9,543       751         8%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
EBITDA as a % of total revenue             53%       55%                    
----------------------------------------------------------------------------
                                                                            
For the year ended March 31,             2013      2012  $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Net income for the period              24,822    23,391     1,431         6%
Add (deduct):                                                               
  Depreciation                          1,539     1,227       312        25%
  Finance income                         (859)   (1,020)      161       -16%
  Finance costs                             -         -         -         - 
  Income and other taxes               10,327     9,233     1,094        12%
----------------------------------------------------------------------------
EBITDA                                 35,829    32,831     2,998         9%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
EBITDA as a % of total revenue             52%       54%                    
----------------------------------------------------------------------------

EBITDA increased by 8% and 9% for the three months and year ended March 31, 2013, respectively, compared to the same periods of the previous fiscal year. These increases provide further indication of our ability to keep growing our recurring annuity/maintenance license sales while effectively managing costs in relation to this base.

EBITDA as a percent of total revenue for the three months and year ended March 31, 2013 was at 53% and 52%, respectively, compared to 55% and 54% recorded in the same periods of the previous fiscal year, respectively.


 
Liquidity and Capital Resources                                             
                                                                            
For the three months ended March 31,     2013      2012  $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Cash, beginning of period              52,236    47,615     4,621        10%
Cash flow from (used in):                                                   
  Operating activities                 11,155    11,512      (357)       -3%
  Financing activities                 (3,718)   (3,318)     (400)       12%
  Investing activities                   (254)     (435)      181       -42%
----------------------------------------------------------------------------
Cash, end of period                    59,419    55,374     4,045         7%
----------------------------------------------------------------------------
                                                                            
For the year ended March 31,             2013      2012  $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Cash, beginning of period              55,374    41,753    13,621        33%
Cash flow from (used in):                                                   
  Operating activities                 28,073    30,185    (2,112)       -7%
  Financing activities                (22,014)  (15,063)   (6,951)       46%
  Investing activities                 (2,014)   (1,501)     (513)       34%
----------------------------------------------------------------------------
Cash, end of period                    59,419    55,374     4,045         7%
----------------------------------------------------------------------------

OPERATING ACTIVITIES

Cash flow generated from operating activities decreased by $0.4 million in the three months ended March 31, 2013, compared to the same period of last year, mainly due to the increase in trade receivables caused by the timing differences of when the sales are made and when the resulting receivables are collected, offset by the change in deferred revenue balance, higher net income, higher income tax expense, and the change in trade payables and accrued liabilities balance.

Cash flow generated from operating activities decreased by $2.1 million in the year ended March 31, 2013, compared to the same period of last year, mainly due to the increase in trade receivables caused by the timing differences of when the sales are made and when the resulting receivables are collected, change in the deferred revenue balance, and higher tax payments, offset by the increase in net income for the year.

FINANCING ACTIVITIES

Cash used in financing activities during the three months and year ended March 31, 2013 increased by $0.4 million and $7.0 million, respectively, compared to the same periods of last year, as a result of paying larger dividends. The year-to-date increase was also affected by the amount spent on buying back common shares.

During the year ended March 31, 2013, CMG employees and directors exercised options to purchase 913,000 Common Shares, which resulted in cash proceeds of $7.4 million.

In the year ended March 31, 2013, CMG paid $27.9 million in dividends, representing the following quarterly dividends:


 
                                                                        2013
($ per share)                         Q1       Q2       Q3       Q4    Total
----------------------------------------------------------------------------
                                                                            
Dividends declared and paid        0.160    0.160    0.160    0.160    0.640
Special dividend declared and                                               
 paid                              0.100        -        -        -    0.100
----------------------------------------------------------------------------
Total dividends declared and                                                
 paid                              0.260    0.160    0.160    0.160    0.740
----------------------------------------------------------------------------

In the year ended March 31, 2012, CMG paid $20.5 million in dividends, representing the following quarterly dividends:


 
                                                                        2012
($ per share)                         Q1       Q2       Q3       Q4    Total
----------------------------------------------------------------------------
                                                                            
Dividends declared and paid        0.105    0.110    0.110    0.130    0.455
Special dividend declared and                                               
 paid                              0.100        -        -        -    0.100
----------------------------------------------------------------------------
Total dividends declared and                                                
 paid                              0.205    0.110    0.110    0.130    0.555
----------------------------------------------------------------------------

On May 22, 2013, CMG announced the payment of a quarterly dividend of $0.18 per share and a special dividend of $0.05 per share on CMG's Common Shares. The dividend will be paid on June 14, 2013 to shareholders of record at the close of business on June 7, 2013.

Over the past 10 years, we have consistently raised our total annual dividend and paid out a special dividend at the end of each fiscal year as determined by our corporate performance. In recognition of the importance of a more regular income stream to our shareholders, as reported in previous year's Management's Discussion and Analysis, we decided to increase the relative proportion of dividends paid quarterly and lower the amount paid as a special annual dividend beginning in fiscal 2013. The above table demonstrates this increase in the regular quarterly dividend which amounted to $0.64 per share in fiscal 2013 compared to $0.455 per share in fiscal 2012. Our total dividend paid also increased from $0.555 per share in fiscal 2012 to $0.74 per share paid in fiscal 2013, representing a 33% increase.

The special dividend, if any, will continue to be determined annually based on the Company's performance.

Based on our expectation of solid profitability and cash-generating ability driven by the predictability of our software revenue base and effective management of costs, we are cautiously optimistic that the company is well positioned for future growth which will enable us to continue to pay quarterly dividends.

On April 16, 2012, the Company announced a Normal Course Issuer Bid ("NCIB") commencing on April 18, 2012 to purchase for cancellation up to 3,416,000 of its Common Shares. During the year ended March 31, 2013, a total of 91,000 Common Shares were purchased at market price for a total cost of $1,551,000.

On April 29, 2013, the Company announced a NCIB commencing on May 1, 2013 to purchase for cancellation up to 3,538,000 of its Common Shares.

INVESTING ACTIVITIES

CMG's current needs for capital asset investment relate to computer equipment and office infrastructure costs, all of which will be funded internally. During the year ended March 31, 2013, CMG expended $2.0 million on property and equipment additions, primarily composed of computing equipment and leasehold improvements, and has a capital budget of $1.8 million for fiscal 2014.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2013, CMG has $59.4 million in cash, no debt, and has access to just over $0.8 million under a line of credit with its principal banker.

During the year ended March 31, 2013, 9,742,000 shares of CMG's public float were traded on the TSX. As at March 31, 2013, CMG's market capitalization based upon its March 31, 2013 closing price of $21.09 was $804.1 million.

Commitments, Off Balance Sheet Items and Transactions with Related Parties

The Company is the operator of the DRMS research and development project (the "DRMS Project"), a collaborative effort with its partners Shell and Petrobras, to jointly develop the newest generation of reservoir and production system simulation software. The project has been underway since 2006 and, with the ongoing support of the participants, it is expected to continue until ultimate delivery of the software. The Company's share of costs associated with the project is estimated to be $5.5 million ($2.6 million net of overhead recoveries) for fiscal 2014. CMG plans to continue funding its share of the project costs associated with the development of the newest generation reservoir simulation software system from internally generated cash flows.

CMG has very little in the way of other ongoing material contractual obligations other than for pre-sold licenses which are reflected as deferred revenue on its statement of financial position, and contractual obligations for office leases which are estimated as follows: 2014 - $2.1 million; 2015 to 2016 - $2.0 million per year; and 2017 - $1.0 million.

Critical Accounting Estimates

The preparation of financial statements 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 dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. By their nature, these estimates are subject to estimation uncertainty. The effect on the financial statements of changes in such estimates in future periods could be material and would be accounted for in the period in which the estimates are revised and in any future periods affected.

Revenue recognition

Revenue consists primarily of software license fees with some fees for professional services. We recognize revenue in accordance with the current rules of IFRS. We follow specific and detailed guidelines in measuring revenue; however, certain judgments affect the application of our revenue recognition policies.

Software license revenue is comprised of annuity/maintenance license fees charged for the use of our software products which is generally for a term of one year or less, and perpetual software licensing, whereby the customer purchases the-then- current version of the software and has the right to use that version in perpetuity. We recognize software license revenue when persuasive evidence of an arrangement exists, the product has been delivered, the fee is fixed or determinable, and collection of the resulting receivable is probable. In cases where collectability is not deemed probable, revenue is recognized upon receipt of cash, assuming all other criteria have been met.

Annuity/maintenance revenue is deferred and recognized on a straight-line basis over the life of the related license period, which is generally one year or less. License fees for perpetual licenses are recognized fully in revenue when all recognition conditions are satisfied.

Certain software license agreements contain multiple-element arrangements as they may also include maintenance fees. Judgment is used in determining a fair value of each element of a contract.

Professional services revenue earned from certain consulting contracts is recognized by the stage of completion of the transaction determined using the percentage-of-completion method. Judgment is used in determining progress of each contract at period end. In assessing revenue recognition, judgment is also used in determining the ability to collect the corresponding account receivable.

Functional currency

The determination of the functional currency is a matter of determining the primary economic environment in which an entity operates. IAS 21, The Effects of Changes in Foreign Exchange Rates, sets out a number of factors to apply in making the determination of the functional currency. However, applying the factors in IAS 21 does not always result in a clear indication of functional currency. Where IAS 21 factors indicate differing functional currencies within a subsidiary, the Company uses judgment in the ultimate determination of that subsidiary's functional currency, including an assessment of the nature of the relationship between the Company and the subsidiary. Judgment was applied in the determination of the functional currency of certain of the Company's operating entities.

Research and development

Assumptions are made in respect to the eligibility of certain research and development projects in the calculation of SR&ED investment tax credits which are netted against the research and development costs in the statement of operations. SR&ED claims are subject to audits by relevant taxation authorities and the actual amount may change depending on the outcome of such audits.

Stock-based compensation

Assumptions and estimates are used in determining the inputs used in the Black-Scholes option pricing model, including assumptions regarding volatility, dividend yield, risk-free interest rates, forfeiture estimates and expected option lives.

Property and equipment

Estimates are used in determining useful economic lives of property and equipment for the purposes of calculating depreciation.

Deferred income taxes

Assumptions and estimates are made regarding the amount and timing of realization and/or settlement of the temporary differences between the accounting carrying value of the Company's assets versus the tax basis of those assets, and the tax rates at which the differences will be recovered or settled in the future.

