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Computer Modelling Group Announces Second Quarter Results

Date : 11/08/2012 @ 5:30PM
Source : Marketwired
Stock : Computer Modelling Group Ltd (CMG)
Quote : 14.26  -0.12 (-0.83%) @ 1:29AM
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Computer Modelling Group Announces Second Quarter Results

Computer Modelling Group (TSX:CMG)
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Computer Modelling Group Ltd. (TSX:CMG) ("CMG" or the "Company") is very pleased to report our second quarter results for the three and six months ended September 30, 2012.


                                                                            
SECOND QUARTER HIGHLIGHTS                                                   
                                                                            
For the three months ended                                                  
September 30,                             2012      2011 $ change  % change 
($ thousands, except per share data)                                        
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance software                                                
 licenses                               12,012     9,308    2,704        29%
Perpetual software licenses              2,671     1,596    1,075        67%
Total revenue                           16,073    11,982    4,091        34%
Operating profit                         8,032     5,226    2,806        54%
Net income                               5,361     4,318    1,043        24%
Earnings per share - basic                0.14      0.12     0.02        17%
----------------------------------------------------------------------------
                                                                            
For the six months ended                                                    
September 30,                             2012      2011 $ change  % change 
($ thousands, except per share data)                                        
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance software                                                
 licenses                               25,192    18,305    6,887        38%
Perpetual software licenses              4,741     6,987   (2,246)      -32%
Total revenue                           32,539    27,921    4,618        17%
Operating profit                        16,137    14,318    1,819        13%
Net income                              11,451    10,981      470         4%
Earnings per share - basic                0.31      0.30     0.01         3%
----------------------------------------------------------------------------

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 November 7, 2012, should be read in conjunction with the unaudited condensed consolidated financial statements and related notes of the Company for the three and six months ended September 30, 2012 and the audited consolidated financial statements and MD&A for the years ended March 31, 2012 and 2011 contained in the 2012 Annual Report for CMG. 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.

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 described in the MD&A of CMG's 2012 Annual Report under the heading "Business Risks":


--  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.

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.

CORPORATE PROFILE

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


QUARTERLY                                                                   
 PERFORMANCE                                                                
                            Fiscal                      Fiscal        Fiscal
                           2011(1)                     2012(2)       2013(3)
($ thousands, unless                                                        
 otherwise stated)       Q3     Q4     Q1     Q2     Q3     Q4     Q1     Q2
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance                                                         
 licenses             7,999  8,531  8,997  9,308 12,056 12,497 13,179 12,012
Perpetual licenses    2,335  3,911  5,391  1,596  2,321  3,416  2,070  2,671
----------------------------------------------------------------------------
Software licenses    10,333 12,442 14,388 10,904 14,377 15,913 15,249 14,683
Professional                                                                
 services             1,730  1,936  1,551  1,078  1,521  1,302  1,216  1,390
----------------------------------------------------------------------------
Total revenue        12,063 14,378 15,939 11,982 15,898 17,215 16,465 16,073
Operating profit      5,516  7,532  9,092  5,226  8,093  9,193  8,105  8,032
Operating profit %       46     52     57     44     51     53     49     50
EBITDA(4)             5,789  7,818  9,366  5,508  8,414  9,543  8,423  8,425
Profit before income                                                        
 and other taxes      5,278  7,413  9,240  6,096  8,184  9,104  8,577  7,703
Income and other                                                            
 taxes                1,715  2,605  2,577  1,778  2,394  2,484  2,487  2,342
Net income for the                                                          
 period               3,563  4,808  6,663  4,318  5,790  6,620  6,090  5,361
Cash dividends                                                              
 declared and paid    3,623  3,643  7,519  4,053  4,079  4,848  9,736  6,020
----------------------------------------------------------------------------
Per share amounts -                                                         
 ($/share)                                                                  
Earnings per share -                                                        
 basic                 0.10   0.13   0.18   0.12   0.16   0.18   0.16   0.14
Earnings per share -                                                        
 diluted               0.10   0.13   0.18   0.11   0.15   0.17   0.16   0.14
Cash dividends                                                              
 declared and paid     0.10   0.10  0.205   0.11   0.11   0.13   0.26   0.16
----------------------------------------------------------------------------
(1) Q3 and Q4 of fiscal 2011 include $0.3 million and $0.1 million,         
    respectively, in revenue that pertains to usage of CMG's products in    
    prior quarters.                                                         
(2) 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.                              
(3) Q1 and Q2 of fiscal 2013 include $2.1 million and $0.2 million,         
    respectively, in revenue that pertains to usage of CMG's products in    
    prior quarters.                                                         
(4) 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".                                          

Highlights

During the six months ended September 30, 2012, as compared to the same period of prior fiscal year, CMG:


