Computer Modelling Group Announces Year End Results

Computer Modelling Group Announces Year End Results 
CALGARY, ALBERTA -- (Marketwired) -- 05/22/14 --   Computer Modelling
Group Ltd. (TSX: CMG) ("CMG" or the "Company") is very pleased to
report our financial results for the fiscal year ended March 31,
2014. 
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 21, 2014, should be read in conjunction with the audited
consolidated financial statements and related notes of the Company
for the years ended March 31, 2014 and 2013. 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 more than 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, Bogota and Kuala
Lumpur. CMG's Common Shares are listed on the Toronto Stock Exchange
("TSX") and trade under the symbol "CMG". 


 
 
ANNUAL PERFORMANCE                                                          
 
                                             March 31,  March 31,  March 31,
($ thousands, unless otherwise stated)            2014       2013       2012
----------------------------------------------------------------------------
 
Annuity/maintenance licenses                    57,139     54,555     42,858
Perpetual licenses                               9,074      8,406     12,724
----------------------------------------------------------------------------
Software licenses                               66,213     62,961     55,582
Professional services                            8,290      5,659      5,452
----------------------------------------------------------------------------
Total revenue                                   74,503     68,620     61,034
Operating profit                                36,782     34,290     31,604
Operating profit (%)                               49%        50%        52%
EBITDA(1)                                       38,373     35,829     32,831
Net income for the year                         27,630     24,822     23,391
Cash dividends declared and paid                30,304     27,905     20,499
Total assets                                   100,268     83,421     74,892
Total shares outstanding                        39,210     38,129     37,307
Trading price per share at March 31              29.16      21.09      15.90
Market capitalization at March 31            1,143,351    804,130    593,170
----------------------------------------------------------------------------
Per share amounts - ($/share)                                               
Earnings per share - basic                        0.71       0.66       0.63
Earnings per share - diluted                      0.70       0.64       0.62
Cash dividends declared and paid                  0.78       0.74      0.555
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(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 2013(1)              Fiscal 2014(2)       
($ thousands, unless                                                        
 otherwise stated)       Q1     Q2     Q3     Q4     Q1     Q2     Q3     Q4
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Annuity/maintenance                                                         
 licenses            13,179 12,012 14,004 15,359 13,958 13,153 14,278 15,750
Perpetual licenses    2,070  2,671  1,365  2,300  2,331  1,829  2,942  1,972
----------------------------------------------------------------------------
Software licenses    15,249 14,683 15,369 17,659 16,289 14,982 17,220 17,722
Professional                                                                
 services             1,216  1,390  1,433  1,620  1,827  2,202  2,007  2,254
----------------------------------------------------------------------------
Total revenue        16,465 16,073 16,802 19,279 18,116 17,184 19,227 19,976
Operating profit      8,105  8,032  8,276  9,877  9,350  8,296  9,575  9,561
Operating profit (%)     49     50     49     51     52     48     50     48
EBITDA                8,423  8,425  8,687 10,294  9,725  8,675  9,972 10,001
Profit before income                                                        
 and other taxes      8,577  7,703  8,556 10,314  9,999  8,133 10,249 10,761
Income and other                                                            
 taxes                2,487  2,342  2,437  3,061  2,918  2,525  3,044  3,025
Net income for the                                                          
 period               6,090  5,361  6,119  7,253  7,081  5,608  7,205  7,736
Cash dividends                                                              
 declared and paid    9,736  6,020  6,050  6,099  8,841  6,994  7,020  7,449
----------------------------------------------------------------------------
Per share amounts -                                                         
 ($/share)                                                                  
Earnings per share -                                                        
 basic                 0.16   0.14   0.16   0.19   0.19   0.15   0.19   0.20
Earnings per share -                                                        
 diluted               0.16   0.14   0.16   0.19   0.18   0.14   0.18   0.19
Cash dividends                                                              
 declared and paid     0.26   0.16   0.16   0.16   0.23   0.18   0.18   0.19
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) 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.                                  
(2) Q1, Q2, Q3 and Q4 of fiscal 2014 include $1.2 million, $0.2 million,    
$0.9 million and $1.8 million, respectively, in revenue that pertains to    
usage of CMG's products in prior quarters.                                  

HIGHLIGHTS 
During the year ended March 31, 2014, as compared to the prior fiscal
year, CMG: 


 
 
--  Increased annuity/maintenance revenue by 5% 
--  Increased total revenue by 9% 
--  Increased operating profit by 7% 
--  Increased spending on research and development by 17% 
--  Increased EBITDA by 7% 
--  Increased total dividends declared and paid by 5% 
--  Realized earnings per share of $0.71, representing an 8% increase 
 
REVENUE                                                                     
 
For the three months ended March 31,      2014     2013  $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Software licenses                       17,722   17,659        63         0%
Professional services                    2,254    1,620       634        39%
----------------------------------------------------------------------------
Total revenue                           19,976   19,279       697         4%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Software license revenue - % of total                                       
 revenue                                    89%      92%                    
Professional services - % of total                                          
 revenue                                    11%       8%                    
----------------------------------------------------------------------------
----------------------------------------------------------------------------
For the year ended March 31,               2014     2013 $ change   % change
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Software licenses                        66,213   62,961    3,252         5%
Professional services                     8,290    5,659    2,631        46%
----------------------------------------------------------------------------
Total revenue                            74,503   68,620    5,883         9%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Software license revenue - % of total                                       
 revenue                                    89%      92%                    
Professional services - % of total                                          
 revenue                                    11%       8%                    
----------------------------------------------------------------------------
----------------------------------------------------------------------------