Accounting Standards and Interpretations Issued But Not Yet Effective

The following standards and interpretations have not been adopted by the Company as they apply to future periods:


 
Standard/Interpretation  Nature of impending       Impact on CMG's financial
                          change in accounting      statements              
                          policy                                            
----------------------------------------------------------------------------
IFRS 9 Financial         IFRS 9 (2009) replaces    IFRS 9 (2010) supersedes 
 Instruments              the guidance in IAS 39    IFRS 9 (2009) and is    
                          Financial Instruments:    effective for annual    
In November 2009 the      Recognition and           periods beginning on or 
 IASB issued IFRS 9       Measurement, on the       after January 1, 2015,  
 Financial Instruments    classification and        with early adoption     
 (IFRS 9 (2009)), and in  measurement of financial  permitted. For annual   
 October 2010 the IASB    assets. The Standard      periods beginning before
 published amendments to  eliminates the existing   January 1, 2015, either 
 IFRS 9 (IFRS 9 (2010)).  IAS 39 categories of      IFRS 9 (2009) or IFRS 9 
 In December 2011, the    held to maturity,         (2010) may be applied.  
 IASB issued an           available-for-sale and                            
 amendment to IFRS 9 to   loans and receivable.    The Company intends to   
 defer the mandatory                                adopt IFRS 9 (2010) in  
 effective date to       Financial assets will be   its financial statements
 annual periods           classified into one of    for the annual period   
 beginning on or after    two categories on         beginning on April 1,   
 January 1, 2015.         initial recognition:      2015. The Company does  
                         - financial assets         not expect IFRS 9 (2010)
                          measured at amortized     to have a material      
                          cost; or                  impact on the financial 
                         - financial assets         statements. The         
                          measured at fair value.   classification and      
                                                    measurement of the      
                         Gains and losses on        Company's financial     
                          remeasurement of          assets and liabilities  
                          financial assets          is not expected to      
                          measured at fair value    change under IFRS 9     
                          will be recognized in     (2010) because of the   
                          profit or loss, except    nature of the Company's 
                          that for an investment    operations and the types
                          in an equity instrument   of financial assets that
                          which is not held-for-    it holds.               
                          trading, IFRS 9                                   
                          provides, on initial                              
                          recognition, an                                   
                          irrevocable election to                           
                          present all fair value                            
                          changes from the                                  
                          investment in other                               
                          comprehensive income                              
                          (OCI). The election is                            
                          available on an                                   
                          individual share-by-                              
                          share basis. Amounts                              
                          presented in OCI will                             
                          not be reclassified to                            
                          profit or loss at a                               
                          later date.                                       
                                                                            
                         IFRS 9 (2010) added                                
                          guidance to IFRS 9                                
                          (2009)on the                                      
                          classification and                                
                          measurement of financial                          
                          liabilities, and this                             
                          guidance is consistent                            
                          with the guidance in IAS                          
                          39 expect as described                            
                          below.                                            
                                                                            
                         Under IFRS 9 (2010), for                           
                          financial liabilities                             
                          measured at fair value                            
                          under the fair value                              
                          option, changes in fair                           
                          value attributable to                             
                          changes in credit risk                            
                          will be recognized in                             
                          OCI, with the remainder                           
                          of the change recognized                          
                          in profit or loss.                                
                          However, if this                                  
                          requirement creates or                            
                          enlarges an accounting                            
                          mismatch in profit or                             
                          loss, the entire change                           
                          in fair value will be                             
                          recognized in profit or                           
                          loss. Amounts presented                           
                          in OCI will not be                                
                          reclassified to profit                            
                          or loss at a later date.                          
                                                                            
                         IFRS 9 (2010) also                                 
                          requires derivative                               
                          liabilities that are                              
                          linked to and must be                             
                          settled by delivery of                            
                          an unquoted equity                                
                          instrument to be                                  
                          measured at fair value,                           
                          whereas such derivative                           
                          liabilities are measured                          
                          at cost under IAS 39.                             
                                                                            
                         IFRS 9 (2010) also added                           
                          the requirements of IAS                           
                          39 for the derecognition                          
                          of financial assets and                           
                          liabilities to IFRS 9                             
                          without change.                                   
                                                                            
                         The IASB has deferred the                          
                          mandatory effective date                          
                          of the existing chapters                          
                          of IFRS 9 Financial                               
                          Instruments (2009) and                            
                          IFRS 9 (2010) to annual                           
                          periods beginning on or                           
                          after January 1, 2015.                            
                          The early adoption of                             
                          either standard                                   
                          continues to be                                   
                          permitted.                                        
----------------------------------------------------------------------------
IFRS 10 Consolidated     IFRS 10 replaces the      The Company intends to   
 Financial Statements     guidance in IAS 27        adopt IFRS 10 in its    
                          Consolidated and          financial statements for
In May 2011, the IASB     Separate Financial        the annual period       
 issued IFRS 10           Statements and SIC-12     beginning on April 1,   
 Consolidated Financial   Consolidation - Special   2013. The Company does  
 Statements, which is     Purpose Entities. IAS 27  not expect IFRS 10 to   
 effective for annual     (2008) survives as IAS    have a material impact  
 periods beginning on or  27 (2011) Separate        on the financial        
 after January 1, 2013,   Financial Statements,     statements.             
 with early adoption      only to carry forward                             
 permitted. If an entity  the existing accounting                           
 applies this Standard    requirements for                                  
 earlier, it shall also   separate financial                                
 apply IFRS 11, IFRS 12,  statements.                                       
 IAS 27 (2011) and IAS                                                      
 28 (2011) at the same   IFRS 10 provides a single                          
 time.                    model to be applied in                            
                          the control analysis for                          
                          all investees, including                          
                          entities that currently                           
                          are SPEs in the scope of                          
                          SIC-12. In addition, the                          
                          consolidation procedures                          
                          are carried forward                               
                          substantially unmodified                          
                          from IAS 27 (2008).                               
----------------------------------------------------------------------------
IFRS 11 Joint            IFRS 11 replaces the      The Company intends to   
 Arrangements             guidance in IAS 31        adopt IFRS 11 in its    
                          Interests inJoint         financial statements for
In May 2011, the IASB     Ventures.                 the annual period       
 issued IFRS 11 Joint                               beginning on April 1,   
 Arrangements, which is  Under IFRS 11, joint       2013. The Company does  
 effective for annual     arrangements are          not expect IFRS 11 to   
 periods beginning on or  classified as either      have a material impact  
 after January 1, 2013,   joint operations or       on the financial        
 with early adoption      joint ventures. IFRS 11   statements.             
 permitted. If an entity  essentially carves out                            
 applies this Standard    of previous jointly                               
 earlier, it shall also   controlled entities,                              
 apply IFRS 10, IFRS 12,  those arrangements which                          
 IAS 27 (2011) and IAS    although structured                               
 28 (2011) at the same    through a separate                                
 time.                    vehicle, such separation                          
                          is ineffective and the                            
                          parties to the                                    
                          arrangement have rights                           
                          to the assets and                                 
                          obligations for the                               
                          liabilities and are                               
                          accounted for as joint                            
                          operations in a fashion                           
                          consistent with jointly                           
                          controlled                                        
                          assets/operations under                           
                          IAS 31. In addition,                              
                          under IFRS 11 joint                               
                          ventures are stripped of                          
                          the free choice of                                
                          equity accounting or                              
                          proportionate                                     
                          consolidation; these                              
                          entities must now use                             
                          the equity method.                                
                                                                            
                         Upon application of IFRS                           
                          11, entities which had                            
                          previously accounted for                          
                          joint ventures using                              
                          proportionate                                     
                          consolidation shall                               
                          collapse the                                      
                          proportionately                                   
                          consolidated net asset                            
                          value (including any                              
                          allocation of goodwill)                           
                          into a single investment                          
                          balance at the beginning                          
                          of the earliest period                            
                          presented. The                                    
                          investment's opening                              
                          balance is tested for                             
                          impairment in accordance                          
                          with IAS 28 (2011) and                            
                          IAS 36 Impairment of                              
                          Assets. Any impairment                            
                          losses are recognized as                          
                          an adjustment to opening                          
                          retained earnings at the                          
                          beginning of the                                  
                          earliest period                                   
                          presented.                                        
----------------------------------------------------------------------------
IFRS 12 Disclosure of    IFRS 12 contains the      The Company intends to   
 Interests in Other       disclosure requirements   adopt IFRS 12 in its    
 Entities                 for entities that have    financial statements for
                          interests in              the annual period       
In May 2011, the IASB     subsidiaries, joint       beginning on April 1,   
 issued IFRS 12           arrangements (i.e. joint  2013. The Company does  
 Disclosure of Interests  operations or joint       not expect the          
 in Other Entities,       ventures), associates     amendments to have a    
 which is effective for   and/or unconsolidated     material impact on the  
 annual periods           structured entities.      financial statements,   
 beginning on or after    Interests are widely      because of the nature of
 January 1, 2013, with    defined as contractual    the Company's interests 
 early adoption           and non-contractual       in other entities.      
 permitted. If an entity  involvement that exposes                          
 applies this Standard    an entity to variability                          
 earlier, it needs not    of returns from the                               
 to apply IFRS 10, IFRS   performance of the other                          
 11, IAS 27 (2011) and    entity. The required                              
 IAS 28 (2011) at the     disclosures aim to                                
 same time.               provide information in                            
                          order to enable users to                          
                          evaluate the nature of,                           
                          and the risks associated                          
                          with, an entity's                                 
                          interest in other                                 
                          entities, and the                                 
                          effects of those                                  
                          interests on the                                  
                          entity's financial                                
                          position, financial                               
                          performance and cash                              
                          flows.                                            
----------------------------------------------------------------------------
IFRS 13 Fair Value       IFRS 13 replaces the fair The Company intends to   
 Measurement              value measurement         adopt IFRS 13           
                          guidance contained in     prospectively in its    
In May 2011, the IASB     individual IFRSs with a   financial statements for
 published IFRS 13 Fair   single source of fair     the annual period       
 Value Measurement,       value measurement         beginning on April 1,   
 which is effective       guidance. It defines      2013. The Company does  
 prospectively for        fair value as the price   not expect IFRS 13 to   
 annual periods           that would be received    have a material impact  
 beginning on or after    to sell an asset or paid  on the financial        
 January 1, 2013. The     to transfer a liability   statements.             
 disclosure requirements  in an orderly                                     
 of IFRS 13 need not be   transaction between                               
 applied in comparative   market participants at                            
 information for periods  the measurement date,                             
 before initial           i.e. an exit price. The                           
 application.             standard also                                     
                          establishes a framework                           
                          for measuring fair value                          
                          and sets out disclosure                           
                          requirements for fair                             
                          value measurements to                             
                          provide information that                          
                          enables financial                                 
                          statement users to                                
                          assess the methods and                            
                          inputs used to develop                            
                          fair value measurements                           
                          and, for recurring fair                           
                          value measurements that                           
                          use significant                                   
                          unobservable inputs                               
                          (Level 3), the effect of                          
                          the measurements on                               
                          profit or loss or other                           
                          comprehensive income.                             
                                                                            