--  Increased annuity/maintenance revenue by 38% 
--  Increased operating profit by 13% 
--  Increased spending on research and development by 21% 
--  Increased EBITDA by 13% 
--  Realized earnings per share of $0.31, representing a 3% increase 

Revenue                                                                     
                                                                            
For the three months ended                                                  
September 30,                            2012      2011   $ change % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Software licenses                      14,683    10,904      3,779       35%
Professional services                   1,390     1,078        312       29%
----------------------------------------------------------------------------
Total revenue                          16,073    11,982      4,091       34%
----------------------------------------------------------------------------
                                                                            
Software license revenue - % of                                             
 total revenue                             91%       91%                    
Professional services - % of total                                          
 revenue                                    9%        9%                    
----------------------------------------------------------------------------
                                                                            
For the six months ended                                                    
September 30,                            2012      2011  $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Software licenses                      29,933    25,292     4,641        18%
Professional services                   2,606     2,629       (23)       -1%
----------------------------------------------------------------------------
Total revenue                          32,539    27,921     4,618        17%
----------------------------------------------------------------------------
                                                                            
Software license revenue - % of                                             
 total revenue                             92%       91%                    
Professional services - % of total                                          
 revenue                                    8%        9%                    
----------------------------------------------------------------------------

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

Total revenue increased by 34% for the three months ended September 30, 2012, compared to the same period of the previous fiscal year, due to an increase in software license sales driven by the growth in both annuity/maintenance and perpetual license sales, and a slight increase in fees for professional services earned during the quarter.

Total revenue increased by 17% in the six months ended September 30, 2012, compared to the same period of the previous fiscal year, as a result of the increase in software license sales driven by the increase in annuity/maintenance revenue.

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                                                  
 September 30,                           2012      2011  $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance licenses           12,012     9,308     2,704        29%
Perpetual licenses                      2,671     1,596     1,075        67%
----------------------------------------------------------------------------
Total software license revenue         14,683    10,904     3,779        35%
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance as a % of total                                         
 software license revenue                  82%       85%                    
Perpetual as a % of total software                                          
 license revenue                           18%       15%                    
----------------------------------------------------------------------------
                                                                            
For the six months ended                                                    
 September 30,                           2012      2011  $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance licenses           25,192    18,305     6,887        38%
Perpetual licenses                      4,741     6,987    (2,246)      -32%
----------------------------------------------------------------------------
Total software license revenue         29,933    25,292     4,641        18%
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance as a % of total                                         
 software license revenue                  84%       72%                    
Perpetual as a % of total software                                          
 license revenue                           16%       28%                    
----------------------------------------------------------------------------

Total software license revenue grew by 35% in the three months ended September 30, 2012, compared to the same period of the previous fiscal year, due to the increases in both annuity/maintenance and perpetual license revenue related to increased sales to new and existing customers. Total software license revenue grew by 18% for the six months ended September 30, 2012, compared to the same period of the previous fiscal year, as a result of an increase in the annuity/maintenance revenue stream offset by a decrease in perpetual license sales.

CMG's annuity/maintenance license revenue increased by 29% and 38% during the three and six months ended September 30, 2012, respectively, compared to the same periods of last year. These increases were driven by sales to new and existing clients as well as an increase in maintenance revenue tied to our strong perpetual sales generated in the current and previous fiscal year. Part of the increase in the six months ended September 30, 2012, compared to the same period of the previous fiscal year, is due to the inclusion of a payment received in the first quarter of the current fiscal year from one of our large customers for whom revenue recognition criteria are fulfilled only at the time of the receipt of funds. The payment was received for the licenses and services provided for two quarters of the previous fiscal year (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). Given our long-standing relationship with this client, and the multi-year nature of the contract, we expect to continue to receive payments under this arrangement; however, the amount and timing are uncertain and will continue to be recorded on a cash basis which may introduce some variability in our reported quarterly annuity/maintenance revenue results. During the current quarter, no payments have been received or recorded for this arrangement. If we were to exclude revenue received from this particular customer from the year-to-date recorded revenue to provide a normalized comparison, we would note that the annuity/maintenance revenue grew by 26% for the six months ended September 30, 2012, compared to the same period of the previous fiscal year.

Despite some variability introduced by the arrangement described above, it should be noted that our annuity/maintenance license sales, representing our recurring revenue stream, have continued to experience consecutive quarterly increases over the past several fiscal years, and this trend continued in the second quarter of fiscal 2013.

We can observe from the table below that the exchange rates between the US and Canadian dollars during the three and six months ended September 30, 2012, compared to the same periods of the previous fiscal year, had only a slight positive impact on our reported annuity/maintenance revenue.