CMG's revenue is comprised of software license sales, which provide the
majority of professional services. 
Total revenue increased by 4% for the three months ended March 31,
2014, compared to the same period of the previous fiscal year, mainly
due to an increase in professional services. 
Total revenue increased by 9% in the year ended March 31, 2014,
compared to the previous fiscal year, due to increases in both
software license revenue and professional services. 
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,       2014     2013 $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Annuity/maintenance licenses             15,750   15,359      391         3%
Perpetual licenses                        1,972    2,300     (328)      -14%
----------------------------------------------------------------------------
Total software license revenue           17,722   17,659       63         0%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Annuity/maintenance as a % of total                                         
 software license revenue                    89%      87%                   
Perpetual as a % of total software                                          
 license revenue                             11%      13%                   
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
For the year ended March 31,               2014     2013 $ change   % change
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Annuity/maintenance licenses             57,139   54,555    2,584         5%
Perpetual licenses                        9,074    8,406      668         8%
----------------------------------------------------------------------------
Total software license revenue           66,213   62,961    3,252         5%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Annuity/maintenance as a % of total                                         
 software license revenue                   86%      87%                    
Perpetual as a % of total software                                          
 license revenue                            14%      13%                    
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Total software license revenue remained flat in the three months ended
March 31, 2014, compared to the same period of the previous fiscal
year. However, total software license revenue grew by 5% for the year
ended March 31, 2014, compared to the previous fiscal year, as a
result of increases in both the annuity/maintenance and perpetual
revenue streams. 
CMG's annuity/maintenance license revenue increased by 3% and 5%
during the three months and year ended March 31, 2014, respectively,
compared to the same periods of the previous fiscal year. These
increases were driven by sales to new and existing clients as well as
an increase in maintenance revenue tied to perpetual sales. In
addition, annuity/maintenance license revenue for the three months
and year ended March 31, 2014, compared to the same periods of the
previous year, was positively affected by the weakening of the
Canadian dollar. 
All of our regions, except South America, experienced solid growth in
annuity/maintenance revenue during both the three months and year
ended March 31, 2014, for the reasons described above, but the most
significant growth came from our US 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 and
timing of the payments received may skew the comparison of the
recorded annuity/maintenance revenue amounts between periods. To
provide a normalized comparison, if we were to remove revenue from
this particular customer from the fourth quarter of the current and
previous fiscal years, we will notice that the annuity/maintenance
revenue increased by 11%, instead of 3%, as compared to the same
period of the previous year. Similarly, if we were to remove revenue
from this particular customer from the years ended March 31, 2014 and
2013, we will notice that the annuity/maintenance revenue increased
by 12%, instead of 5%, as compared to the previous year. We are
pleased to report that subsequent to the year ended March 31, 2014 we
received an additional quarterly payment from this particular
customer which will be reflected in Q1 of fiscal 2015 results. Given
our long-term relationship with this customer, and their on-going use
of our licenses, we expect to continue to receive payments from them;
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 annuity/maintenance revenue results. 
Perpetual license sales decreased by 14% for the three months ended
March 31, 2014, compared to the same period of the previous fiscal
year, due to a decrease in Canada and South America partially offset
by growth in perpetual sales generated by the US and Eastern
Hemisphere. 
Perpetual license sales for the year ended March 31, 2014 increased
by 8%, compared to the previous fiscal year, due to growth in
perpetual sales generated by the US, South America and Eastern
Hemisphere partially offset by a decrease in Canada. 
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, 2014, compared to the same periods of the previous fiscal
year, had a positive impact on our reported 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,                                 2014     2013 $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
US dollar annuity/maintenance                                               
 license sales                 US$       10,462   10,777     (315)       -3%
Weighted average conversion                                                 
 rate                                     1.072    1.006                    
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Canadian dollar equivalent     CDN$      11,212   10,838      374         3%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
US dollar perpetual license                                                 
 sales                         US$        1,808    1,475      333        23%
Weighted average conversion                                                 
 rate                                     1.091    1.015                    
----------------------------------------------------------------------------
Canadian dollar equivalent     CDN$       1,972    1,497      475        32%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
For the year ended March 31,               2014     2013  $ change % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
US dollar annuity/maintenance  US$                                          
 license sales                           38,030   35,138     2,892        8%
Weighted average conversion                                                 
 rate                                     1.030    1.003                    
----------------------------------------------------------------------------
Canadian dollar equivalent     CDN$      39,178   35,231     3,947       11%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
US dollar perpetual license    US$                                          
 sales                                    8,234    5,634     2,600       46%
Weighted average conversion                                                 
 rate                                     1.048    1.004                    
----------------------------------------------------------------------------
Canadian dollar equivalent     CDN$       8,627    5,657     2,970       53%
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The following table quantifies the foreign exchange impact on our
software license revenue: 


 
 
For the three months ended                Incremental     Foreign           
 March 31, 2014                   Q4 2013     License    Exchange    Q4 2014
($ thousands)                     Balance      Growth      Impact    Balance
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Annuity/maintenance license                                                 
 sales                             15,359        (300)        691     15,750
Perpetual license sales             2,300        (466)        138      1,972
----------------------------------------------------------------------------
Total software license revenue     17,659        (766)        829     17,722
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
For the year ended March 31,              Incremental     Foreign           
2014                                 2013     License    Exchange       2014
($ thousands)                     Balance      Growth      Impact    Balance
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Annuity/maintenance license                                                 
 sales                             54,555       1,537       1,047     57,139
Perpetual license sales             8,406         308         360      9,074
----------------------------------------------------------------------------
Total software license revenue     62,961       1,845       1,407     66,213
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
REVENUE BY GEOGRAPHIC SEGMENT                                               
 
For the three months ended March 31,     2014     2013  $ change   % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Annuity/maintenance revenue                                                 
  Canada                                6,225    5,805       420          7%
  United States                         3,236    2,799       437         16%
  South America                         2,616    3,399      (783)       -23%
  Eastern Hemisphere(1)                 3,673    3,356       317          9%
                                       15,750   15,359       391          3%
Perpetual revenue                                                           
----------------------------------------------------------------------------
----------------------------------------------------------------------------
  Canada                                   67      803      (736)       -92%
  United States                           787      331       456        138%
  South America                            33      232      (199)       -86%
  Eastern Hemisphere                    1,085      934       151         16%
                                        1,972    2,300      (328)       -14%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total software license revenue                                              
  Canada                                6,292    6,608      (316)        -5%
  United States                         4,023    3,130       893         29%
  South America                         2,649    3,631      (982)       -27%
  Eastern Hemisphere                    4,758    4,290       468         11%
----------------------------------------------------------------------------
                                       17,722   17,659        63          0%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
For the year ended March 31,             2014     2013  $ change   % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Annuity/maintenance revenue                                                 
  Canada                               23,120   21,708     1,412          7%
  United States                        12,778   10,558     2,220         21%
  South America                         8,027   10,169    (2,142)       -21%
  Eastern Hemisphere(1)                13,214   12,120     1,094          9%
----------------------------------------------------------------------------
                                       57,139   54,555     2,584          5%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Perpetual revenue                                                           
  Canada                                  514    2,344    (1,830)       -78%
  United States                         1,641      993       648         65%
  South America                         1,385      741       644         87%
  Eastern Hemisphere                    5,534    4,328     1,206         28%
----------------------------------------------------------------------------
                                        9,074    8,406       668          8%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total software license revenue                                              
  Canada                               23,634   24,052      (418)        -2%
  United States                        14,419   11,551     2,868         25%
  South America                         9,412   10,910    (1,498)       -14%
  Eastern Hemisphere                   18,748   16,448     2,300         14%
----------------------------------------------------------------------------
                                       66,213   62,961     3,252          5%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Includes Europe, Africa, Asia and Australia.                            

On a geographic basis, total software license sales increased in the US
and Eastern Hemisphere markets and decreased in the Canadian and
South American markets during the three months and year ended March
31, 2014, as compared to the same periods of the previous fiscal
year. The most significant growth came from our annuity/maintenance
license sales, with increases experienced across all regions, with
the exception of South America, for the three months and year ended
March 31, 2014, compared to the same periods of the previous fiscal
year. 
The Canadian market (representing 36% of year-to-date total software
revenue) experienced increases in annuity/maintenance license sales
during the three months and year ended March 31, 2014, 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 experienced decreases during the three months and year ended
March 31, 2014, compared to the same periods of the previous fiscal
year, due to the fluctuations inherent in the perpetual revenue
stream. The Canadian market continues to be the leader in generating
total software license revenue and, particularly, in generating
recurring annuity/maintenance revenue as evidenced by the quarterly
year-over-year increases of 38%, 10% and 10% recorded during Q4 2013,
Q1 2014 and Q3 2014, respectively (annuity/maintenance was relatively
flat in Q2 2014, compared to the same period in the previous fiscal
year). The growth trend has continued into the fourth quarter of the
current fiscal year with the recorded increase of 7%. 
The US market (representing 22% of year-to-date total software
revenue) had the most significant growth in annuity/maintenance
license sales during the three months and year ended March 31, 2014,
compared to the same periods of the previous fiscal year, driven by
sales to new and existing clients. Perpetual license sales also grew
during the three months and year ended March 31, 2014, compared to
the same periods of the previous fiscal year. 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 20%,
32%, 16% and 21% recorded during Q4 2013, Q1 2014, Q2 2014, and Q3
2014, respectively. This double digit growth trend has continued into
the fourth quarter of the current fiscal year with the recorded
increase of 16%. 
South America (representing 14% of year-to-date total software
revenue) experienced decreases of 23% and 21% in annuity/maintenance
revenue during the three months and year ended March 31, 2014,
respectively, compared to the same periods of 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). To provide a normalized comparison, if we were to
remove revenue from this particular customer from the fourth quarter
of the current and previous fiscal years, we will notice that the
South America annuity/maintenance revenue increased by 29%, instead
of decreasing by 23%, as compared to the same period of the previous
year. Similarly, if we were to remove revenue from this particular
customer from the years ended March 31, 2014 and 2013, we will notice
that the annuity/maintenance revenue increased by 20%, instead of
decreasing by 21%, as compared to the previous year which
demonstrates the continued growth in the South American market. The
South American region experienced a decrease in perpetual license
sales during the three months ended March 31, 2014, compared to the
same period of the previous fiscal year, while there was an increase
in perpetual license sales during the year ended March 31, 2014,
compared to the previous fiscal year. 
Eastern Hemisphere (representing 28% of the year-to-date total
software revenue) grew annuity/maintenance license sales during both
the three months and year ended March 31, 2014, compared to the same
periods of the previous fiscal year, due to sales to both new and
existing customers. Perpetual license sales also increased in both
the three months and year ended March 31, 2014, compared to the same
periods of 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 the 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. 
QUARTERLY SOFTWARE LICENSE REVENUE ($THOUSANDS) 
To view the figure associated with this release, please visit the
following link:
http://media3.marketwire.com/docs/CMGL_QSLR.pdf. 