                         IFRS 13 explains 'how' to                          
                          measure fair value when                           
                          it is required or                                 
                          permitted by other                                
                          IFRSs. IFRS 13 does not                           
                          introduce new                                     
                          requirements to measure                           
                          assets or liabilities at                          
                          fair value, nor does it                           
                          eliminate the                                     
                          practicability                                    
                          exceptions to fair value                          
                          measurements that                                 
                          currently exist in                                
                          certain standards.                                
----------------------------------------------------------------------------
Amendments to IAS 1      The amendments require    The Company intends to   
 Presentation of          that an entity present    adopt the amendments in 
 Financial Statements     separately the items of   its financial statements
                          OCI that may be           for the annual period   
In June 2011, the IASB    reclassified to profit    beginning on April 1,   
 published amendments to  or loss in the future     2013. As the amendments 
 IAS 1 Presentation of    from those that would     only require changes in 
 Financial Statements:    never be reclassified to  the presentation of     
 Presentation of Items    profit or loss.           items in other          
 of Other Comprehensive   Consequently an entity    comprehensive income,   
 Income, which are        that presents items of    the Company does not    
 effective for annual     OCI before related tax    expect the amendments to
 periods beginning on or  effects will also have    IAS 1 to have a material
 after July 1, 2012 and   to allocate the           impact on the financial 
 are to be applied        aggregated tax amount     statements.             
 retrospectively. Early   between these                                     
 adoption is permitted.   categories.                                       
                                                                            
                         The existing option to                             
                          present the profit or                             
                          loss and other                                    
                          comprehensive income in                           
                          two statements has                                
                          remained unchanged.                               
----------------------------------------------------------------------------
Amendments to IAS 32 and The amendments to IAS 32  The Company intends to   
 IFRS 7, Offsetting       clarify that an entity    adopt the amendments to 
 Financial Assets and     currently has a legally   IFRS 7 in its financial 
 Liabilities              enforceable right to      statements for the      
                          set-off if that right     annual period beginning 
In December 2011, the     is:                       on April 1, 2013, and   
 IASB published                                     the amendments to IAS 32
 Offsetting Financial    - not contingent on a      in its financial        
 Assets and Financial     future event; and         statements for the      
 Liabilities and issued  - enforceable both in the  annual period beginning 
 new disclosure           normal course of          April 1, 2014. The      
 requirements in IFRS 7   business and in the       Company does not expect 
 Financial Instruments:   event of default,         the amendments to have a
 Disclosures.The          insolvency or bankruptcy  material impact on the  
 effective date for the   of the entity and all     financial statements.   
 amendments to IAS 32 is  counterparties.                                   
 annual periods                                                             
 beginning on or after   The amendments to IAS 32                           
 January 1, 2014. The     also clarify when a                               
 effective date for the   settlement mechanism                              
 amendments to IFRS 7 is  provides for net                                  
 annual periods           settlement or gross                               
 beginning on or after    settlement that is                                
 January 1, 2013. These   equivalent to net                                 
 amendments are to be     settlement.                                       
 applied                                                                    
 retrospectively.        The amendments to IFRS 7                           
                          contain new disclosure                            
                          requirements for                                  
                          financial assets and                              
                          liabilities that are:                             
                                                                            
                         - offset in the statement                          
                          of financial position;                            
                          or                                                
                         - subject to master                                
                          netting arrangements or                           
                          similar arrangements.                             
----------------------------------------------------------------------------

Outstanding Share Data

The following table represents the number of Common Shares and options outstanding:


 
As at May 22, 2013                                                          
(thousands)                                                                 
----------------------------------------------------------------------------
Common Shares                                                         38,156
                                                                            
Options                                                                2,910
----------------------------------------------------------------------------

On July 13, 2005, CMG adopted a rolling stock option plan which allows the Company to grant options to its employees and directors to acquire Common Shares of up to 10% of the outstanding Common Shares at the date of grant. Based upon this calculation, at May 22, 2013, CMG could grant up to 3,815,000 stock options.

Business Risks

The Company has the following business risks:

COMMODITY PRICE RISK

CMG's customers are oil and gas companies and it might, therefore, be assumed that its financial results are significantly impacted by commodity prices. CMG's actual experience of growth in software license revenues during depressed oil price markets makes us believe that software license sales are influenced more by the utility of the software as opposed to the prevailing commodity price but different circumstances could prevail in the future. Low commodity prices and resulting lower cash flow in the industry could impact how customers license CMG software; one could expect sales of perpetual licenses to decrease in favour of leasing software on a term basis.

Volatility in commodity prices could have an impact on CMG's consulting business; however, this business segment generates less than 10% of total revenues and CMG has no current plans to significantly expand this area of business.

CREDIT AND LIQUIDITY RISKS

Our product demand is dependent on the customers' overall spending plans, which are driven by commodity prices and the availability of capital. This risk is mitigated by having a diversified customer base with the majority of revenue being derived from larger entities which are not as affected by the market volatility or cyclical downturns in commodity prices. In addition, our diversified geographic profile helps to mitigate the effects of economic recessions and instability experienced in any particular geographic region.

The Company mitigates the collection risk by closely monitoring its accounts receivable and assessing creditworthiness of its customers. The Company has not had any significant losses to date.

In terms of liquidity, the Company held $59.4 million of cash at March 31, 2013, which more than covers its obligations and it has over $0.8 million of the credit facility available for its use. The Company's cash is held with a reputable banking institution. For the described reasons, we believe that our liquidity risk is low.

SALES VARIABILITY RISK

CMG's software license revenue consists of annuity/maintenance software licensing, which is generally for a term of one year or less, and perpetual software licensing, whereby the customer purchases the-then-current version of the software and has the right to use that version in perpetuity. Software licensing under perpetual sales is a significant part of CMG's business but is more variable in nature as the purchase decision, and its timing, fluctuate with clients' needs and budgets. CMG has found that a number of clients prefer to acquire perpetual software licenses rather than leasing the software on an annual basis. The experience over the last few years is that a number of these clients are purchasing additional licenses to allow more users to access CMG technology in their operations. CMG has found that a large percentage of its customers who have acquired perpetual software licenses are subsequently purchasing maintenance licenses to ensure they have access to current CMG technology.

The variability in sales of perpetual licenses may cause significant fluctuations in the Company's quarterly and annual financial results, and these results may not meet the expectations of analysts or investors. Accordingly, the Company's past results may not be a good indication of its future performance.

CMG's customers are both domestic and international oil and gas companies and for the years ended March 31, 2013 and March 31, 2012, no customer represented revenue in excess of 10% of total revenue.

FOREIGN EXCHANGE RISK

CMG's reported results are affected by the exchange rate between the Canadian dollar and the US dollar as approximately 67% (2012 - 73%) of product revenues in fiscal 2013 were denominated in US dollars. Approximately 23% of CMG's total costs in fiscal 2013 (2012 - 24%) were denominated in US dollars and provided a partial economic hedge against the fluctuation in currency exchange between the US and the Canadian dollar on revenues. CMG's residual revenues and costs are primarily denominated in Canadian dollars and its policy is to convert excess US dollar cash into Canadian dollars when received.

GEOPOLITICAL RISKS

CMG sells its products and services in over 50 countries worldwide, and has operations in a number of different countries. Some of these countries have greater economic, political and social risks than experienced in North America which may adversely affect the Company's sales, costs and operations in those jurisdictions. Some of those risks include:


 
--  Currency restrictions and exchange rate fluctuations 
    
--  Civil unrest and political instability 
    
--  Changes in laws governing existing operations and contracts 
    
--  Changes to taxation policies dramatically increasing tax costs to the
    Company 
    
--  Economic and legal sanctions 
    
--  Non-compliance with applicable anti-corruption and bribery laws 

Any disruption in our ability to complete a sale cycle, including disruption of travel to customers' locations to provide training and support, and the cost of reorganizing daily activities of foreign operations, could have an adverse effect on our financial condition. CMG mitigates the potential adverse effect on sales by invoicing for the full license term in advance for the majority of software license sales and by invoicing as frequently as the contract allows for consulting and contract research services. CMG closely monitors the business and regulatory environments of the countries in which it conducts operations to minimize the potential impact on costs and operations.

Non-compliance with applicable anti-corruption and bribery laws could subject the Company to onerous penalties and the costs of prosecution. CMG has established business practices and internal controls to minimize the potential occurrence of any irregular payments. In addition, the Company has established well-defined anti-corruption and bribery policies and procedures that each employee and contractor is required to sign indicating their compliance.

COMPETITION RISK

Competition is a risk for CMG as it is for almost every company in every sector. The reservoir simulation software industry currently consists of four major suppliers (including CMG) and a number of small suppliers. Some of the other suppliers, including two major suppliers, offer products or oil field services outside the scope of reservoir simulation. Some potential customers may prefer to deal with such multi-service suppliers, while others prefer an independent supplier, such as CMG.

Although competition is very active, CMG believes that its proven technology and the comprehensive scope of its products, combined with its international presence and recognition as a major independent supplier, provide distinct competitive advantages.

Sustaining competitive advantage is another issue, which CMG addresses by making a significant ongoing commitment to research and development spending. CMG expended $12.5 million (2012 - $10.6 million) in product research and development in its most recently completed fiscal year.

The introduction by competitors of products embodying new technology and the emergence of new industry standards and practices could render CMG's products obsolete and unmarketable and could exert price pressures on existing products, which could have negative effects on the Company's business, operating results and financial condition.

There is a significant barrier for new entrants into the reservoir simulation software industry. The cost of entry is substantial as a significant investment in research and development is required. In addition, to become a major supplier, a significant time investment is required to build up quality relationships with potential clients.

LABOUR RISK

The Company's continued success is substantially dependent on the performance of its key employees and officers. The loss of the services of these personnel as well as failure to attract additional key personnel could have a negative impact upon the Company's business, operating results and financial condition. Due to high levels of competition for qualified personnel, there can be no assurance that the Company will be successful in retaining and attracting such personnel. The Company attempts to overcome this by offering an attractive compensation package and providing an environment that provides the intellectual and professional stimulation sought by our employee group.

INTELLECTUAL PROPERTY RISK

CMG regards its software as proprietary and attempts to protect it with copyrights, trademarks and trade secret measures, including restrictions on disclosure and technical measures. Despite these precautions, it may be possible for third parties to copy CMG's programs or aspects of its trade secrets. CMG has no patents, and existing legal and technical precautions afford only limited practical protection. CMG could incur substantial costs in protecting and enforcing its intellectual property rights. Moreover, from time to time third parties may assert patent, trademark, copyright and other intellectual property rights to technologies that are important to CMG. In such an event, CMG may be required to incur significant costs in litigating a resolution to the asserted claim. There can be no assurance that such a resolution would not require that CMG pay damages or obtain a license of a third party's proprietary rights in order to continue licensing its products as currently offered, or, if such a license is required, that it will be available on terms acceptable to CMG.

CMG does not know of any infringement of any third party's patent rights, copyrights, trade secrecy rights or other intellectual property disputes in the development or support of its products.

Disclosure Controls and Procedures and Internal Control over Financial Reporting

Management is responsible for establishing and maintaining disclosure controls and procedures ("DC&P") and internal control over financial reporting ("ICFR") as defined under National Instrument 52-109.