Software license revenue under perpetual sales increased by 67% for the three months ended September 30, 2012, compared to the same period of the previous fiscal year, driven by increased sales of perpetual licenses in the North America and Eastern Hemisphere. Perpetual license sales for the six months ended September 30, 2012, decreased by 32% compared to the same period of the previous fiscal year. In the first quarter of the previous fiscal year, we reported an amount associated with a multi-million dollar perpetual contract in the Eastern Hemisphere which contributed significantly to the revenue growth in the first six months of the previous fiscal year.

Software licensing under perpetual sales is a significant part of CMG's business, but may fluctuate significantly between periods due to the uncertainty associated with the timing and the location where sales are generated. For this reason, even though we expect to achieve a certain level of aggregate perpetual sales on an annual basis, we expect to observe fluctuations in the quarterly perpetual revenue amounts throughout the fiscal year. It should be further pointed out that strong perpetual sales in previous quarters contributed to the increase in our recurring maintenance revenue in the current quarter.

Similar to the annuity/maintenance revenue stream, we can observe from the table below that the exchange rates between the US and Canadian dollars during the three and six months ended September 30, 2012, compared to the same periods of the previous fiscal year, had only a slight positive impact on our reported perpetual license revenue.

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


For the three months ended                                                  
September 30,                             2012      2011  $ change % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
US dollar annuity/maintenance                                               
 license sales                   US$     6,938     5,902     1,036       18%
Weighted average conversion                                                 
 rate                                    1.005     0.990                    
----------------------------------------------------------------------------
Canadian dollar equivalent      CDN$     6,972     5,841     1,131       19%
----------------------------------------------------------------------------
                                                                            
US dollar perpetual license                                                 
 sales                           US$     1,905     1,656       249       15%
Weighted average conversion                                                 
 rate                                    1.007     0.964                    
----------------------------------------------------------------------------
Canadian dollar equivalent      CDN$     1,918     1,596       322       20%
----------------------------------------------------------------------------
                                                                            
For the six months ended                                                    
September 30,                             2012      2011 $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
US dollar annuity/maintenance                                               
 license sales                   US$    15,576    11,448    4,128        36%
Weighted average conversion                                                 
 rate                                    1.001     0.994                    
----------------------------------------------------------------------------
Canadian dollar equivalent      CDN$    15,598    11,377    4,221        37%
----------------------------------------------------------------------------
                                                                            
US dollar perpetual license                                                 
 sales                           US$     3,251     7,277   (4,026)      -55%
Weighted average conversion                                                 
 rate                                    1.002     0.956                    
----------------------------------------------------------------------------
Canadian dollar equivalent      CDN$     3,257     6,955   (3,698)      -53%
----------------------------------------------------------------------------
                                                                            
REVENUE BY GEOGRAPHIC SEGMENT                                               
                                                                            
For the three months ended                                                  
September 30,                             2012      2011 $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
Annuity/maintenance revenue                                                 
  Canada                                 5,473     3,998    1,475        37%
  United States                          2,549     2,061      488        24%
  South America                          1,172       926      246        27%
  Eastern Hemisphere(1)                  2,818     2,323      495        21%
----------------------------------------------------------------------------
                                        12,012     9,308    2,704        29%
----------------------------------------------------------------------------
Perpetual revenue                                                           
  Canada                                   753         -      753         - 
  United States                            258       141      117        83%
  South America                              -       615     (615)     -100%
  Eastern Hemisphere                     1,660       840      820        98%
----------------------------------------------------------------------------
                                         2,671     1,596    1,075        67%
----------------------------------------------------------------------------
Total software license revenue                                              
  Canada                                 6,226     3,998    2,228        56%
  United States                          2,807     2,202      605        27%
  South America                          1,172     1,541     (369)      -24%
  Eastern Hemisphere                     4,478     3,163    1,315        42%
----------------------------------------------------------------------------
                                        14,683    10,904    3,779        35%
----------------------------------------------------------------------------
                                                                            
For the six months ended                                                    
September 30,                             2012      2011 $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
Annuity/maintenance revenue                                                 
  Canada                                10,413     7,732    2,681        35%
  United States                          4,942     4,052      890        22%
  South America                          4,334     1,748    2,586       148%
  Eastern Hemisphere(1)                  5,503     4,773      730        15%
----------------------------------------------------------------------------
                                        25,192    18,305    6,887        38%
----------------------------------------------------------------------------
Perpetual revenue                                                           
  Canada                                 1,314        32    1,282      4006%
  United States                            662       603       59        10%
  South America                            483     1,291     (808)      -63%
  Eastern Hemisphere                     2,282     5,061   (2,779)      -55%
----------------------------------------------------------------------------
                                         4,741     6,987   (2,246)      -32%
----------------------------------------------------------------------------
Total software license revenue                                              
  Canada                                11,727     7,764    3,963        51%
  United States                          5,604     4,655      949        20%
  South America                          4,817     3,039    1,778        59%
  Eastern Hemisphere                     7,785     9,834   (2,049)      -21%
----------------------------------------------------------------------------
                                        29,933    25,292    4,641        18%
----------------------------------------------------------------------------
(1)  Includes Europe, Africa, Asia and Australia.                           