 
 
1.  Q1, Q2, Q3 and Q4 of fiscal 2010 include $0.4 million, $0.4 million,
    $0.3 million and $0.4 million, respectively, in revenue that pertains to
    usage of CMG's products in prior quarters. 
2.  Q1, Q2, Q3 and Q4 of fiscal 2011 include $1.1 million, $0.2 million,
    $0.3 million and $0.1 million, respectively, in revenue that pertains to
    usage of CMG's products in prior quarters. 
3.  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. 
4.  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. 
5.  Q1, Q2, Q3 and Q4 of fiscal 2014 include $1.2 million, $0.2 million,
    $0.9 million, and $1.8 million, respectively, in revenue that pertains
    to usage of CMG's products in prior quarters. 
 
DEFERRED REVENUE                                                            
 
                                       Fiscal   Fiscal                      
                                         2014     2013   $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Deferred revenue at:                                                        
Q1                                     22,014   18,779      3,235        17%
Q2                                     19,346   18,241      1,105         6%
Q3                                     18,069   15,510      2,559        16%
Q4                                     29,531   25,289      4,242        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 the end of Q1,
Q2, Q3 and Q4 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 Q4 compared to the balances at Q1, Q2 and
Q3. 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, 2014 increased by 17% compared to the
prior fiscal year due to both the renewal of existing and signing of
new software licenses and maintenance contracts in the quarter. 
PROFESSIONAL SERVICES REVENUE 
CMG recorded professional services revenue of $2.3 million for the
three months ended March 31, 2014, representing an increase of $0.6
million compared to the same period of the previous fiscal year, due
to both an increase in project activities by our clients and due to
entering into a large consulting agreement with one of our clients.
Professional services for the year ended March 31, 2014 amounted to
$8.3 million, representing a $2.6 million increase compared to the
previous fiscal year, which again resulted from both an increase in
project activities by our clients and entering into a large
consulting agreement with one of our clients in the current fiscal
year. 
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,     2014     2013   $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Sales, marketing and professional                                           
 services                               4,539    4,140        399        10%
Research and development                3,917    3,456        461        13%
General and administrative              1,959    1,806        153         8%
----------------------------------------------------------------------------
Total operating expenses               10,415    9,402      1,013        11%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Direct employee costs(i)                8,385    7,507        878        12%
Other corporate costs                   2,030    1,895        135         7%
----------------------------------------------------------------------------
                                       10,415    9,402      1,013        11%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
For the year ended March 31,             2014     2013   $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Sales, marketing and professional                                           
 services                              16,144   15,473        671         4%
Research and development               14,623   12,517      2,106        17%
General and administrative              6,954    6,340        614        10%
----------------------------------------------------------------------------
Total operating expenses               37,721   34,330      3,391        10%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Direct employee costs(i)               30,292   27,309      2,983        11%
Other corporate costs                   7,429    7,021        408         6%
----------------------------------------------------------------------------
                                       37,721   34,330      3,391        10%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i)Includes salaries, bonuses, stock-based compensation, benefits,          
commissions, and professional development.                                  

CMG's total operating expenses increased by 11% and 10% for the three
months and year ended March 31, 2014, respectively, 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, 2014 related to staff costs, which is consistent with
80% recorded in the comparative period of the previous fiscal year.
Staffing levels for the current fiscal year grew in comparison to the
previous fiscal year to support our continued growth. At March 31,
2014, CMG's staff complement was 195 employees and consultants, up
from 173 employees as at March 31, 2013. Direct employee costs
increased during the three months and year ended March 31, 2014,
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 7% for the three months ended
March 31, 2014, compared to the same period of the previous fiscal
year, mainly due to computer-related purchases and the increase in
other office costs.  
Other corporate costs increased by 6% for the year ended March 31,
2014, compared to the previous fiscal year, mainly due to
computer-related purchases and the increase in other office costs
partially offset by the inclusion of the costs associated with CMG's
biennial technical symposium which took place during the first
quarter of the previous fiscal year.   
RESEARCH AND DEVELOPMENT 


 
 
For the three months ended March 31,    2014     2013    $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Research and development (gross)       4,359    3,906         453        12%
SR&ED credits                           (442)    (450)          8        -2%
----------------------------------------------------------------------------
Research and development               3,917    3,456         461        13%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Research and development as a % of                                          
 total revenue                            20%      18%                      
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 

 
 
For the year ended March 31,            2014     2013    $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Research and development (gross)      16,439   14,364       2,075        14%
SR&ED credits                         (1,816)  (1,847)         31        -2%
----------------------------------------------------------------------------
Research and development              14,623   12,517       2,106        17%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Research and development as a % of                                          
 total revenue                            20%      18%                      
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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
$1.0 million and $4.0 million for the three months and year ended
March 31, 2014, respectively (2013 - $0.9 million and $3.1 million).
See discussion under "Commitments, Off Balance Sheet Items and
Transactions with Related Parties." 
The increases of 12% and 14% in our gross spending on research and
development for the three months and year ended March 31, 2014,
respectively, compared to the same periods of the previous fiscal
year, 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 13% and 17% during the
three months and year ended March 31, 2014, respectively, compared to
the same periods of the previous fiscal year, due to increased
employee compensation costs and costs associated with computing
resources. 
SR&ED credits remained relatively flat for the three months and year
ended March 31, 2014, compared to the same periods of the previous
fiscal year, due to the increase in SR&ED eligible expenditures
offset by the decrease in the Federal SR&ED input tax credit rate
from 20% to 15% effective January 1, 2014 lowering our average rate
for fiscal 2014. 


 
 
DEPRECIATION                                                                
 
For the three months ended March 31,     2014     2013  $ change   % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Depreciation of property and                                                
 equipment, allocated to:                                                   
  Sales, marketing and professional                                         
   services                               118      126        (8)        -6%
  Research and development                247      239         8          3%
  General and administrative               75       52        23         44%
----------------------------------------------------------------------------
Total depreciation                        440      417        23          6%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
For the year ended March 31,             2014     2013  $ change   % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Depreciation of property and                                                
 equipment, allocated to:                                                   
  Sales, marketing and professional                                         
   services                               423      467       (44)        -9%
  Research and development                939      880        59          7%
  General and administrative              229      192        37         19%
----------------------------------------------------------------------------
Total depreciation                      1,591    1,539        52          3%
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Depreciation in the three months and year ended March 31, 2014 was
relatively flat as compared to the same periods of the previous
fiscal year. 


 
 
FINANCE INCOME                                                              
 
For the three months ended March 31,     2014     2013   $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Interest income                           165      139         26        19%
Net foreign exchange gain               1,035      298        737       247%
----------------------------------------------------------------------------
Total finance income                    1,200      437        763       175%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
For the year ended March 31,             2014     2013   $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Interest income                           644      548         96        18%
Net foreign exchange gain               1,716      311      1,405       452%
----------------------------------------------------------------------------
Total finance income                    2,360      859      1,501       175%
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Interest income increased in the three months and year ended March 31,
2014, 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 72% (2013 - 67%) of CMG's revenue for the
year ended March 31, 2014 is denominated in US dollars, whereas only
approximately 24% (2013 - 23%) of CMG's total costs are denominated
in US dollars. 