At March 31, 2013, the Chief Executive Officer ("CEO") and the Chief Financial Officer ("CFO") concluded that the design and operation of the Company's DC&P were effective and that material information relating to the Company, including its subsidiaries, was made known to them and was recorded, processed, summarized and reported within the time periods specified under applicable securities legislation. Further, the CEO and the CFO concluded that the design and operation of the Company's ICFR were effective at March 31, 2013 in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. It should be noted that while the Company's CEO and CFO believe that the Company's disclosure controls and procedures and internal controls over financial reporting provide a reasonable level of assurance that they are effective, they do not expect that such controls and procedures will prevent all errors and fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

During the year ended March 31, 2013, there have been no significant changes to the Company's ICFR that have materially affected, or are reasonably likely to materially affect, the company's ICFR.

NON-IFRS FINANCIAL MEASURES

This MD&A includes certain measures which have not been prepared in accordance with IFRS such as "EBITDA", "direct employee costs" and "other corporate costs." Since these measures do not have a standard meaning prescribed by IFRS, they are unlikely to be comparable to similar measures presented by other issuers. Management believes that these indicators nevertheless provide useful measures in evaluating the Company's performance.

"Direct employee costs" include salaries, bonuses, stock-based compensation, benefits, commission expenses, and professional development. "Other corporate costs" include facility-related expenses, corporate reporting, professional services, marketing and promotion, computer expenses, travel, and other office-related expenses. Direct employee costs and other corporate costs should not be considered an alternative to total operating expenses as determined in accordance with IFRS. People-related costs represent the Company's largest area of expenditure; hence, management considers highlighting separately corporate and people-related costs to be important in evaluating the quantitative impact of cost management of these two major expenditure pools. See "Expenses" heading for a reconciliation of direct employee costs and other corporate costs to total operating expenses.

"EBITDA" refers to net income before adjusting for depreciation expense, finance income, finance costs, and income and other taxes. EBITDA should not be construed as an alternative to net income as determined by IFRS. The Company believes that EBITDA is useful supplemental information as it provides an indication of the results generated by the Company's main business activities prior to consideration of how those activities are amortized, financed or taxed. See "EBITDA" heading for a reconciliation of EBITDA to net income.

FORWARD-LOOKING INFORMATION

Certain information included in this MD&A is forward-looking. Forward-looking information includes statements that are not statements of historical fact and which address activities, events or developments that the Company expects or anticipates will or may occur in the future, including such things as investment objectives and strategy, the development plans and status of the Company's software development projects, the Company's intentions, results of operations, levels of activity, future capital and other expenditures (including the amount, nature and sources of funding thereof), business prospects and opportunities, research and development timetable, and future growth and performance. When used in this MD&A, statements to the effect that the Company or its management "believes", "expects", "expected", "plans", "may", "will", "projects", "anticipates", "estimates", "would", "could", "should", "endeavours", "seeks", "predicts" or "intends" or similar statements, including "potential", "opportunity", "target" or other variations thereof that are not statements of historical fact should be construed as forward-looking information. These statements reflect management's current beliefs with respect to future events and are based on information currently available to management of the Company. The Company believes that the expectations reflected in such forward-looking information are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking information should not be unduly relied upon.

With respect to forward-looking information contained in this MD&A, we have made assumptions regarding, among other things:


 
--  Future software license sales 
--  The continued financing by and participation of the Company's partners
    in the DRMS project and it being completed in a timely manner 
--  Ability to enter into additional software license agreements 
--  Ability to continue current research and new product development 
--  Ability to recruit and retain qualified staff 

Forward-looking information is not a guarantee of future performance and involves a number of risks and uncertainties, only some of which are described herein. Many factors could cause the Company's actual results, performance or achievements, or future events or developments, to differ materially from those expressed or implied by the forward-looking information including, without limitation, the following factors which are discussed in greater detail in the "Business Risks" section of this MD&A:


 
--  Economic conditions in the oil and gas industry 
--  Reliance on key clients 
--  Foreign exchange 
--  Economic and political risks in countries where the Company currently
    does or proposes to do business 
--  Increased competition 
--  Reliance on employees with specialized skills or knowledge 
--  Protection of proprietary rights 

Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results, performance or achievement may vary materially from those expressed or implied by the forward-looking information contained in this MD&A. These factors should be carefully considered and readers are cautioned not to place undue reliance on forward-looking information, which speaks only as of the date of this MD&A. All subsequent forward-looking information attributable to the Company herein is expressly qualified in its entirety by the cautionary statements contained in or referred to herein. The Company does not undertake any obligation to release publicly any revisions to forward-looking information contained in this MD&A to reflect events or circumstances that occur after the date of this MD&A or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.

This Management's Discussion and Analysis was reviewed and approved by the Audit Committee and Board of Directors and is effective as of May 22, 2013.

Outlook

Our fiscal 2013 has continued to show growth in our annuity/maintenance revenue stream with double-digit increases experienced across all geographic regions. During fiscal 2013 our annuity/maintenance revenue increased by 27% whereas total revenue increased by 12%. Over 80% of our software license revenue is derived from our annuity and maintenance contracts, and with a strong renewal rate, we expect to see continued growth in this revenue base.

For the year ended March 31, 2013, our EBITDA represented 52% of our total revenue which demonstrates our continuous ability to effectively manage our corporate costs.

CMG continues to focus its resources on the development, enhancement and deployment of simulation software tools relevant to the challenges and opportunities facing its diverse customer base. With the growth in unconventional hydrocarbon and enhanced oil recovery (EOR) projects around the globe, we are seeing an increase in the use of reservoir simulation software by reservoir engineers. This growth in simulation use has been reflected in the number and types of projects being simulated and the amount of simulation done on each project, hence, increasing the demand for our software. While oil prices continue to fluctuate, they remain at levels that should allow our customers to move forward on projects involving various types of unconventional reserves and advanced recovery processes.

Another instrumental part of our success includes training programs which we offer to our clients to enable them to become more efficient and effective users of our software. Our training attendance has increased across all regions, but most notably in Canada, where the number of scheduled courses increased by 29% during fiscal 2013.

CMG's joint project to develop the newest generation of dynamic reservoir modelling systems ("DRMS Project") made significant progress in fiscal 2013. During the first quarter, Rob Eastick, now Vice President, DRMS took over the role of Project Manager for the DRMS Project. The most recent beta version of the software was released during our fourth quarter. Rob and the entire DRMS team continue to make progress toward the anticipated limited commercial release of the software by the end of calendar 2013. CMG and its partners remain committed to funding the ongoing development and to the future success of the project.

We will continue to extend our reach globally and focus our efforts on increasing our license sales to both existing and new clients. Our newest effort towards this expansion includes opening a branch office in Colombia which will help us to grow our presence in the South American market.

The excellent reputation behind our Company and its product suite offering will continue to enable us to grow and sustain a healthy market share while generating solid software license revenue. With our strong working capital position, we are well positioned to continue to invest in all aspects of our business in order to continue to grow and diversify our revenue base and to ultimately return value to our shareholders in the form of regular quarterly dividend payments and growth in share value. During fiscal 2013, our total dividends declared and paid increased by 33%.

Kenneth M. Dedeluk, President and Chief Executive Officer

May 22, 2013


 
COMPUTER MODELLING GROUP LTD.                                               
                                                                            
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION                               
                                                                            
(thousands of Canadian $)                      March 31, 2013 March 31, 2012
                                                                            
Assets                                                                      
Current assets:                                                             
  Cash                                                 59,419         55,374
  Trade and other receivables (note 14(a))             19,141         15,494
  Prepaid expenses                                      1,216          1,195
  Prepaid income taxes (note 11)                          341              -
----------------------------------------------------------------------------
                                                       80,117         72,063
Property and equipment (note 5)                         3,304          2,829
----------------------------------------------------------------------------
Total assets                                           83,421         74,892
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Liabilities and Shareholders' Equity                                        
Current liabilities:                                                        
  Trade payables and accrued liabilities (note                              
   6)                                                   6,047          5,358
  Income taxes payable (note 11)                          296          1,404
  Deferred revenue                                     25,289         21,693
----------------------------------------------------------------------------
                                                       31,632         28,455
Deferred tax liability (note 11)                          379            358
----------------------------------------------------------------------------
Total liabilities                                      32,011         28,813
----------------------------------------------------------------------------
                                                                            
Shareholders' equity:                                                       
  Share capital                                        40,498         31,751
  Contributed surplus                                   4,673          3,535
  Retained earnings                                     6,239         10,793
----------------------------------------------------------------------------
Total shareholders' equity                             51,410         46,079
----------------------------------------------------------------------------
Total liabilities and shareholders' equity             83,421         74,892
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.                
Approved by the Board                                                      
                                                                           
Frank L. Meyer           Robert F. M. Smith                                
Director                 Director                                          
                                                                            
COMPUTER MODELLING GROUP LTD.                                               
                                                                            
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME              
                                                                            
Years Ended March 31,                                    2013           2012
(thousands of Canadian $ except per share                                   
 amounts)                                                                   
----------------------------------------------------------------------------
                                                                            
Revenue(note 7)                                        68,620         61,034
----------------------------------------------------------------------------
                                                                            
Operating expenses                                                          
  Sales, marketing and professional services           15,473         13,036
  Research and development (note 8)                    12,517         10,629
  General and administrative                            6,340          5,765
----------------------------------------------------------------------------
                                                       34,330         29,430
----------------------------------------------------------------------------
Operating profit                                       34,290         31,604
                                                                            
Finance income (note 10)                                  859          1,020
----------------------------------------------------------------------------
Profit before income and other taxes                   35,149         32,624
Income and other taxes (note 11)                       10,327          9,233
----------------------------------------------------------------------------
                                                                            
Net and total comprehensive income                     24,822         23,391
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Earnings Per Share                                                          
Basic (note 12(e))                                       0.66           0.63
Diluted (note 12(e))                                     0.64           0.62
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.                
                                                                            
COMPUTER MODELLING GROUP LTD.                                               
                                                                            
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY                                
                                                                            
                                     Common                                 
                                      Share Contributed  Retained     Total 
(thousands of Canadian $)           Capital     Surplus  Earnings    Equity 
----------------------------------------------------------------------------
                                                                            
Balance, April 1, 2011               24,801       2,655     8,314    35,770 
Total comprehensive income for the                                          
 year                                     -           -    23,391    23,391 
Dividends paid                            -           -   (20,499)  (20,499)
Shares issued for cash on exercise                                          
 of stock options                                                           
(note 12(b))                          5,874           -         -     5,874 
Common shares buy-back (notes                                               
 12(b) & (c))                           (25)          -      (413)     (438)
Stock-based compensation:                                                   
 Current period expense                   -       1,981         -     1,981 
 Stock options exercised              1,101      (1,101)        -         - 
----------------------------------------------------------------------------
Balance, March 31, 2012              31,751       3,535    10,793    46,079 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Balance, April 1, 2012               31,751       3,535    10,793    46,079 
Total comprehensive income for the                                          
 year                                     -           -    24,822    24,822 
Dividends paid                            -           -   (27,905)  (27,905)
Shares issued for cash on exercise                                          
 of stock options                                                           
(note 12(b))                          7,442           -         -     7,442 
Common shares buy-back (notes                                               
 12(b) & (c))                           (80)               (1,471)   (1,551)
Stock-based compensation:                                                   
 Current period expense                   -       2,523         -     2,523 
 Stock options exercised              1,385      (1,385)        -         - 
----------------------------------------------------------------------------
Balance, March 31, 2013              40,498       4,673     6,239    51,410 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.                
                                                                            