On a geographic basis, total software license sales increased across all regions with the exception of the South American market which experienced an overall decrease during the three months ended September 30, 2012, compared to the same period of the previous fiscal year, and Eastern Hemisphere, which experienced a $2.0 million decrease in the six months ended September 30, 2012, compared to the same period of the previous fiscal year. Total revenues in both of these regions, were impacted by lower perpetual sales. The most significant growth came from our annuity/maintenance license sales, with increases experienced across all regions.

The Canadian market (representing 39% of year-to-date total software revenue) experienced healthy increases in both annuity/maintenance and perpetual license sales during the three and six months ended September 30, 2012, compared to the same periods of the previous fiscal year. These increases were supported by the sales to both new and existing clients. The Canadian market continues to be the leader in generating total software license revenue and, particularly, in generating the recurring annuity/maintenance revenue as evidenced by the quarterly increases of 51%, 40%, 17% and 32% recorded during Q2 2012, Q3 2012, Q4 2012, and Q1 2013, respectively. This growth trend has continued into the second quarter of the current fiscal year with the recorded increase of 37%.

The US market (representing 19% of year-to-date total software revenue) also grew annuity/maintenance and perpetual license sales during the three and six months ended September 30, 2012, compared to the same periods of the previous fiscal year. Similar to the Canadian market, we have continued to see successive increases in the annuity/maintenance license sales in the US as evidenced by the increases of 19%, 20%, 26% and 20% recorded during Q2 2012, Q3 2012, Q4 2012, and Q1 2013, respectively. This growth trend has continued into the second quarter of the current fiscal year with the recorded increase of 24%.

South America (representing 16% of year-to-date total software revenue) experienced growth in annuity/maintenance revenue during the three and six months ended September 30, 2012, compared to the same periods of the previous fiscal year. Annuity/maintenance revenue grew in the first six months of the current fiscal year mainly due to the inclusion of the significant amount on the long-term contract for which revenue is recognized on a cash basis. If we were to adjust year-to-date annuity/maintenance revenue in the current fiscal year for the described amount, we would notice that South America grew annuity/maintenance revenue by just over 30% as a result of the sales to both new and existing clients. The increase in annuity/maintenance license sales was offset by the decreases in perpetual license sales during both the three and six months ended September 30, 2012.

Eastern Hemisphere (representing 26% of the year-to-date total software revenue) grew annuity/maintenance license sales during both three and six months ended September 30, 2012, compared to the same periods of the previous fiscal year. While perpetual license sales increased in the current quarter, they decreased on a year-to-date basis, as a result of the large perpetual sale made during the first quarter of the previous fiscal year which contributed significantly to revenue growth during the six months ended September 30, 2011.

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

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

QUARTERLY SOFTWARE LICENSE REVENUE ($THOUSANDS)

To view the Quarterly Software Licence Revenue chart, please visit the following link: http://media3.marketwire.com/docs/1108cmg_chart.jpg


DEFERRED REVENUE                                                            
                                                                            
                                          2012      2011  $ change % change 
($ thousands)                                                               
----------------------------------------------------------------------------
Deferred revenue at:                                                        
March 31                                21,693    16,755     4,938       29%
June 30                                 18,779    15,326     3,453       23%
September 30                            18,241    14,600     3,641       25%
----------------------------------------------------------------------------

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 September 30, June 30 and March 31 is reflective of the growth in annuity/maintenance license sales. The variation within the year is due to the timing of renewals of annuity and maintenance contracts that are skewed to the beginning of the calendar year which explains the decreases in the deferred revenue balance at the end of the first quarter (June 30) and second quarter (September 30) compared to fiscal year-end (March 31). Deferred revenue at September 30, 2012 increased compared to the same period of prior fiscal year due to both renewal of the existing and signing of the new annuity and maintenance contracts in the quarter.

PROFESSIONAL SERVICES REVENUE

CMG recorded professional services revenue of $1.4 million for the three months ended September 30, 2012, representing growth of $0.3 million compared to the same period of the previous fiscal year, resulting from the increase in project activities by our clients and the associated consulting and training activities in the current quarter. Professional services for the six months ended September 30, 2012 amounted to $2.6 million, remaining consistent with the same period of the previous fiscal year. The year-to-date revenue related to consulting activities actually increased; however, this increase was not evident due to the inclusion of a $0.3 million grant in the professional services revenue during the first quarter of the previous fiscal year, which was received from the CMG Reservoir Simulation Foundation ("Foundation CMG") for the DRMS project. The grant was fulfilled during that same quarter; hence, no additional amounts related to the grant have been subsequently recorded as professional services.