 
 
CDN$ to US$                                      At March 31  Yearly average
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
2012                                                  1.0009          1.0106
2013                                                  0.9846          0.9963
2014                                                  0.9047          0.9452
----------------------------------------------------------------------------
----------------------------------------------------------------------------

CMG recorded a net foreign exchange gain of $1.0 million and $1.7
million for the three months and year ended March 31, 2014,
respectively, compared to a net foreign exchange gain of $0.3 million
for both the three months and year ended March 31, 2013. These gains
were a result of a weakening in the Canadian dollar which contributed
positively to the valuation of our US-denominated working capital. 
INCOME AND OTHER TAXES 
CMG's effective tax rate for the year ended March 31, 2014 is
reflected as 29.41% (2013 - 28.30%), whereas the prevailing Canadian
statutory tax rate is now 25.0%. This difference 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,    2014     2013   $ change   % change 
($ thousands, except per share                                              
 amounts)                                                                   
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Total revenue                         19,976   19,279        697          4%
Operating expenses                   (10,415)  (9,402)    (1,013)        11%
----------------------------------------------------------------------------
 
Operating profit                       9,561    9,877       (316)        -3%
 
Operating profit as a % of total                                            
 revenue                                  48%      51%                      
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Net income for the period              7,736    7,253        483          7%
Net income for the period as a % of                                         
 total revenue                            39%      38%                      
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Basic earnings per share ($/share)      0.20     0.19       0.01          5%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
For the year ended March 31,            2014     2013   $ change   % change 
($ thousands, except per share                                              
 amounts)                                                                   
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Total revenue                         74,503   68,620      5,883          9%
Operating expenses                   (37,721) (34,330)    (3,391)        10%
----------------------------------------------------------------------------
 
Operating profit                      36,782   34,290      2,492          7%
 
Operating profit as a % of total                                            
 revenue                                  49%      50%                      
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Net income for the period             27,630   24,822      2,808         11%
 
Net income for the period as a % of                                         
 total revenue                            37%      36%                      
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Basic earnings per share ($/share)      0.71     0.66       0.05          8%
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Operating profit as a percentage of total revenue for the three months
and year ended March 31, 2014 was at 48% and 49%, respectively,
compared to 51% and 50% recorded in the same periods of the previous
fiscal year. While our total revenue for the year ended March 31,
2014 grew by 9%, as compared to the same period of the previous
fiscal year, our operating expenses grew by 10%, 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 increased to 39%
for the three months ended March 31, 2014, compared to 38% for the
same period of the previous fiscal year. 
Net income for the period as a percentage of revenue increased to 37%
for the year ended March 31, 2014, compared to 36% for the previous
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,    2014     2013   $ change   % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Net income for the period              7,736    7,253        483          7%
Add (deduct):                                                               
  Depreciation                           440      417         23          6%
  Finance income                      (1,200)    (437)      (763)       175%
  Income and other taxes               3,025    3,061        (36)        -1%
----------------------------------------------------------------------------
EBITDA                                10,001   10,294       (293)        -3%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
EBITDA as a % of total revenue            50%      53%                      
----------------------------------------------------------------------------
----------------------------------------------------------------------------
For the year ended March 31,            2014     2013   $ change   % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Net income for the period             27,630   24,822      2,808         11%
Add (deduct):                                                               
  Depreciation                         1,591    1,539         52          3%
  Finance income                      (2,360)    (859)    (1,501)       175%
  Income and other taxes              11,512   10,327      1,185         11%
----------------------------------------------------------------------------
EBITDA                                38,373   35,829      2,544          7%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
EBITDA as a % of total revenue            52%      52%                      
----------------------------------------------------------------------------
----------------------------------------------------------------------------

EBITDA decreased by 3% for the three months ended March 31, 2014 and
increased by 7% for the year ended March 31, 2014, compared to the
same periods of the previous fiscal year. 
EBITDA as a percent of total revenue for the three months ended March
31, 2014 was at 50%, compared to 53% recorded in the same period of
the previous fiscal year, while it remained consistent at 52% for the
year ended March 31, 2014, compared to the previous fiscal year. 
Our high EBITDA as a percent of total revenue provides indication of
our ability to keep growing our revenue while effectively managing
costs. 


 
 
LIQUIDITY AND CAPITAL RESOURCES                                             
 
For the three months ended March 31,    2014     2013   $ change   % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Cash, beginning of period             64,708   52,236     12,472         24%
Cash flow from (used in):                                                   
  Operating activities                13,396   11,155      2,241         20%
  Financing activities                (5,324)  (3,718)    (1,606)        43%
  Investing activities                  (370)    (254)      (116)        46%
----------------------------------------------------------------------------
Cash, end of period                   72,410   59,419     12,991         22%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
For the year ended March 31,            2014     2013    $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Cash, beginning of period             59,419   55,374       4,045         7%
Cash flow from (used in):                                                   
  Operating activities                32,860   28,073       4,787        17%
  Financing activities               (19,030) (22,014)      2,984       -14%
  Investing activities                  (839)  (2,014)      1,175       -58%
----------------------------------------------------------------------------
Cash, end of period                   72,410   59,419      12,991        22%
----------------------------------------------------------------------------
----------------------------------------------------------------------------

OPERATING ACTIVITIES 
Cash flow generated from operating activities increased by $2.2
million in the three months ended March 31, 2014, compared to the
same period of the previous fiscal year, mainly due to the increase
in net income, and the changes in the deferred revenue and prepaid
expense balances, partially offset by the change in the trade
accounts payable balance. 
Cash flow generated from operating activities increased by $4.8
million in the year ended March 31, 2014, compared to the previous
fiscal year, mainly due to the increase in net income, the change in
deferred revenue balance and the net impact of changes in income
taxes payable partially offset by both the increase in trade
receivables, caused by the timing differences of when the sales are
made and when the resulting receivables are collected and the change
in the trade accounts payable balance. 
FINANCING ACTIVITIES 
Cash used in financing activities during the three months ended March
31, 2014 increased by $1.6 million, compared to the same period of
the previous fiscal year, as a result of paying larger dividends. 
Cash used in financing activities during the year ended March 31,
2014 decreased by $3.0 million, compared to the previous fiscal year,
due to receiving higher proceeds from the issuance of Common Shares
partially offset by paying larger dividends. In addition, in the
first quarter of the previous fiscal year, CMG spent $1.6 million on
buying back Common Shares. 
During the year ended March 31, 2014, CMG employees and directors
exercised options to purchase 1,081,000 Common Shares, which resulted
in cash proceeds of $11.3 million. 
In the year ended March 31, 2014, CMG paid $30.3 million in
dividends, representing the following quarterly dividends: 


 
 
                                                                        2014
($ per share)                         Q1       Q2       Q3       Q4    Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Dividends declared and paid         0.18     0.18     0.18     0.19     0.73
Special dividend declared and                                               
 paid                               0.05        -        -        -     0.05
----------------------------------------------------------------------------
Total dividends declared and                                                
 paid                               0.23     0.18     0.18     0.19     0.78
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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         0.16     0.16     0.16     0.16     0.64
Special dividend declared and                                               
 paid                               0.10        -        -        -     0.10
----------------------------------------------------------------------------
Total dividends declared and                                                
 paid                               0.26     0.16     0.16     0.16     0.74
----------------------------------------------------------------------------
----------------------------------------------------------------------------