COMPUTER MODELLING GROUP LTD.                                               
                                                                            
CONSOLIDATED STATEMENTS OF CASH FLOWS                                       
                                                                            
Years ended March 31,                                  2013            2012 
(thousands of Canadian $)                                                   
----------------------------------------------------------------------------
                                                                            
Cash flows from operating activities                                        
  Net income                                         24,822          23,391 
Adjustments for:                                                            
  Depreciation (note 5)                               1,539           1,227 
  Income and other taxes (note 11)                   10,327           9,233 
  Stock-based compensation (note 12(d))               2,523           1,981 
  Interest income (note 10)                            (548)           (472)
----------------------------------------------------------------------------
                                                     38,663          35,360 
Changes in non-cash working capital:                                        
  Trade and other receivables                        (3,643)         (2,164)
  Trade payables and accrued liabilities                689             815 
  Prepaid expenses                                      (21)           (131)
  Deferred revenue                                    3,596           4,938 
----------------------------------------------------------------------------
Cash generated from operating activities             39,284          38,818 
  Interest received                                     544             458 
  Income taxes paid                                 (11,755)         (9,091)
----------------------------------------------------------------------------
Net cash from operating activities                   28,073          30,185 
----------------------------------------------------------------------------
                                                                            
Cash flows from financing activities                                        
  Proceeds from issue of common shares                7,442           5,874 
  Dividends paid                                    (27,905)        (20,499)
  Common shares buy-back (note 12(c))                (1,551)           (438)
----------------------------------------------------------------------------
Net cash used in financing activities               (22,014)        (15,063)
----------------------------------------------------------------------------
                                                                            
Cash flows used in investing activities                                     
Property and equipment additions (note 5)            (2,014)         (1,501)
----------------------------------------------------------------------------
Increase (decrease) in cash                           4,045          13,621 
Cash, beginning of year                              55,374          41,753 
----------------------------------------------------------------------------
Cash, end of year                                    59,419          55,374 
----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.                

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended March 31, 2013 and 2012.

1. Reporting Entity:

Computer Modelling Group Ltd. ("CMG") is a company domiciled in Alberta, Canada and is incorporated pursuant to the Alberta Business Corporations Act, with its Common Shares listed on the Toronto Stock Exchange under the symbol "CMG". The address of CMG's registered office is Suite 200, 1824 Crowchild Trail N.W., Calgary, Alberta, Canada, T2M 3Y7. The consolidated financial statements as at and for the year ended March 31, 2013 comprise CMG and its subsidiaries (together referred to as the "Company"). The Company is a computer software technology company engaged in the development and licensing of reservoir simulation software. The Company also provides professional services consisting of highly specialized support, consulting, training, and contract research activities.

2. Basis of Preparation:

(a) STATEMENT OF COMPLIANCE:

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").

These consolidated financial statements as at and for the year ended March 31, 2013 were authorized for issuance by the Board of Directors on May 22, 2013.

(b) BASIS OF MEASUREMENT:

The consolidated financial statements have been prepared on the historical cost basis, which is based on the fair value of the consideration at the time of the transaction.

(c) FUNCTIONAL AND PRESENTATION CURRENCY:

The consolidated financial statements are presented in Canadian dollars, which is the functional currency of CMG and its subsidiaries. All financial information presented in Canadian dollars has been rounded to the nearest thousand.

(d) USE OF ESTIMATES, JUDGMENTS AND ASSUMPTIONS:

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies, the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue, costs and expenses for the period. Estimates and underlying assumptions are based on historical experience and other assumptions that are considered reasonable in the circumstances and are reviewed on an on-going basis. Actual results may differ from such estimates and it is possible that the differences could be material. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

(i) Key judgments in applying accounting policies

The key judgments made in applying accounting policies, apart from those involving estimations (note 2(d)(ii) below), that have the most significant effect on the amounts recognized in these consolidated financial statements are as follows:

Functional currency - the determination of the functional currency is a matter of determining the primary economic environment in which an entity operates. IAS 21 - The Effects of Changes in Foreign Exchange Rates, sets out a number of factors to apply in making the determination of the functional currency. However, applying the factors in IAS 21 does not always result in a clear indication of functional currency. Where IAS 21 factors indicate differing functional currencies within a subsidiary, the Company uses judgment in the ultimate determination of that subsidiary's functional currency, including an assessment of the nature of the relationship between the Company and the subsidiary. Judgment was applied in the determination of the functional currency of certain of the Company's operating entities.

Research and development - assumptions are made in respect to the eligibility of certain research and development projects in the calculation of scientific research and experimental development ("SR&ED") investment tax credits which are netted against the research and development costs in the statement of comprehensive income. SR&ED claims are subject to audits by relevant taxation authorities and the actual amount may change depending on the outcome of such audits (note 8).

Revenue recognition - certain software license agreements contain multiple-element arrangements as they may also include maintenance fees. Judgment is used in determining a fair value of each element of a contract. Professional services revenue earned from certain consulting contracts is recognized by the stage of completion of the transaction determined using the percentage-of-completion method. Judgment is used in determining the progress of each contract at period end. In assessing revenue recognition, judgment is also used in determining the ability to collect the corresponding account receivable (note 7).

(ii) Estimation uncertainty

The following are the key sources of estimation uncertainty and key assumptions concerning the future, that have a significant risk of causing material adjustments to the carrying amount of assets and liabilities within the next financial year:

Stock-based compensation - assumptions and estimates are used in determining the inputs used in the Black-Scholes option pricing model, including assumptions regarding volatility, dividend yield, risk-free interest rates, forfeiture estimates and expected option lives (note 12(d)).

Property and equipment - estimates are used in determining useful economic lives of property and equipment for the purposes of calculating depreciation (note 5).

Deferred income taxes - assumptions and estimates are made regarding the amount and timing of realization and/or settlement of the temporary differences between the accounting carrying value of the Company's assets versus the tax basis of those assets, and the tax rates at which the differences will be recovered or settled in the future (note 11).

3. Significant Accounting Policies:

(a) BASIS OF CONSOLIDATION:

The consolidated financial statements include the accounts of CMG and its subsidiaries, all 100% owned. All inter-company transactions and balances have been eliminated on consolidation. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

(b) REVENUE RECOGNITION:

Revenue consists of software license fees and professional service fees.

Software License Revenue

Software license revenue is comprised of annuity/maintenance license fees charged for the use of the Company's software products which is generally for a term of one year or less, and perpetual software licensing fees, whereby the customer purchases the-then-current version of the software and has the right to use that version in perpetuity.

Software license revenue is recognized when persuasive evidence of an arrangement exists, the product has been delivered, the fee is fixed or determinable, and collection of the resulting receivable is probable. In cases where collectability is not deemed probable, revenue is recognized upon receipt of cash, assuming all other criteria have been met.

Annuity/maintenance revenue is recognized on a straight-line basis over the life of the related license period, which is generally one year or less. Revenue for licenses billed in advance is deferred and recognized in revenue over the relevant license period.

License fees for perpetual licenses are recognized fully in revenue when all recognition conditions are satisfied.

Software license agreements with multiple-element arrangements, such as those including license fees and maintenance fees, are recognized as separate units of accounting and are recognized as each element is earned based on the relative fair value of each element. A delivered element is considered a separate unit of accounting if it has value to the customer on a standalone basis, and delivery or performance of the undelivered elements is considered probable and substantially under the Company's control. If these criteria are not met, revenue for the arrangement as a whole is accounted for as a single unit of accounting.

Professional Services Revenue

Revenue from professional services, consisting of consulting, training and contract research activities, is recorded on a percentage-of-completion basis or as such services are performed as appropriate in the circumstances. Percentage-of-completion is used when the outcome of the contract can be estimated reliably and is assessed based on work completed as determined by the hours incurred. When the outcome of the contract cannot be estimated reliably, the amount of revenue recognized is limited to the cost incurred in the period.

(c) CASH:

Cash is comprised of interest-earning bank accounts.

(d) PROPERTY AND EQUIPMENT:

Property and equipment are recorded at cost less accumulated depreciation. Cost includes expenditures that are directly attributable to the acquisition of the asset.

Depreciation is based on the cost of an asset and is recognized from the date the item is ready for use in the statement of comprehensive income using the following annual rates and methods that are expected to amortize the cost of the property and equipment over their estimated useful lives:


 
      Computer equipment              33 1/3% straight-line                 
      Furniture and equipment         20% straight-line                     
      Leasehold improvements          Straight-line over the lease term     

Any gain or loss on disposal of an item of property and equipment (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognized in the statement of comprehensive income.

The estimated useful lives and depreciation methods are reviewed at each fiscal year-end and adjusted if appropriate.

(e) RESEARCH AND DEVELOPMENT COSTS:

All costs of product research and development are expensed to operations as incurred as the impact of both technological changes and competition require the Company to continually enhance its products on an annual basis. Research and development costs are recorded net of related SR&ED investment tax credits.

(f) JOINT RESEARCH AND DEVELOPMENT COSTS:

The Company participates in a joint project engaged in product research and development and accordingly records its proportionate share of costs incurred as research and development costs within the statement of comprehensive income.

(g) FINANCE INCOME AND FINANCE COSTS:

Finance income comprises interest income earned on the bank balances and is recognized as it accrues through the statement of comprehensive income, using the effective interest method.

Foreign currency gains and losses are reported on a net basis as either finance income or finance cost depending on whether foreign currency movements are in a net gain or net loss position. Foreign currency gains and losses are recognized in the period in which they occur.

(h) FOREIGN CURRENCY TRANSLATION:

Transactions in foreign currencies are translated to Canadian dollars, the functional currency of the Company, at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars at the rate of exchange prevailing at the reporting date while non-monetary assets and liabilities that are measured in terms of historical cost are translated using the exchange rates at the dates of the transactions.

Revenues and expenses are translated at the rate of exchange in effect on the transaction dates. Realized and unrealized foreign exchange gains and losses are included in the statement of comprehensive income in the period in which they occur.

(i) INCOME TAXES:

Income taxes comprise current and deferred tax.

Current tax is the expected tax payable or receivable based on taxable profit for the period calculated using tax rates that have been enacted or substantively enacted at the reporting date, and includes any adjustments to tax payable in respect of previous years. Taxable profit differs from profit as reported in the Consolidated Statement of Operations and Comprehensive Income because of items that are taxable or deductible in other years and items that are never taxable and deductible. Prepaid income taxes and current income taxes payable are offset only when a legally enforceable right of offset exists and the prepaid income tax and tax payable arise in the same tax jurisdiction and relate to the same taxable entity.