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


Expenses                                                                    
                                                                            
For the three months ended                                                  
September 30,                             2012      2011  $ change % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Sales, marketing and professional                                           
 services                                3,592     3,042       550       18%
Research and development                 3,028     2,393       635       27%
General and administrative               1,421     1,321       100        8%
----------------------------------------------------------------------------
Total operating expenses                 8,041     6,756     1,285       19%
----------------------------------------------------------------------------
                                                                            
Direct employee costs(i)                 6,491     5,402     1,089       20%
Other corporate costs                    1,550     1,354       196       14%
----------------------------------------------------------------------------
                                         8,041     6,756     1,285       19%
----------------------------------------------------------------------------
                                                                            
For the six months ended                                                    
September 30,                             2012      2011  $ change % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Sales, marketing and professional                                           
 services                                7,555     6,167     1,388       23%
Research and development                 5,925     4,888     1,037       21%
General and administrative               2,922     2,548       374       15%
----------------------------------------------------------------------------
Total operating expenses                16,402    13,603     2,799       21%
----------------------------------------------------------------------------
                                                                            
Direct employee costs(i)                13,086    10,965     2,121       19%
Other corporate costs                    3,316     2,638       678       26%
----------------------------------------------------------------------------
                                        16,402    13,603     2,799       21%
----------------------------------------------------------------------------

(i)Includes salaries, bonuses, stock-based compensation, benefits and commissions.

CMG's total operating expenses increased by 19% and 21% for the three and six months ended September 30, 2012, 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 six months ended September 30, 2012 related to staff costs, compared to 81% recorded in the comparative period of last year. Staffing levels for the first six months of the current fiscal year grew in comparison to the same period of the previous fiscal year to support our continued growth. At September 30, 2012, CMG's staff complement was 167 employees, up from 143 employees as at September 30, 2011. Direct employee costs increased during the three and six months ended September 30, 2012, 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 14% for the three months ended September 30, 2012, compared to the same period of the previous fiscal year, due to the costs associated with the expansion of our office space, which occurred in the third quarter of the previous fiscal year, and a minor office space addition in the current quarter.

Other corporate costs increased by 26% for the six months ended September 30, 2012, compared to the same period of the previous fiscal year, mainly due to inclusion of the costs associated with CMG's biennial technical symposium which took place during the first quarter of the current fiscal year. The remaining increase is attributable to the costs associated with the expansion of our office space, which are comprised of additional office rent, increased computing resources and increased depreciation associated with capital spending on the new space.


RESEARCH AND DEVELOPMENT                                                    
                                                                            
For the three months ended                                                  
September 30,                            2012      2011  $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Research and development (gross)        3,487     2,753       734        27%
SR&ED credits                            (459)     (360)      (99)       28%
----------------------------------------------------------------------------
Research and development                3,028     2,393       635        27%
----------------------------------------------------------------------------
                                                                            
Research and development as a % of                                          
 total revenue                             19%       20%                    
----------------------------------------------------------------------------
                                                                            
For the six months ended                                                    
September 30,                            2012      2011  $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Research and development (gross)        6,872     5,552     1,320        24%
SR&ED credits                            (947)     (664)     (283)       43%
----------------------------------------------------------------------------
Research and development                5,925     4,888     1,037        21%
----------------------------------------------------------------------------
                                                                            
Research and development as a % of                                          
 total revenue                             18%       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 proportionate share of joint research and development costs on the DRMS system development of $0.7 million and $1.5 million for the three and six months ended September 30, 2012, respectively, (2011 - $0.7 million and $1.4 million). See discussion under "Commitments, Off Balance Sheet Items and Transactions with Related Parties."

The increases of 27% and 24% in our gross spending on research and development for the three and six months ended September 30, 2012, respectively, demonstrate our continued commitment to advancement of our technology which is the focal part of our business strategy. Research and development costs, net of research and experimental development ("SR&ED") credits, increased by 27% and 21% during the three and six months ended September 30, 2012, respectively, compared to the same periods of the previous fiscal year, due to increased employee compensation costs, investment in computing resources and facilities costs associated with the newly leased office space.

At the same time, we had an increase in SR&ED credits driven mainly by the increases in our direct employee costs as well as the increase in the eligibility of our expenses for SR&ED credits.