On May 21, 2014, CMG announced the payment of a quarterly dividend of
$0.20 per share on CMG's Common Shares. The dividend will be paid on
June 13, 2014 to shareholders of record at the close of business on
June 6, 2014. 
In the fiscal 2012 Management's Discussion and Analysis, we reported
that, beginning in fiscal 2013, we would increase the relative
proportion of dividends paid quarterly and lower the amount paid as a
special dividend at the end of the fiscal year, in order to provide a
more regular income stream to our shareholders throughout the year.
The above tables demonstrate an increase in the regular quarterly
dividend from $0.64 per share in fiscal 2013 to $0.73 per share in
fiscal 2014 and the lowering of the special dividend paid between the
two years. Our total dividend paid also increased from $0.74 per
share in fiscal 2013 to $0.78 per share paid in fiscal 2014,
representing a 5% increase. The special dividend, if any, will
continue to be determined annually based on the Company's,
performance, however, our focus will remain on a sustainable dividend
paid quarterly. 
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. During the year ended March 31, 2014, no common shares were
purchased. 
On May 5, 2014, the Company announced a NCIB commencing on May 5,
2014 to purchase for cancellation up to 3,720,000 of its Common
Shares. 
INVESTING ACTIVITIES 
CMG's current needs for capital asset investment relate to computer
equipment and will be funded internally. During the year ended March
31, 2014, CMG expended $0.8 million on property and equipment
additions, primarily composed of computing equipment, and has a
capital budget of $2.3 million for fiscal 2015. 
LIQUIDITY AND CAPITAL RESOURCES 
At March 31, 2014, CMG has $72.4 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, 2014, 9,377,000 shares of CMG's
public float were traded on the TSX. As at March 31, 2014 CMG's
market capitalization based upon its March 31, 2014 closing price of
$29.16 was $1.1 billion. 
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 $5.9 million ($3.1
million net of overhead recoveries) for fiscal 2015. 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: 2015 - $2.2 million per year; 2016 - $2.3 million; 2017 -
$1.2 million; 2018 and 2019 - $0.2 million per year. 
The leases for our Calgary offices expire in fiscal 2017 and we are
currently in the process of negotiating the lease of new premises. 
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. 
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS ADOPTED: 
The Company adopted the following new standards and interpretations
effective as of April 1, 2013: 
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 adopted IFRS 10 in its
consolidated financial statements for the annual period beginning on
April 1, 2013. IFRS 10 did not have a material impact on the
consolidated 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 adopted IFRS 11 in its consolidated financial statements
for the annual period beginning on April 1, 2013. IFRS 11 did not
have a material impact on the consolidated 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 adopted IFRS 12 in its consolidated
financial statements for the annual period beginning April 1, 2013.
The amendments did not have a material impact on the consolidated
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 adopted IFRS 13 prospectively in its consolidated financial
statements for the annual period beginning on April 1, 2013. IFRS 13
did not have a material impact on the consolidated 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
adopted the amendments in its consolidated 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 amendments to IAS 1 did not have a material impact on the
consolidated financial statements. 
Amendments IFRS 7 - Offsetting Financial Assets and Liabilities 
Contain new disclosure requirements for offsetting financial assets
and liabilities and netting arrangements. The Company adopted the
amendments to IFRS 7 in its consolidated financial statements for the
annual period beginning on April 1, 2013. The amendments did not have
a material impact on the consolidated financial statements. 
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 change Impact on CMG's         
                         in accounting policy       financial statements    
 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
IFRS 9, Financial                                                           
Instruments              IFRS 9 replaces the        The mandatory effective 
                         guidance in IAS 39         date of IFRS 9 has been 
In November 2009 the     Financial Instruments:     left open by the IASB.  
IASB issued IFRS 9       Recognition and            Early application of    
Financial Instruments,   Measurement on the         IFRS is permitted. The  
in October 2010 the IASB classification and         Company does not intend 
published amendments to  measurement of financial   to adopt IFRS 9 in its  
IFRS 9 and in November   assets. The Standard       consolidated financial  
2013 the IASB published  eliminates the existing    statements for the      
further amendments to    IAS 39 categories of held  annual period beginning 
IFRS 9.                  to maturity, available-    April 1, 2014. The      
                         for-sale and loans and     Company does not expect 
The mandatory effective  receivable.                IFRS 9 to have a        
date of IFRS 9 has been                             material impact on the  
left open by the IASB.   Financial assets will be   consolidated financial  
Earlier application of   classified into one of two statements because of   
IFRS 9 is permitted.     categories on initial      the nature of the       
                         recognition:               Company's operations an 
                                                    of financial assets that
                         - financial assets         it holds.               
                         measured at amortized                              
                         cost; or                                           
                         - financial assets                                 
                         measured at fair value.                            
 
                         Gains and losses on                                
                         remeasurement of financial                         
                         assets measured at fair                            
                         value will be recognized                           
                         in profit or loss, except                          
                         that for an investment in                          
                         an equity instrument which                         
                         is not held-for-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.                                        
 
                         Under IFRS 9, 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.                                    
 
                         IFRS 9 incorporates a new                          
                         hedge accounting standard,                         
                         aligning hedge accounting                          
                         more closely with risk                             
                         management.                                        
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Amendments to IAS 32,    The amendments to IAS 32   The Company intends to  
Offsetting Financial     clarify that an entity     adopt the amendments to 
Assets and Liabilities   currently has a legally    IAS 32 in its           
                         enforceable right to set-  consolidated financial  
In December 2011, the    off if that right is:      statements fo
r the      
IASB published                                      annual period beginning 
Offsetting Financial     - not contingent on a      April 1, 2014. The      
Assets and Financial     future event; and          Company does not expect 
Liabilities and issued   - enforceable both in the  the amendments to have a
new presentation         normal course of business  material impact on the  
requirements in IAS 32   and in the event of        consolidated financial  
Financial Instruments:   default, insolvency or     statements.             
Presentation.            bankruptcy of the entity                           
                         and all counterparties.                            
The effective date for                                                      
the amendments to IAS 32 The amendments to IAS 32                           
is annual periods        also clarify when a                                
beginning on or after    settlement mechanism                               
January 1, 2014. The     provides for net                                   
amendments are to be     settlement or gross                                
applied retrospectively. settlement that is                                 
                         equivalent to net                                  
                         settlement.                                        
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Standard/Interpretation  Nature of impending change Impact on CMG's         
                         in accounting policy       financial statements    
 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Amendments to IAS        These amendments to IAS 36 The Company intends to  
36,Impairment of Assets  clarify IASB's original    adopt the amendments to 
                         intention to require:      IAS 36 in its           
In May 2013, the IASB                               consolidated financial  
published Recoverable    - the disclosure of the    statements for the      
Amount Disclosures for   recoverable amount of      annual period beginning 
Non-Financial Assets     impaired assets; and       April 1, 2014. The      
detailing narrow scope   - additional disclosures   Company does not expect 
amendments to IAS 36     about the measurement of   the amendments to have a
Impairment of Assets.    the recoverable amount of  material impact on the  
                         impaired assets when the   consolidated financial  
The effective date for   recoverable amount is      statements.             
the amendments to IAS 36 based on fair value less                           
is annual period         costs of disposal,                                 
beginning on or after    including the discount                             
January 1, 2014. These   rate when a present value                          
amendments are to be     technique is used to                               
applied retrospectively  measure the recoverable                            
and earlier adoption is  amount.                                            
permitted for periods                                                       
when IFRS 13 is applied.                                                    
----------------------------------------------------------------------------
----------------------------------------------------------------------------
OUTSTANDING SHARE DATA                                                      
 
The following table represents the number of Common Shares and options      
 outstanding:                                                               
 