Deferred taxes are recognized for temporary differences between the tax and accounting bases of assets and liabilities and for the benefit of losses available to be carried forward for tax purposes to the extent that it is probable that future taxable profits will be available against which the losses can be utilized. Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply in the years in which temporary differences are expected to be recovered or settled. Any change to the net deferred tax assets and liabilities is included in operations in the period it occurs. Deferred tax assets and liabilities are offset only when a legally enforceable right of offset exists and the deferred tax assets and liabilities arise in the same tax jurisdiction and relate to the same taxable entity.

In determining the amount of current and deferred tax, the Company takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. The Company believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Company to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made.

(j) INVESTMENT TAX CREDITS:

The Company receives federal and provincial investment tax credits in Canada on qualified scientific research and experimental development expenditures incurred in each taxation year. Investment tax credits are recorded as a deduction against related expenses or capital items provided that reasonable assurance over collection of the tax credits exists.

(k) EARNINGS PER SHARE:

Basic earnings per share is computed by dividing the net income by the weighted average number of Common Shares outstanding for the period. Diluted per share amounts reflect the potential dilution that could occur if securities or other contracts to issue Common Shares were exercised or converted to Common Shares. In calculating the dilutive effect of stock options, it is assumed that proceeds received from the exercise of in-the-money stock options are used to repurchase Common Shares at the average market price during the period.

(l) STOCK-BASED COMPENSATION PLAN:

The Company has a stock-based compensation plan that is described in note 12(d). The fair value of stock options is determined using the Black-Scholes valuation model as of the grant date and is expensed over the vesting period, with a corresponding increase in equity, based on the Company's estimate of the number of options that will actually vest. Measurement inputs include the share price on the measurement date, the exercise price of the instrument, expected volatility (based on an evaluation of the Company's historic volatility, particularly over the historic period commensurate with the expected term), expected term of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value. At the end of each reporting period, the Company revises its estimates of the number of options that are expected to vest and recognizes the impact of any revision in the statement of comprehensive income. When stock options are exercised, the Company records consideration received, together with amounts previously recognized in contributed surplus, as an increase in share capital.

(m) SHORT-TERM EMPLOYEE BENEFITS:

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

(n) FINANCIAL INSTRUMENTS:

(i) Non-derivative financial assets

The Company initially recognizes loans and receivables on the date that they are originated. All other financial assets are recognized initially on the trade date at which the Company becomes a party to the contractual provisions of the instruments. The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. The Company classifies non-derivative financial assets into the following categories:

Financial assets at fair value through profit or loss ("FVTPL"):

A financial asset is classified in this category if it is either held for trading or designated as such upon initial recognition.

It is held for trading if:

- It has been acquired principally for the purpose of selling it in the near term;

- It is part of the Company's portfolio of financial instruments that are managed together and have a pattern of short-term profit taking;

- It is a derivative not designated and effective as a hedging instrument.

It is classified as FVTPL if:

- It forms part of a contract containing one or more embedded derivatives;

- It forms part of a group of financial instruments which is managed and its performance is evaluated on a fair value basis.

FVTPL are measured initially and subsequently at fair value, and changes therein are recognized in the statement of comprehensive income. Transaction costs are recognized in the statement of comprehensive income as incurred. The Company's only financial asset belonging to this category is cash.

Loans and receivables:

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The Company's trade and other receivables are classified as loans and receivables. Trade receivables are recognized initially at fair value plus any directly attributable transaction costs, and subsequently measured at amortized cost using the effective interest rate method less any provision for impairment. The Company's trade and other receivables are classified as current assets. The fair value of trade and other receivables is estimated at the present value of future cash flows, discounted at the market rate of interest at the reporting date.

(ii) Non-derivative financial liabilities

Financial liabilities at amortized cost include trade payables and accrued liabilities. Such liabilities are initially recognized at fair value on the trade date at which the Company becomes a party to the contractual provisions of the instrument, represented by the amount required to be paid plus any directly attributable transaction costs, and subsequently measured at amortized cost using the effective interest method. Financial liabilities are classified as current liabilities if payment is due within a year; otherwise, they are classified as non-current liabilities. The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire. The fair value of non-derivative financial liabilities, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.

(iii) Share Capital

Common Shares are classified as equity. Incremental costs directly attributable to the issue of Common Shares are recognized as a deduction from equity, net of any tax effects.

(o) IMPAIRMENT:

(i) Receivables

Trade and other receivables are assessed for impairment at each reporting date at both a specific and collective level. All individually significant receivables are assessed for specific impairment. All individually significant receivables found not to be specifically impaired, together with receivables that are not individually significant, are collectively assessed for impairment by grouping together receivables with similar risk characteristics. In assessing collective impairment, the Company uses historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for management's judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends. An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. Losses are recognized in the statement of comprehensive income and reflected in an allowance account against trade and other receivables. When a subsequent event (such as the repayment by a debtor) causes the amount of impairment loss to decrease, the decrease is reversed through the statement of comprehensive income.

(ii) Non-financial assets

The carrying amounts of the Company's non-financial assets, other than deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated, and any impairment loss required is recognized in the statement of comprehensive income. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognized.

(p) LEASES:

The Company's only lease commitments relate to its office premises which are classified as operating leases since they do not transfer the risks and rewards of ownership to the Company. Payments made under operating leases are recognized in the statement of comprehensive income on a straight-line basis over the term of the lease.

4. Accounting Standards and Interpretations Not Yet Adopted:

The following is a summary of new standards, amendments to standards and interpretations not yet effective for the year ended March 31, 2013, and have not been applied in preparing these consolidated financial statements:


 
--  IFRS 9 Financial Instruments
    Replaces the guidance in IAS 39 Financial Instruments: Recognition and
    Measurement, on the classification and measurement of financial assets
    and liabilities. The Company intends to adopt IFRS 9 (2010) in its
    financial statements for the annual period beginning on April 1, 2015.
    The Company does not expect IFRS 9 (2010) to have a material impact on
    the financial statements because of the nature of the Company's
    operations and the types of financial assets that it holds. 
--  IFRS 10 Consolidated Financial Statements
    Replaces the guidance in IAS 27 Consolidated and Separate Financial
    Statements and SIC-12 Consolidation - Special Purpose Entities, and
    provides a single model to be applied in the control analysis for all
    investees, including entities that currently are special purpose
    entities in the scope of SIC-12. The Company intends to adopt IFRS 10 in
    its financial statements for the annual period beginning on April 1,
    2013, and does not expect IFRS 10 to have a material impact on the
    financial statements. 
--  IFRS 11 Joint Arrangements
    Replaces the guidance in IAS 31 Interest in Joint Ventures, and
    essentially carves out of previous jointly controlled entities, those
    arrangements which although structured through a separate vehicle, such
    separation is ineffective and the parties to the arrangement have rights
    to the assets and obligations for the liabilities and are accounted for
    as joint operations in a fashion consistent with jointly controlled
    assets/operations under IAS 31. In addition, under IFRS 11 joint
    ventures must now use the equity method of accounting. The Company
    intends to adopt IFRS 11 in its financial statements for the annual
    period beginning on April 1, 2013. The Company does not expect IFRS 11
    to have a material impact on the financial statements. 
--  IFRS 12 Disclosure of Interests in Other Entities 
    Contains the disclosure requirements for entities that have interest in
    subsidiaries, joint arrangements, associates and/or unconsolidated
    structured entities. The Company intends to adopt IFRS 12 in its
    financial statements for the annual period beginning April 1, 2013. The
    Company does not expect the amendments to have a material impact on the
    financial statements, because of the nature of the Company's interests
    in other entities. 
--  IFRS 13 Fair Value Measurement
    Replaces the fair value measurement guidance contained in individual
    IFRSs with a single source of fair value measurement guidance. The
    Company intends to adopt IFRS 13 prospectively in its financial
    statements for the annual period beginning on April 1, 2013. The Company
    does not expect IFRS 13 to have a material impact on the financial
    statements. 
--  Amendments to IAS 1 Presentation of Financial Statements
    Require an entity present separately the items of other comprehensive
    income that may be reclassified to profit or loss in the future from
    those that would never be reclassified to profit or loss. The Company
    intends to adopt the amendments in its financial statements for the
    annual period beginning on April 1, 2013. As the amendments only require
    changes in the presentation of items in other comprehensive income, the
    Company does not expect the amendments to IAS 1 to have a material
    impact on the financial statements. 
--  Amendments to IAS 32 and IFRS 7 Offsetting Financial Assets and
    Liabilities
    Amendments to IAS 32 clarifies when an entity has a legally enforceable
    right to set-off and net versus gross settlement mechanisms, while
    amendments to IFRS 7 contain new disclosure requirements for offset
    financial assets and liabilities and netting arrangements. The Company
    intends to adopt the amendments to IFRS 7 in its financial statements
    for the annual period beginning on April 1, 2013, and the amendments to
    IAS 32 in its financial statements for the annual period beginning April
    1, 2014. The Company does not expect the amendments to have a material
    impact on the financial statements. 

5. Property and Equipment:


 
Cost                          Computer Furniture and    Leasehold           
(thousands of $)             Equipment     Equipment Improvements     Total 
----------------------------------------------------------------------------
Balance at April 1, 2011         4,101         1,430        1,813     7,344 
Additions                          476           357          668     1,501 
Disposals                         (328)         (226)        (235)     (789)
----------------------------------------------------------------------------
Balance at March 31, 2012        4,249         1,561        2,246     8,056 
----------------------------------------------------------------------------
                                                                            
Balance at April 1, 2012         4,249         1,561        2,246     8,056 
Additions                        1,419           126          469     2,014 
Disposals                         (269)            -            -      (269)
----------------------------------------------------------------------------
Balance at March 31, 2013        5,399         1,687        2,715     9,801 
----------------------------------------------------------------------------
                                                                            
Accumulated Depreciation                                                    
(thousands of $)                                                            
----------------------------------------------------------------------------
Balance at April 1, 2011        (2,816)         (770)      (1,204)   (4,790)
Depreciation charge for the                                                 
 year                             (764)         (227)        (236)   (1,227)
Disposals                          328           227          235       790 
----------------------------------------------------------------------------
Balance at March 31, 2012       (3,252)         (770)      (1,205)   (5,227)
----------------------------------------------------------------------------
                                                                            
Balance at April 1, 2012        (3,252)         (770)      (1,205)   (5,227)
Depreciation charge for the                                                 
 year                             (851)         (262)        (426)   (1,539)
Disposals                          269             -            -       269 
----------------------------------------------------------------------------
Balance at March 31, 2013       (3,834)       (1,032)      (1,631)   (6,497)
----------------------------------------------------------------------------
                                                                            