DEPRECIATION                                                                
                                                                            
For the three months ended                                                  
September 30,                             2012      2011 $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Depreciation of property and                                                
 equipment, allocated to:                                                   
  Sales, marketing and professional                                         
   services                                119        96       23        24%
  Research and development                 226       120      106        88%
  General and administrative                48        66      (18)      -27%
----------------------------------------------------------------------------
Total depreciation                         393       282      111        39%
----------------------------------------------------------------------------
                                                                            
For the six months ended                                                    
September 30,                             2012      2011 $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Depreciation of property and                                                
 equipment, allocated to:                                                   
  Sales, marketing and professional                                         
   services                                217       187       30        16%
  Research and development                 406       238      168        71%
  General and administrative                88       131      (43)      -33%
----------------------------------------------------------------------------
Total depreciation                         711       556      155        28%
----------------------------------------------------------------------------

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


Finance Income and Costs                                                    
                                                                            
For the three months ended                                                  
September 30,                            2012       2011 $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Interest income                           131        111       20        18%
Net foreign exchange gain                   -        759     (759)     -100%
----------------------------------------------------------------------------
Total finance income                      131        870     (739)      -85%
----------------------------------------------------------------------------
Total finance costs (represented by                                         
 net foreign exchange loss)              (460)         -     (460)        - 
----------------------------------------------------------------------------
                                                                            
For the six months ended                                                    
September 30,                            2012       2011 $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Interest income                           276        218       58        27%
Net foreign exchange gain                   -        800     (800)     -100%
----------------------------------------------------------------------------
Total finance income                      276      1,018     (742)      -73%
----------------------------------------------------------------------------
Total finance costs (represented by                                         
 net foreign exchange loss)              (133)         -     (133)        - 
----------------------------------------------------------------------------

Interest income increased in the three and six months ended September 30, 2012, 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 65% (2011 - 72%) of CMG's revenue for the six months ended September 30, 2012 is denominated in US dollars, whereas only approximately 23% (2011 - 23%) of CMG's total costs are denominated in US dollars.


                                                          Six month trailing
CDN$ to US$            At June 30   At September 30                  average
----------------------------------------------------------------------------
2010                       0.9429            0.9711                   0.9614
2011                       1.0370            0.9626                   1.0252
2012                       0.9813            1.0166                   0.9977
----------------------------------------------------------------------------

CMG recorded a foreign exchange loss of $0.5 million and $0.1 million for the three and six months ended September 30, 2012, respectively, compared to a $0.8 million foreign exchange gain recorded in both the three and six months ended September 30, 2011.

The strengthening of the Canadian dollar during the second quarter of the current fiscal year, along with the fluctuation in the exchange rates between the Canadian and the US dollars during the current fiscal year, have contributed negatively to the valuation of our US-denominated working capital, hence, contributing to the foreign exchange losses recorded in the three and six months ended September 30, 2012.

Income and Other Taxes

CMG's effective tax rate for the six months ended September 30, 2012 is reflected as 29.7% (2011 - 28.4%), whereas the prevailing Canadian statutory tax rate is now 25.0%. This is primarily due to a combination of the non-tax deductibility of stock- based compensation expense and the benefit of foreign withholding taxes being realized only as a tax deduction as opposed to a tax credit.

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


Operating Profit and Net Income                                             
                                                                            
For the three months ended                                                  
September 30,                            2012      2011  $ change  % change 
($ thousands, except per share                                              
 amounts)                                                                   
----------------------------------------------------------------------------
                                                                            
Total revenue                          16,073    11,982     4,091        34%
Operating expenses                     (8,041)   (6,756)   (1,285)       19%
----------------------------------------------------------------------------
                                                                            
Operating profit                        8,032     5,226     2,806        54%
                                                                            
Operating profit as a % of total                                            
 revenue                                   50%       44%                    
----------------------------------------------------------------------------
                                                                            
Net income for the period               5,361     4,318     1,043        24%
                                                                            
Net income for the period as a % of                                         
 total revenue                             33%       36%                    
----------------------------------------------------------------------------
                                                                            
Earnings per share ($/share)             0.14      0.12      0.02        17%
----------------------------------------------------------------------------
                                                                            
For the six months ended                                                    
September 30,                            2012      2011  $ change  % change 
($ thousands, except per share                                              
 amounts)                                                                   
----------------------------------------------------------------------------
                                                                            
Total revenue                          32,539    27,921     4,618        17%
Operating expenses                    (16,402)  (13,603)   (2,799)       21%
----------------------------------------------------------------------------
                                                                            
Operating profit                       16,137    14,318     1,819        13%
                                                                            
Operating profit as a % of total                                            
 revenue                                   50%       51%                    
----------------------------------------------------------------------------
                                                                            
Net income for the period              11,451    10,981       470         4%
                                                                            
Net income for the period as a % of                                         
 total revenue                             35%       39%                    
----------------------------------------------------------------------------
                                                                            
Earnings per share ($/share)             0.31      0.30      0.01         3%
----------------------------------------------------------------------------

Operating profit as a percentage of total revenue for the three months ended September 30, 2012 was at 50%, compared to 44% recorded in the same period of the previous fiscal year. While our total revenue grew by 34% during this period of time, our operating expenses grew by only 19%. This demonstrates our ability to effectively manage our costs.

Operating profit as a percentage of revenue for the six months ended September 30, 2012 was 50%, which is comparable to 51% recorded in the same period of the previous fiscal year.