As at May 21, 2014                                                          
(thousands)                                                                 
-------------------
---------------------------------------------------------
Common Shares                                                         39,278
Options                                                                2,861
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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 21, 2014,
CMG could grant up to 3,927,000 stock options. 
On May 21, 2014, the Company's Board of Directors approved a
two-for-one stock split of the Company's issued and outstanding
Common Shares. Shareholders of record at the close of business on
June 25, 2014, will receive one additional Common Share for every
Common Share owned. The Company's Common Shares are expected to
commence trading on the Toronto Stock Exchange on a post-split basis
on June 23, 2014. All share data contained in this MD&A are presented
on a pre-split basis. 
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 $72.4 million of cash at
March 31, 2014, 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, 2014 and March 31, 2013,
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 72% (2013 - 67%)
of product revenues in fiscal 2014 were denominated in US dollars.
Approximately 24% of CMG's total costs in fiscal 2014 (2013 - 23%)
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 disti
nct competitive advantages. 
Sustaining competitive advantage is another issue, which CMG
addresses by making a significant ongoing commitment to research and
development spending. CMG expended $14.6 million (2013 - $12.5
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, 2014, 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, 2014 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 tha
t 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, 2014, 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 21, 2014. 
OUTLOOK 
During fiscal 2014, our annuity and maintenance revenue grew by 5%,
compared to the previous fiscal year, with the most significant
growth coming from the US at 21%. If we were to adjust revenue that
we received for a large contract, for which payments are recognized
on a cash basis and introduce skewing of the results, we would have
noticed that annuity and maintenance revenue actually grew by 12%
during fiscal 2014, compared to the previous fiscal year. Despite
this variability of results, we have experienced growth in annuity
and maintenance revenue across all geographic regions. 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 recurring revenue base. 
Although professional services are not the primary source of our
revenue, we were able to grow this business by $2.6 million in fiscal
2014 as compared to fiscal 2013. 
For the year ended March 31, 2014, 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. We
strive to invest 20% of our top line towards continuous improvement
of our product features as well as development of new capabilities in
order to maintain our technological distinction and take advantage of
new opportunities. We will continue fostering value-based, long-term
relationships with our customers while helping them solve problems
associated with hydrocarbon recovery, with an emphasis on the
advanced recovery processes, which are increasing in complexity and
where our products continue to gain increasing importance. 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. More recently, the North American market is seeing an
increased opportunity in shale gas and liquids which use complex
recovery processes that necessitate the use of simulation. In the
Middle East region we are seeing a shift in focus towards development
of unconventional oil and gas resources, which presents new
opportunities for the use of our software.   
One of the instrumental parts of our success includes training
programs which we offer to our customers to enable them to become
more efficient and effective users of our software. We continue to
see strong class attendance across all the regions. 
CMG's joint project to develop the newest generation of dynamic
reservoir modelling systems ("DRMS Project") continued to progress
during the current fiscal year. The most recent version of the
software was released to our partners during the fourth quarter of
fiscal 2014, for the purposes of testing it on selected assets. This
release achieved its target of successfully simulating a complex
integrated asset model. CMG and its partners remain committed to
funding the ongoing development and to the future success of the
project. 
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 to ultimately return value to our shareholders
in the form of regular quarterly dividend payments and growth in
share value. During fiscal 2014, our total dividends declared and
paid increased by 5%. 


 
 
Kenneth M. Dedeluk                                                          
President and Chief Executive Officer                                       
May 21, 2014                                                                
 
COMPUTER MODELLING GROUP LTD.                                               
 
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION                               
 
(thousands of Canadian $)                     March 31, 2014  March 31, 2013
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Assets                                                                      
Current assets:                                                             
  Cash                                                72,410          59,419
  Trade and other receivables (note 13(a))            24,025          19,141
  Prepaid expenses                                     1,153           1,216
  Prepaid income taxes (note 10)                         128             341
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                      97,716          80,117
Property and equipment (note 4)                        2,552           3,304
----------------------------------------------------------------------------
Total assets                                         100,268          83,421
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Liabilities and Shareholders' Equity                                        
Current liabilities:                                                        
  Trade payables and accrued liabilities                                    
   (note 5)                                            5,947           6,047
  Income taxes payable (note 10)                       1,287             296
  Deferred revenue                                    29,531          25,289
----------------------------------------------------------------------------
                                                      36,765          31,632
Deferred tax liability (note 10)                         335             379
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total liabilities                                     37,100          32,011
----------------------------------------------------------------------------
 
Shareholders' equity:                                                       
  Share capital                                       53,750          40,498
  Contributed surplus                                  5,853           4,673
  Retained earnings                                    3,565           6,239
----------------------------------------------------------------------------
Total shareholders' equity                            63,168          51,410
----------------------------------------------------------------------------
Total liabilities and shareholders' equity           100,268          83,421
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Subsequent events (notes 11(b) and 20)                                      
 
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,                                        2014       2013
(thousands of Canadian $ except per share amounts)                          
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Revenue (note 6)                                           74,503     68,620
----------------------------------------------------------------------------
 
Operating expenses                                                          
  Sales, marketing and professional services               16,144     15,473
  Research and development (note 7)                        14,623     12,517
  General and administrative                                6,954      6,340
----------------------------------------------------------------------------
                                                           37,721     34,330
----------------------------------------------------------------------------
Operating profit                                           36,782     34,290
 
Finance income (note 9)                                     2,360        859
----------------------------------------------------------------------------
Profit before income and other taxes                       39,142     35,149
Income and other taxes (note 10)                           11,512     10,327
----------------------------------------------------------------------------
 
Net and total comprehensive income                         27,630     24,822
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Earnings Per Share                                                          
Basic (note 11(e))                                           0.71       0.66
Diluted (note 11(e))                                         0.70       0.64
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
See accompanying notes to consolidated financial statements.                
 
COMPUTER MODELLING GROUP LTD.                                               
 
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY                                
 
                                  Common  Contributed   Retained      Total 
(thousands of Canadian $)  Share Capital      Surplus   Earnings     Equity 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
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 11(b))                      7,442            -          -      7,442 
Common shares buy-back                                                      
 (notes 11(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 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Balance, April 1, 2013            40,498        4,673      6,239     51,410 
Total comprehensive income                                                  
 for the year                          -            -     27,630     27,630 
Dividends paid                         -            -    (30,304)   (30,304)
Shares issued for cash on                                                   
 exercise of stock options                                                  
 (note 11(b))                     11,274            -          -     11,274 
Stock-based compensation:                                                   
  Current period expense               -        3,158          -      3,158 
  Stock options exercised          1,978       (1,978)         -          - 
----------------------------------------------------------------------------
Balance, March 31, 2014           53,750        5,853      3,565     63,168 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.                
 
COMPUTER MODELLING GROUP LTD.                                               
 
CONSOLIDATED STATEMENTS OF CASH FLOWS                                       
 
Years ended March 31,                                       2014       2013 
(thousands of Canadian $)                                                   
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Cash flows from operating activities                                        
  Net income                                              27,630     24,822 
Adjustments for:                                                            
  Depreciation (note 4)                                    1,591      1,539 
  Income and other taxes (note 10)                        11,512     10,327 
  Stock-based compensation (note 11(d))                    3,158      2,523 
  Interest income (note 9)                                  (644)      (548)
----------------------------------------------------------------------------
                                                          43,247     38,663 
Changes in non-cash working capital:                                        
  Trade and other receivables                             (4,876)    (3,643)
  Trade payables and accrued liabilities                    (100)       689 
  Prepaid expenses                                            63        (21)
  Deferred revenue                                         4,242      3,596 
----------------------------------------------------------------------------
Cash generated from operating activities                  42,576     39,284 
  Interest received                                          635        544 
  Income taxes paid                                      (10,351)   (11,755)
----------------------------------------------------------------------------
Net cash from operating activities                        32,860     28,073 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Cash flows from financing activities                                        
Proceeds from issue of common shares                      11,274      7,442 
Dividends paid                                           (30,304)   (27,905)
Common shares buy-back (note 11(c))                            -     (1,551)
----------------------------------------------------------------------------
Net cash used in financing activities                    (19,030)   (22,014)
----------------------------------------------------------------------------
 
Cash flows used in investing activities                                     
Property and equipment additions (note 4)                   (839)    (2,014)
----------------------------------------------------------------------------
Increase in cash                                          12,991      4,045 
Cash, beginning of year                                   59,419     55,374 
----------------------------------------------------------------------------
Cash, end of year                                         72,410     59,419 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.                