Carrying Amounts                                                            
----------------------------------------------------------------------------
At March 31, 2012                  997           791        1,041     2,829 
----------------------------------------------------------------------------
At March 31, 2013                1,565           655        1,084     3,304 
----------------------------------------------------------------------------

6. Trade Payables and Accrued Liabilities:


 
(thousands of $)                               March 31, 2013 March 31, 2012
----------------------------------------------------------------------------
Trade payables                                            518            340
Employee salaries, commissions and benefits                                 
 payable                                                3,574          3,359
Accrued liabilities and other payables                  1,955          1,659
----------------------------------------------------------------------------
                                                        6,047          5,358
----------------------------------------------------------------------------

7. Revenue:


 
Years ended March 31,                                    2013           2012
(thousands of $)                                                            
----------------------------------------------------------------------------
Software licenses                                      62,961         55,582
Professional services                                   5,659          5,452
----------------------------------------------------------------------------
                                                       68,620         61,034
----------------------------------------------------------------------------

8. Research and Development Costs:


 
Years ended March 31,                                   2013           2012 
(thousands of $)                                                            
----------------------------------------------------------------------------
Research and development                              14,364         12,100 
SR&ED investment tax credits                          (1,847)        (1,471)
----------------------------------------------------------------------------
                                                      12,517         10,629 
----------------------------------------------------------------------------

9. Personnel Expenses:


 
Years ended March 31,                                    2013           2012
(thousands of $)                                                            
----------------------------------------------------------------------------
Salaries, commissions and short-term employee                               
 benefits                                              24,570         21,222
Stock-based compensation (note 12(d))                   2,523          1,981
----------------------------------------------------------------------------
                                                       27,093         23,203
----------------------------------------------------------------------------

10. Finance Income:


 
Years ended March 31,                                    2013           2012
(thousands of $)                                                            
----------------------------------------------------------------------------
Interest income                                           548            472
Net foreign exchange gain                                 311            548
----------------------------------------------------------------------------
Finance income                                            859          1,020
----------------------------------------------------------------------------

11. Income and Other Taxes:

The major components of income tax expense are as follows:


 
Years ended March 31,                                    2013          2012 
(thousands of $)                                                            
----------------------------------------------------------------------------
Current year income taxes                               9,436         9,001 
Adjustment for prior year                                 144          (561)
----------------------------------------------------------------------------
Current income taxes                                    9,580         8,440 
                                                                            
Deferred tax expense (recovery)                            21           (26)
Foreign withholding and other taxes                       726           819 
----------------------------------------------------------------------------
                                                       10,327         9,233 
----------------------------------------------------------------------------

The provision for income and other taxes reported differs from the amount computed by applying the combined Canadian Federal and Provincial statutory rate to the profit before income and other taxes.

The reasons for this difference and the related tax effects are as follows:


 
Years ended March 31,                                  2013            2012 
(thousands of $, unless otherwise stated)                                   
----------------------------------------------------------------------------
Combined statutory tax rate                           25.00%          26.13%
----------------------------------------------------------------------------
Expected income tax                                   8,788           8,525 
Non-deductible costs                                    658             545 
Effect of tax rates in foreign jurisdictions            168             165 
Withholding taxes                                       544             586 
Recognition of previously unrecognized SR&ED                                
 investment tax credits                                   -            (463)
Adjustment for prior year                               144             (98)
Other                                                    25             (27)
----------------------------------------------------------------------------
                                                     10,327           9,233 
----------------------------------------------------------------------------

The components of the Company's deferred tax liability are as follows:


 
(thousands of $)                              March 31, 2013 March 31, 2012 
----------------------------------------------------------------------------
Tax liability on SR&ED investment tax credits           (362)          (267)
Tax liability on property and equipment                  (17)           (91)
----------------------------------------------------------------------------
Deferred tax liability                                  (379)          (358)
----------------------------------------------------------------------------

All movement in deferred tax assets and liabilities is recognized through net income of the respective period.

Prepaid income taxes and current income taxes payable have not been offset as the amounts relate to income taxes levied by different tax authorities to different taxable entities.

12. Share Capital:

(a) AUTHORIZED:

An unlimited number of Common Shares, an unlimited number of Non-Voting Shares, and an unlimited number of Preferred Shares, issuable in series.

(b) ISSUED:


 
(thousands of shares)                                         Common Shares 
----------------------------------------------------------------------------
Balance, April 1, 2011                                               36,427 
Issued for cash on exercise of stock options                            913 
Common shares buy-back                                                  (33)
----------------------------------------------------------------------------
Balance, March 31, 2012                                              37,307 
----------------------------------------------------------------------------
                                                                            
Balance, April 1, 2012                                               37,307 
Issued for cash on exercise of stock options                            913 
Common shares buy-back                                                  (91)
----------------------------------------------------------------------------
Balance, March 31, 2013                                              38,129 
----------------------------------------------------------------------------

Subsequent to March 31, 2013, 27,000 stock options were exercised for cash proceeds of $207,000.

On May 23, 2012, the Board of Directors considered the merits of renewing the Company's shareholder rights plan on or before the third-year anniversary of shareholder approval of the plan and determined that it was in the best interest of the Company to continue to have a shareholder rights plan in place. Upon careful review, the Board of Directors agreed to approve an amended and restated rights plan (the "Amended and Restated Rights Plan") between the Company and Valiant Trust Company, which is similar in all respects to the existing shareholder rights plan, with the exception of certain minor amendments. The Amended and Restated Rights Plan was approved by the Company's shareholders on July 12, 2012.

(c) COMMON SHARES BUY-BACK:

On April 6, 2011, the Company announced a Normal Course Issuer Bid ("NCIB") commencing on April 7, 2011 to purchase for cancellation up to 1,636,000 of its Common Shares. This NCIB ended on April 6, 2012 and a total of 33,000 Common Shares were purchased at market price for a total cost of $438,000 during the year ended March 31, 2012.

On April 16, 2012, the Company announced a NCIB commencing on April 18, 2012 to purchase for cancellation up to 3,416,000 of its Common Shares. During the year ended March 31, 2013, a total of 91,000 Common Shares were purchased at market price for a total cost of $1,551,000.

On April 29, 2013, the Company announced a NCIB commencing on May 1, 2013 to purchase for cancellation up to 3,538,000 of its Common Shares.

(d) STOCK-BASED COMPENSATION PLAN:

The Company adopted a rolling stock option plan as of July 13, 2005, which was reaffirmed by the Company's shareholders on July 7, 2011, which allows it to grant options to acquire Common Shares of up to 10% of the outstanding Common Shares at the date of grant. Based upon this calculation, at March 31, 2013, the Company could grant up to 3,812,000 stock options. Pursuant to the stock option plan, the maximum term of an option granted cannot exceed five years from the date of grant. The outstanding stock options vest as to 50% after the first year anniversary, from date of grant, and then vest as to 25% of the total options granted after each of the second and third year anniversary dates.

The following table outlines changes in stock options:


 
Years ended March 31,                                                       
(thousands except per share                        2013                 2012
 amounts)                                                                   
----------------------------------------------------------------------------
                                               Weighted             Weighted
                                                Average              Average
                                               Exercise             Exercise
                                   Options        Price Options        Price
                                   Granted    ($/share) Granted    ($/share)
----------------------------------------------------------------------------
Outstanding at beginning of year     2,903         9.85   2,825         7.41
Granted                              1,006        18.19   1,071        13.43
Exercised                             (913)        8.15    (913)        6.43
Forfeited/cancelled                    (58)       15.09     (80)       10.57
----------------------------------------------------------------------------
Outstanding at end of year           2,938        13.13   2,903         9.85
----------------------------------------------------------------------------
Options exercisable at end of year   1,207         9.75   1,120         7.31
----------------------------------------------------------------------------

The range of exercise prices of stock options outstanding and exercisable at March 31, 2013 is as follows:


 
                                         Outstanding             Exercisable
----------------------------------------------------------------------------
                                Weighted                                    
                                 Average    Weighted                Weighted
                               Remaining     Average                 Average
                   Number of Contractual    Exercise   Number of    Exercise
Exercise Price       Options        Life       Price     Options       Price
 ($/option)      (thousands)     (years)  ($/option) (thousands)  ($/option)
----------------------------------------------------------------------------
4.52 - 5.63              104         0.4        5.45         104        5.45
5.64 - 7.80              327         1.4        7.80         327        7.80
7.81 - 9.07              655         2.4        9.07         405        9.07
9.08 - 13.43             855         3.4       13.40         364       13.40
13.44 - 21.75            997         4.3       18.12           7       13.93
----------------------------------------------------------------------------
                       2,938         3.2       13.13       1,207        9.75
----------------------------------------------------------------------------

The fair value of stock options granted was estimated using the Black-Scholes option pricing model under the following assumptions:


 
Years ended March 31,                                    2013           2012
----------------------------------------------------------------------------
Fair value at grant date ($/option)              2.45 to 3.83   1.23 to 3.42
Share price at grant date ($/share)            17.90 to 21.75 13.00 to 16.35
Risk-free interest rate (%)                      1.13 to 1.33   0.99 to 2.06
Estimated hold period prior to exercise                                     
 (years)                                               2 to 4         2 to 4
Volatility in the price of common shares (%)         27 to 36       24 to 37
Dividend yield per common share (%)              3.39 to 4.12   3.20 to 4.94
----------------------------------------------------------------------------

The Company recognized total stock-based compensation expense for the year ended March 31, 2013 of $2,523,000 (2012 - $1,981,000).

(e) EARNINGS PER SHARE:

The following table summarizes the earnings and weighted average number of Common Shares used in calculating basic and diluted earnings per share:


 
Years ended                                                                 
 March 31,                                                                  
(thousands                                                                  
 except per                              2013                           2012
 share amounts)                                                             
----------------------------------------------------------------------------
                                                                            
                           Weighted                       Weighted          
                            Average  Earnings              Average  Earnings
               Earnings      Shares Per Share Earnings      Shares Per Share
                    ($) Outstanding ($/share)      ($) Outstanding ($/share)
----------------------------------------------------------------------------
Basic            24,822      37,643      0.66   23,391      36,866      0.63
Dilutive effect                                                             
 of stock                                                                   
 options                      1,143                          1,034          
----------------------------------------------------------------------------
Diluted          24,822      38,786      0.64   23,391      37,900      0.62
----------------------------------------------------------------------------

During the year ended March 31, 2013, 65,000 options (2012 - 113,000) were excluded from the computation of the weighted-average number of diluted shares outstanding because their effect was not dilutive.

13. Capital Management:

The Company's objectives in managing capital are to ensure sufficient liquidity to pursue its strategy of organic growth combined with strategic acquisitions and to maximize the return to its shareholders. The capital structure of the Company consists of cash, credit facilities and shareholders' equity. The Company does not have any externally imposed capital requirements and does not presently utilize any quantitative measures to monitor its capital.

The Company's policy is to pay quarterly dividends based on the Company's overall financial performance and cash flow generation. Decisions on dividend payments are made on a quarterly basis by the Board of Directors. There can be no assurance as to the amount or payment of such dividends in the future.