Net income as a percentage of revenue decreased to 33% for the three months ended September 30, 2012, compared to 36% recorded in the same period of the previous fiscal year, as a result of recording a net foreign exchange loss of $0.5 million during the three months ended September 30, 2012, compared to recording a net foreign exchange gain of $0.8 million for the same period of the previous fiscal year.

Net income for the period as a percentage of revenue decreased to 35% for the six months ended September 30, 2012, compared to 39% for the same period of the previous fiscal year, mainly as a result of recording a net foreign exchange loss of $0.1 million during the six months ended September 30, 2012, compared to recording a net foreign exchange gain of $0.8 million for the same period of 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                                                  
September 30,                            2012      2011   $ change % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Net income for the period               5,361     4,318      1,043       24%
Add (deduct):                                                               
  Depreciation                            393       282        111       39%
  Finance income                         (131)     (870)       739      -85%
  Finance costs                           460         -        460        - 
  Income and other taxes                2,342     1,778        564       32%
----------------------------------------------------------------------------
EBITDA                                  8,425     5,508      2,917       53%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
EBITDA as a % of total revenue             52%       46%                    
----------------------------------------------------------------------------
                                                                            
For the six months ended                                                    
September 30,                            2012      2011   $ change % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Net income for the period              11,451    10,981        470        4%
Add (deduct):                                                               
  Depreciation                            711       556        155       28%
  Finance income                         (276)   (1,018)       742      -73%
  Finance costs                           133         -        133        - 
  Income and other taxes                4,829     4,355        474       11%
----------------------------------------------------------------------------
EBITDA                                 16,848    14,874      1,974       13%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
EBITDA as a % of total revenue             52%       53%                    
----------------------------------------------------------------------------

EBITDA increased by 53% and 13% for the three and six months ended September 30, 2012, compared to the same periods of the previous fiscal year. These increases provide further indication of our ability to keep growing our recurring annuity/maintenance license sales while effectively managing costs in relation to this base.


Liquidity and Capital Resources                                             
                                                                            
For the three months ended                                                  
September 30,                            2012      2011  $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Cash, beginning of period              51,535    38,347    13,188        34%
Cash flow from (used in):                                                   
  Operating activities                  3,537     8,322    (4,785)      -57%
  Financing activities                 (3,456)   (3,259)     (197)        6%
  Investing activities                   (922)     (100)     (822)      822%
----------------------------------------------------------------------------
Cash, end of period                    50,694    43,310     7,384        17%
----------------------------------------------------------------------------
                                                                            
For the six months ended                                                    
September 30,                            2012      2011  $ change  % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
Cash, beginning of period              55,374    41,753    13,621        33%
Cash flow from (used in):                                                   
  Operating activities                 10,198    11,162      (964)       -9%
  Financing activities                (13,519)   (9,341)   (4,178)       45%
  Investing activities                 (1,359)     (264)   (1,095)      415%
----------------------------------------------------------------------------
Cash, end of period                    50,694    43,310     7,384        17%
----------------------------------------------------------------------------

OPERATING ACTIVITIES

Cash flow generated from operating activities decreased by $4.8 million in the three months ended September 30, 2012, compared to the same period of last year, mainly due to the timing differences of when the sales are made and when the resulting receivables are collected, and the variation in the amount of tax payments made during the quarter.

Cash flow generated from operating activities decreased by $1.0 million in the six months ended September 30, 2012, compared to the same period of last year, mainly as a result of an increase in the deferred revenue balance, and higher tax payments.

FINANCING ACTIVITIES

Cash used in financing activities during the three and six months ended September 30, 2012 increased by $0.2 million and $4.2 million, respectively, compared to the same periods of last year, as a result of paying larger dividends and buying back common shares.

During the six months ended September 30, 2012, CMG employees and directors exercised options to purchase 459,000 Common Shares, which resulted in cash proceeds of $3.8 million.

In the six months ended September 30, 2012, CMG paid $15.8 million in dividends, representing the following quarterly dividends:


($ per share)                                              Q1             Q2
----------------------------------------------------------------------------
                                                                            
Dividends declared and paid                              0.16           0.16
Special dividend declared and paid                       0.10              -
----------------------------------------------------------------------------
Total dividends declared and paid                        0.26           0.16
----------------------------------------------------------------------------

On November 7, 2012, CMG announced the payment of a quarterly dividend of $0.16 per share on CMG's Common Shares. The dividend will be paid on December 14, 2012 to shareholders of record at the close of business on December 7, 2012.

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

On April 16, 2012, the Company announced a NCIB commencing on April 18, 2012 to purchase for cancellation up to 3,416,000 of its Common Shares. During the six months ended September 30, 2012, a total of 91,000 Common Shares were purchased at market price for a total cost of $1,551,000.