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
Years ended March 31, 2014 and 2013. 
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, 2014 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, 2014 were authorized for issuance by the Board of Directors
on May 21, 2014.  
(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 7).  
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 6).  
(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 11(d)). 
Property and equipment - estimates are used in determining useful
economic lives of property and equipment for the purposes of
calculating depreciation (note 4).  
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 10). 
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 11(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.  
(q) NEW ACCOUNTING STANDARDS AND INTERPRETATIONS ADOPTED:  
(i) 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 adopted IFRS 10 in its
consolidated financial statements for the annual period beginning on
April 1, 2013. IFRS 10 did not have a material impact on the
consolidated financial statements.  
(ii) 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 adopted IFRS 11 in its consolidated financial statements
for the annual period beginning on April 1, 2013. IFRS 11 did not
have a material impact on the consolidated financial statements. 
(iii) 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 adopted IFRS 12 in its consolidated
financial statements for the annual period beginning April 1, 2013.
The amendments did not have a material impact on the consolidated
financial statements, because of the nature of the Company's
interests in other entities. 
(iv) 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 adopted IFRS 13 prospectively in its consolidated financial
statements for the annual period beginning on April 1, 2013. IFRS 13
did not have a material impact on the consolidated financial
statements.  
(v) 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
adopted the amendments in its consolidated 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 amendments to IAS 1 did not have a material impact on the
consolidated financial statements.  
(vi) Amendments IFRS 7 - Offsetting Financial Assets and Liabilities 
Contain new disclosure requirements for offsetting financial assets
and liabilities and netting arrangements. The Company adopted the
amendments to IFRS 7 in its consolidated financial statements for the
annual period beginning on April 1, 2013. The amendments did not have
a material impact on the consolidated financial statements.  
(r) 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,
2014, and have not been applied in preparing these consolidated
financial statements:  
(i) 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 mandatory effective date of IFRS 9, which
supersedes previous versions, has been left open by the IASB. Early
application of IFRS 9 is permitted. The Company does not intend to
adopt IFRS 9 in its consolidated financial statements for the annual
period beginning April 1, 2014. The Company does not expect IFRS 9 to
have a material impact on the consolidated financial statements
because of the nature of the Company's operations and the types of
financial assets that it holds. 
(ii) Amendments to IAS 32 - Offsetting Financial Assets and
Liabilities 
Clarify when an entity has a legally enforceable right to set-off and
net versus gross settlement mechanisms. The Company intends to adopt
the amendments to IAS 32 in its consolidated financial statements for
the annual period beginning April 1, 2014. The Company does not
expect the amendments to have a material impact on the consolidated
financial statements.   
(iii) Amendments to IAS 36 - Impairment of Assets 
Clarify IASB's original intention to require the disclosure of the
recoverable amount of impaired assets as well as additional
disclosures about the measurement of the recoverable amount of
impaired assets. The Company intends to adopt the amendments to IAS
36 in its consolidated financial statements for the annual period
beginning April 1, 2014. The Company does not expect the amendments
to have a material impact on the consolidated financial statements.  
4. PROPERTY AND EQUIPMENT:  


 
 
Cost                       Computer  Furniture and     Leasehold            
(thousands of $)          Equipment      Equipment  Improvements      Total 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
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 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Balance at April 1, 2013      5,399          1,687         2,715      9,801 
Additions                       810             29             -        839 
Disposals                      (505)            (4)            -       (509)
----------------------------------------------------------------------------
Balance at March 31, 2014     5,704          1,712         2,715     10,131 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Accumulated Depreciation                                                    
(thousands of $)                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
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)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Balance at April 1, 2013     (3,834)        (1,032)       (1,631)    (6,497)
Depreciation charge for                                                     
 the year                      (908)          (268)         (415)    (1,591)
Disposals                       505              4             -        509 
----------------------------------------------------------------------------
Balance at March 31, 2014    (4,237)        (1,296)       (2,046)    (7,579)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Carrying Amounts                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
At March 31, 2013             1,565            655         1,084      3,304 
----------------------------------------------------------------------------
At March 31, 2014             1,467            416           669      2,552 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

5. TRADE PAYABLES AND ACCRUED LIABILITIES: 


 
 
(thousands of $)                             March 31, 2014   March 31, 2013
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Trade payables                                          344              518
Employee salaries, commissions and benefits                                 
 payable                                              3,503            3,574
Accrued liabilities and other payables                2,100            1,955
----------------------------------------------------------------------------
                                                      5,947            6,047
----------------------------------------------------------------------------
----------------------------------------------------------------------------

6. REVENUE: 


 
 
Years ended March 31,                                   2014            2013
(thousands of $)                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Software licenses                                     66,213          62,961
Professional services                                  8,290           5,659
----------------------------------------------------------------------------
                                                      74,503          68,620
----------------------------------------------------------------------------
----------------------------------------------------------------------------

7. RESEARCH AND DEVELOPMENT COSTS:  


 
 
Years ended March 31,                                  2014            2013 
(thousands of $)                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Research and development                             16,439          14,364 
SR&ED investment tax credits                         (1,816)         (1,847)
----------------------------------------------------------------------------
                                                     14,623          12,517 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

8. PERSONNEL EXPENSES:  


 
 
Years ended March 31,                                   2014            2013
(thousands of $)                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Salaries, commissions and short-term                                        
 employee benefits                                    26,994          24,570
Stock-based compensation (note 11(d))                  3,158           2,523
----------------------------------------------------------------------------
                                                      30,152          27,093
----------------------------------------------------------------------------
----------------------------------------------------------------------------

9. FINANCE INCOME: 


 
 
Years ended March 31,                                   2014            2013
(thousands of $)                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Interest income                                          644             548
Net foreign exchange gain                              1,716             311
----------------------------------------------------------------------------
Finance income                                         2,360             859
----------------------------------------------------------------------------
----------------------------------------------------------------------------

10. INCOME AND OTHER TAXES: 
The major components of income tax expense are as follows:  


 
 
Years ended March 31,                                  2014             2013
(thousands of $)                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Current year income taxes                            10,537            9,436
Adjustment for prior year                                 7              144
----------------------------------------------------------------------------
Current income taxes                                 10,544            9,580
 
Deferred tax expense (recovery)                         (44)              21
Foreign withholding and other taxes                   1,012              726
----------------------------------------------------------------------------
                                                     11,512           10,327
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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,                                  2014            2013 
(thousands of $, unless otherwise stated)                                   
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Combined statutory tax rate                           25.00%          25.00%
----------------------------------------------------------------------------
Expected income tax                                   9,786           8,788 
Non-deductible costs                                    814             658 
Effect of tax rates in foreign jurisdictions            101             168 
Withholding taxes                                       757             544 
Adjustment for prior year                                 7             144 
Other                                                    47              25 
----------------------------------------------------------------------------
                                                     11,512          10,327 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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


 
 
(thousands of $)                             March 31, 2014  March 31, 2013 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Tax liability on SR&ED investment tax                                       
 credits                                               (354)           (362)
Tax asset (liability) on property and                                       
 equipment                                               19             (17)
----------------------------------------------------------------------------
Net deferred tax liability                             (335)           (379)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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. 
11. 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, 2012                                               37,307 
Issued for cash on exercise of stock options                            913 
Common shares buy-back                                                  (91)
----------------------------------------------------------------------------
Balance, March 31, 2013                                              38,129 
----------------------------------------------------------------------------
 