Since November 2002, the Company embarked on a series of normal course issuer bids to buy back its shares. Reference is made to note 12(c).

The Company makes adjustments to its capital structure in light of general economic conditions and the Company's working capital requirements. In order to maintain or adjust its capital structure, the Company, upon approval from its Board of Directors, may pay dividends, buy back shares or undertake other activities as deemed appropriate under the specific circumstances. The Board of Directors reviews and approves any material transactions not in the ordinary course of business.

14. Financial Instruments and Risk Management:

(i) Classification of financial instruments


 
                                              Classification     Measurement
----------------------------------------------------------------------------
Cash                                        Held for trading      Fair value
Trade and other receivables            Loans and receivables  Amortized cost
Trade payables and accrued                                                  
 liabilities                     Other financial liabilities  Amortized cost
----------------------------------------------------------------------------

(ii) Fair values of financial instruments

The carrying values of cash, trade and other receivables, trade payables and accrued liabilities approximate their fair values due to the short-term nature of these instruments.

OVERVIEW:

The Company is exposed to risks of varying degrees of significance and likelihood which could affect its ability to achieve its strategic objectives for growth. The main objectives of the Company's risk management process are to ensure that risks are properly identified and that the capital base is adequate in relation to those risks. The principal financial risks to which the Company is exposed are described below:

(a)CREDIT RISK:

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligation and arises principally from the Company's trade and other receivables. The amounts reported in the statements of financial position for trade receivables are net of allowances for bad debts, estimated by the Company's management based on prior experience and their assessment of the current economic environment.

The Company's trade receivables consist primarily of balances from customers operating in the oil and gas industry, both domestically and internationally, as the Company sells its products and services in over 50 countries worldwide. Some of these countries have greater economic and political risk than experienced in North America and as a result there may be greater risk associated with sales in those jurisdictions. The Company manages this risk by invoicing for the full license term in advance for the majority of software license sales and by invoicing as frequently as the contract allows for consulting and contract research services. In cases where collectability is not deemed probable, revenue is recognized upon receipt of cash, assuming all other criteria have been met. Historically, the Company has not experienced any significant losses related to individual customers or groups of customers in any particular geographic area; therefore, no allowance for doubtful accounts has been established at March 31, 2013 and 2012.

As at March 31, 2013, the Company has a concentration of credit risk with 12 domestic and international customers who represent 72% of trade receivables (2012 - 11 customers; 66%).

The carrying amount of trade and other receivables represents the maximum credit exposure. The maximum exposure to credit risk at March 31, 2013 was $19.1 million (2012 - $15.5 million). The aging of trade and other receivables at the reporting date was:


 
(thousands of $)                               March 31, 2013 March 31, 2012
----------------------------------------------------------------------------
Current                                                10,621          7,648
31-60 days                                              4,798          5,519
61-90 days                                              2,493            159
Over 90 days                                            1,229          2,168
----------------------------------------------------------------------------
Balance, end of year                                   19,141         15,494
----------------------------------------------------------------------------

The Company assesses the creditworthiness of its customers on an ongoing basis and it regularly monitors the amount and age of balances outstanding. Payment terms with customers are 30 days from invoice date; however, industry practice can extend these terms. Accordingly, the Company views the credit risks on these amounts as normal for the industry.

The Company minimizes the credit risk of cash by depositing only with a reputable financial institution in highly liquid interest-bearing cash accounts.

(b) MARKET RISK:

Market risk is the risk that changes in market prices of the foreign exchange rates and interest rates will affect the Company's income or the value of its financial instruments.

(i) Foreign Exchange Risk

The Company operates internationally and primarily prices its products in either the Canadian or US dollar. This gives rise to exposure to market risks from changes in the foreign exchange rates between the Canadian and US dollar. Approximately 67% of the Company's revenues for the year ended March 31, 2013 (2012 - 73%) were denominated in US dollars and at March 31, 2013, the Company had approximately $16.8 million (2012 - $13.4 million) of its working capital denominated in US dollars. The Company currently does not use derivative instruments to hedge its exposure to those risks but as approximately 23% (2012 - 24%) of the Company's total costs are also denominated in US dollars they provide a partial economic hedge against the fluctuation in this currency exchange. In addition, the Company manages levels of foreign currency held by converting excess US dollars into Canadian dollars at spot rates.

The Company's operations are exposed to currency risk on US denominated financial assets and liabilities with fluctuations in the rate recognized as foreign exchange gains or losses in the Consolidated Statements of Operations and Comprehensive Income. It is estimated that a one cent change in the US dollar would result in a net change of approximately $124,000 to equity and net income for the year ended March 31, 2013. A weaker US dollar with respect to the Canadian dollar will result in a negative impact while the reverse would result from a stronger US dollar.

(ii) Interest Rate Risk

The Company has significant cash balances and no interest-bearing debt. The Company's current policy is to invest excess cash in interest-bearing deposits and/or guaranteed investment certificates issued by its principal banker. The Company is exposed to interest cash flow risk from changes in interest rates on its cash balances. Based on the March 31, 2013 cash balance, each 1% change in the interest rate on the Company's cash balance would change equity and net income for the year ended March 31, 2013 by approximately $446,000.

(c) LIQUIDITY RISK:

Liquidity risk is the risk that the Company is not able to meet its financial obligations as they fall due or can do so only at excessive cost. The Company manages liquidity risk through the management of its capital structure as outlined in note 13. The Company's growth is financed through a combination of the cash flows from operations and its cash balances on hand. Given the Company's available liquid resources as compared to the timing of the payments of its liabilities, management assesses the Company's liquidity risk to be low. The Company monitors its expenditures by preparing annual budgets which are updated periodically. At March 31, 2013, the Company has significant cash balances in excess of its obligations and over $800,000 of the line of credit (note 16) available for its use.

15. Commitments:

(a) RESEARCH COMMITMENTS:

The Company is the operator of the DRMS research and development project (the "DRMS project"), a collaborative effort with its partners Shell International Exploration and Production BV ("Shell") and Petroleo Brasileiro S.A. ("Petrobras"), to jointly develop the newest generation of reservoir and production system simulation software. The project has been underway since 2006 and, with the ongoing support of the participants, it is expected to continue until ultimate delivery of the software. The Company's share of costs associated with the project is estimated to be $5.5 million ($2.6 million net of overhead recoveries) for fiscal 2014.

(b) LEASE COMMITMENTS:

The Company has operating lease commitments relating to its office premises with the minimum annual lease payments as follows:


 
Years ended March 31,                                    2013           2012
(thousands of $)                                                            
----------------------------------------------------------------------------
Less than one year                                      2,059          1,940
Between one and five years                              5,083          6,784
----------------------------------------------------------------------------
                                                        7,142          8,724
----------------------------------------------------------------------------

The Company leases a number of properties under operating leases. During the year ended March 31, 2013, $2.1 million (2012 - $1.9 million) was recognized as an expense in the statement of comprehensive income in respect of operating leases related to office premises.

16. Line Of Credit:

The Company has arranged for a $1.0 million line of credit with its principal banker, which can be drawn down by way of a demand operating credit facility or may be used to support letters of credit. As at March 31, 2013, US $165,000 (2012 - US $165,000) had been reserved on this line of credit for the letter of credit supporting a performance bond.

17. Segmented Information:

The Company is organized into one operating segment represented by the development and licensing of reservoir simulation software. The Company provides professional services, consisting of support, training, consulting and contract research activities, to promote the use and development of its software; however, these activities are not evaluated as a separate business segment.

Revenues and property and equipment of the Company arise in the following geographic regions:


 
(thousands of $)                             Revenue  Property and equipment
----------------------------------------------------------------------------
                               Years ended March 31,         As at March 31,
                                    2013        2012        2013        2012
----------------------------------------------------------------------------
                                                                            
Canada                            26,573      18,940       3,132       2,670
United States                     12,105      10,656          53          71
South America                     12,262      11,920          62          68
Eastern Hemisphere(1)             17,680      19,518          57          20
----------------------------------------------------------------------------
                                  68,620      61,034       3,304       2,829
----------------------------------------------------------------------------
(1) Includes Europe, Africa, Asia and Australia.                            

No customer represents revenue in excess of 10% of total revenue in the years ended March 31, 2013 and 2012.

18. Subsidiaries:

CMG is the beneficial owner of the entire issued share capital and controls all the votes of its subsidiaries. The principal activities of all the subsidiaries are the sale and support for the use of CMG's software licenses. Transactions between subsidiaries are eliminated on consolidation. The following is the list of CMG's subsidiaries:


 
Subsidiary                                          Country of Incorporation
----------------------------------------------------------------------------
Computer Modelling Group Inc.                                  United States
CMG Venezuela                                                      Venezuela
CMG Middle East FZ LLC                                            Dubai, UAE
----------------------------------------------------------------------------

19. Joint Operation:

The Company is the operator of a joint software development project, the DRMS project, which gives the Company exclusive rights to commercialize the jointly developed software while the other partners will have unlimited software access for their internal use. Accordingly, the Company records its proportionate share of costs incurred on the project (37.04%) as research and development costs within the consolidated statements of operations and comprehensive income.

For the year ended March 31, 2013, CMG included $3.9 million (2012 - $3.2 million) of costs in its consolidated statements of operations and comprehensive income related to this joint project.

Additionally, the Company is entitled to charge the project for various services provided as operator, which were recorded in revenue as professional services and amounted to $1.9 million during the year ended March 31, 2013 (2012 - $1.7 million).

20. Related Parties:

(a) INTERCOMPANY TRANSACTIONS:

The Company has three wholly owned subsidiaries (note 18) which have intercompany transactions under the normal course of operations and are eliminated upon consolidation.

(b) KEY MANAGEMENT PERSONNEL COMPENSATION:

The key management personnel of the Company are the members of the Company's executive management team and Board of Directors, and control approximately 6.9% of the outstanding shares of CMG at March 31, 2013.

In addition to their salaries and director fees, as applicable, directors and executive officers also participate in the Company's stock option plan (note 12(d)), which is available to almost all employees of the Company.

Key management personnel compensation comprised the following:


 
Years ended March 31,                                    2013           2012
(thousands of $)                                                            
----------------------------------------------------------------------------
Salaries, bonus and employee benefits                   3,694          4,310
Stock-based compensation                                  724            616
----------------------------------------------------------------------------
                                                        4,418          4,926
----------------------------------------------------------------------------

21. Subsequent Events:

On May 22, 2013, the Board of Directors declared a quarterly cash dividend of $0.18 per share and a special cash dividend of $0.05 per share on its Common Shares, payable on June 14, 2013, to all shareholders of record at the close of business on June 7, 2013. Contacts: Computer Modelling Group Ltd. Kenneth M. Dedeluk President & CEO (403) 531-1300 ken.dedeluk@cmgl.ca

Computer Modelling Group Ltd. John Kalman Vice President, Finance & CFO (403) 531-1300 john.kalman@cmgl.ca www.cmgl.ca

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