Balance, April 1, 2013                                               38,129 
Issued for cash on exercise of stock options                          1,081 
----------------------------------------------------------------------------
Balance, March 31, 2014                                              39,210 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Subsequent to March 31, 2014, 69,000 stock options were exercised for
cash proceeds of $652,000. 
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 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. During the year ended March 31, 2014, no Common Shares were
purchased.  
On May 5, 2014, the Company announced a NCIB commencing on May 5,
2014 to purchase for cancellation up to 3,720,000 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, 2014, the Company could grant up to
3,921,000 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,                          2014                     2013
(thousands except per share amounts)                                        
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                           Weighted                 Weighted
                                            Average                  Average
                            Options  Exercise Price  Options  Exercise Price
                            Granted       ($/share)  Granted       ($/share)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Outstanding at                                                              
 beginning of year            2,938           13.13    2,903            9.85
Granted                       1,164           24.45    1,006           18.19
Exercised                    (1,081)          10.41     (913)           8.15
Forfeited                       (92)          16.98      (58)          15.09
----------------------------------------------------------------------------
Outstanding at end of                                                       
 year                         2,929           18.50    2,938           13.13
----------------------------------------------------------------------------
Options exercisable                                                         
 at end of year               1,083           13.44    1,207            9.75
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The range of exercise prices of stock options outstanding and
exercisable at March 31, 2014 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)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
7.80 - 9.07             355         1.1        8.79         355        8.79 
9.08 - 13.43            606         2.4       13.34         372       13.38 
13.44 - 18.18           814         3.4       18.13         355       18.12 
18.19 - 29.15         1,154         4.4       24.44           1       21.75 
----------------------------------------------------------------------------
                      2,929         3.3       18.50       1,083       13.44 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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


 
 
Years ended March 31,                                    2014           2013
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Fair value at grant date ($/option)              3.06 to 4.94   2.45 to 3.83
Share price at grant date ($/share)            24.40 to 29.15 17.90 to 21.75
Risk-free interest rate (%)                      1.21 to 1.64   1.13 to 1.33
Estimated hold period prior to exercise                                     
 (years)                                               2 to 4         2 to 4
Volatility in the price of common shares (%)         26 to 28       27 to 36
Dividend yield per common share (%)              2.78 to 3.21   3.39 to 4.12
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The Company recognized total stock-based compensation expense for the
year ended March 31, 2014 of $3,158,000 (2013 - $2,523,000). 
(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,                               2014                           2013
(thousands except per                                                       
 share amounts)                                                             
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                           Weighted                       Weighted          
                            Average  Earnings              Average  Earnings
               Earnings      Shares Per Share Earnings      Shares Per Share
                    ($) Outstanding ($/share)      ($) Outstanding ($/share)
----------------------------------------------------------------------------
Basic            27,630      38,733      0.71   24,822      37,643      0.66
Dilutive                                                                    
 effect of                                                                  
 stock options                  966                          1,143          
----------------------------------------------------------------------------
Diluted          27,630      39,699      0.70   24,822      38,786      0.64
----------------------------------------------------------------------------
----------------------------------------------------------------------------

During the year ended March 31, 2014, 108,000 options (2013 - 65,000)
were excluded from the computation of the weighted-average number of
diluted shares outstanding because their effect was not dilutive. 
12. 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
11(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.  
13. 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           Other financial          Amortized cost
liabilities                              liabilities                        
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(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, 2014 and 2013. 
As at March 31, 2014, the Company has a concentration of credit risk
with 13 domestic and international customers who represent 73% of
trade receivables (2013 - 12 customers; 72%). 
The carrying amount of trade and other receivables represents the
maximum credit exposure. The maximum exposure to credit risk at March
31, 2014 was $24.0 million (2013 - $19.1 million). The aging of trade
and other receivables at the reporting date was: 


 
 
(thousands of $)                              March 31, 2014  March 31, 2013
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Current                                               11,204          10,621
31-60 days                                             8,445           4,798
61-90 days                                             2,801           2,493
Over 90 days                                           1,575           1,229
----------------------------------------------------------------------------
Balance, end of year                                  24,025          19,141
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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 72% (2013 - 67%) 
of the Company's revenues for the year ended March 31, 2014 were
denominated in US dollars and at March 31, 2014, the Company had
approximately $16.7 million (2013 - $16.8 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 24% (2013 - 23%) 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 $125,000 to equity and net income for the
year ended March 31, 2014. 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, 2014 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, 2014 by approximately
$543,000.   
(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 12. 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, 2014, the
Company has significant cash balances in excess of its obligations
and over $800,000 of the line of credit (note 15) available for its
use. 
14. 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 simulations
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 $5.9 million ($3.1
million net of overhead recoveries) for fiscal 2015.  
(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,                                   2014            2013
(thousands of $)                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Less than one year                                     2,189           2,059
Between one and five years                             3,817           5,083
----------------------------------------------------------------------------
                                                       6,006           7,142
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The Company leases a number of properties under operating leases.
During the year ended March 31, 2014, $2.3 million (2013 - $2.1
million) was recognized as an expense in the statement of
comprehensive income in respect of operating leases related to office
premises. 
15. 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, 2014, US $165,000 (2013 - US $165,000) had
been reserved on this line of credit for the letter of credit
supporting a performance bond.  
16. 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,
                              2014          2013          2014          2013
----------------------------------------------------------------------------
 
Canada                      26,690        26,573         2,364         3,132
United States               15,276        12,105            53            53
South America               12,763        12,262            76            62
Eastern                                                                     
Hemisphere(1)               19,774        17,680            59            57
----------------------------------------------------------------------------
                            74,503        68,620         2,552         3,304
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Includes Europe, Africa, Asia and Australia.                            

No customer represented 10% or more of total revenue in the years ended
March 31, 2014 and 2013.    
17. 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, United Arab Emirates
CMG (Europe) Limited                                          United Kingdom
----------------------------------------------------------------------------
----------------------------------------------------------------------------

18. 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, 2014, CMG included $4.8 million (2013 -
$3.9 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 $2.4 million during the year
ended March 31, 2014 (2013 - $1.9 million). 
19. RELATED PARTIES: 
(a) INTERCOMPANY TRANSACTIONS: 
The Company has four wholly owned subsidiaries (note 17) 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 5.3% of the outstanding shares of CMG at March
31, 2014. 
In addition to their salaries and director fees, as applicable,
directors and executive officers also participate in the Company's
stock option plan (note 11(d)), which is available to almost all
employees of the Company. 
Key management personnel compensation comprised the following: 


 
 
Years ended March 31,                                   2014            2013
(thousands of $)                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Salaries, bonus and employee benefits                  3,707           3,694
Stock-based compensation                                 870             724
----------------------------------------------------------------------------
                                                       4,577           4,418
----------------------------------------------------------------------------
----------------------------------------------------------------------------

20. SUBSEQUENT EVENTS: 
On May 21, 2014, the Board of Directors declared a quarterly cash
dividend of $0.20 per share on its Common Shares, payable on June 13,
2014, to all shareholders of record at the close of business on June
6, 2014. 
On May 21, 2014, the Company's Board of Directors approved a
two-for-one stock split of the Company's issued and outstanding
Common Shares. Shareholders of record at the close of business on
June 25, 2014 will receive one additional Common Share for every
Common Share owned. The Company's Common Shares are expected to
commence trading on the Toronto Stock Exchange on a post-split basis
on June 23, 2014. All share data contained in these consolidated
financial statements and notes are presented on a pre-split basis. 
Contacts:
Computer Modelling Group Ltd.
Kenneth M. Dedeluk
President & CEO
(403) 531-1300
ken.dedeluk@cmgl.ca 
Computer Modelling Group Ltd.
Sandra Balic
Vice President, Finance & CFO
(403) 531-1300
sandra.balic@cmgl.ca
www.cmgl.ca
 
 
Press spacebar to pause and continue. Press esc to stop.