INVESTING ACTIVITIES

CMG's current needs for capital asset investment relate to computer equipment and office infrastructure costs, all of which will be funded internally. During the six months ended September 30, 2012, CMG expended $1.4 million on property and equipment additions, primarily composed of computing equipment and leasehold improvements, and currently has a capital budget of $2.1 million for fiscal 2013.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2012, CMG has $50.7 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 six months ended September 30, 2012, 3,482,000 shares of CMG's public float were traded on the TSX. As at September 30, 2012, CMG's market capitalization based upon its September 30, 2012 closing price of $19.31 was $727.5 million.

Commitments, Off Balance Sheet Items and Transactions with Related Parties

The Company is the operator of the DRMS research and development project (the "DRMS Project"), a collaborative effort with its partners Shell International Exploration and Production BV ("Shell") and Petroleo Brasileiro S.A. ("Petrobras"), to jointly develop the newest generation of reservoir and production system simulation software. The project has been underway since 2006 and, with the ongoing support of the participants, it is expected to continue until ultimate delivery of the software. The Company's share of costs associated with the project is estimated to be $4.0 million ($1.9 million net of overhead recoveries) for the current fiscal year. 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: 2013 - $1.0 million; 2014 to 2016 - $2.0 million per year; and 2017 - $1.0 million.

Business Risks and Critical Accounting Estimates

These remain unchanged from the factors detailed in CMG's 2012 Annual Report.

Accounting Standards and Interpretations Issued But Not Yet Effective

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


Standard/Interpretation   Nature of impending       Impact on CMG's         
                          change in accounting      financial statements    
                          policy                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
IFRS 9 Financial          IFRS 9 (2009) replaces    IFRS 9 (2010) supersedes
Instruments               the guidance in IAS 39    IFRS 9 (2009) and is    
                          Financial Instruments:    effective for annual    
In November 2009 the      Recognition and           periods beginning on or 
IASB issued IFRS 9        Measurement, on the       after January 1, 2015,  
Financial Instruments     classification and        with early adoption     
(IFRS 9 (2009)), and in   measurement of financial  permitted. For annual   
October 2010 the IASB     assets. The Standard      periods beginning before
published amendments to   eliminates the existing   January 1, 2015, either 
IFRS 9 (IFRS 9 (2010)).   IAS 39 categories of      IFRS 9 (2009) or IFRS 9 
In December 2011, the     held to maturity,         (2010) may be applied.  
IASB issued an amendment  available-for-sale and                            
to IFRS 9 to defer the    loans and receivable.     The Company intends to  
mandatory effective date                            adopt IFRS 9 (2010) in  
to annual periods         Financial assets will be  its financial statements
beginning on or after     classified into one of    for the annual period   
January 1, 2015.          two categories on         beginning on April 1,   
                          initial recognition:      2015. The Company does  
                                                    not expect IFRS 9 (2010)
                          - financial assets        to have a material      
                          measured at amortized     impact on the financial 
                          cost; or                  statements. The         
                                                    classification and      
                          -financial assets         measurement of the      
                          measured at fair value.   Company's financial     
                                                    assets and liabilities  
                          Gains and losses on       is not expected to      
                          remeasurement of          change under IFRS 9     
                          financial assets          (2010) because of the   
                          measured at fair value    nature of the Company's 
                          will be recognized in     operations and the types
                          profit or loss, except    of financial assets that
                          that for an investment    it holds.               
                          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.                                       
                                                                            
                          IFRS 9 (2010) added                               
                          guidance to IFRS 9                                
                          (2009) on the                                     
                          classification and                                
                          measurement of financial                          
                          liabilities, and this                             
                          guidance is consistent                            
                          with the guidance in IAS                          
                          39 expect as described                            
                          below.                                            
                                                                            
                          Under IFRS 9 (2010), for                          
                          financial liabilities                             
                          measured at fair value                            
                          under the fair value                              
                          option, changes in fair                           
                          value attributable to                             
                          changes in credit risk                            
                          will be recognized in                             
                          OCI, with the remainder                           
                          of the change recognized                          
                          in profit or loss.                                
                          However, if this                                  
                          requirement creates or                            
                          enlarges an accounting                            
                          mismatch in profit or                             
                          loss, the entire change                           
                          in fair value will be                             
                          recognized in profit or                           
                          loss. Amounts presented                           
                          in OCI will not be                                
                          reclassified to profit                            
                          or loss at a later date.                          
                                                                            
                          IFRS 9 (2010) also                                
                          requires derivative                               
                          liabilities that are                              
                          linked to and must be                             
                          settled by delivery of                            
                          an unquoted equity                                
                          instrument to be                                  
                          measured at fair value,                           
                          whereas such derivative                           
                          liabilities are measured                          
                          at cost under IAS 39.                             
                                                                            
                          IFRS 9 (2010) also added                          
                          the requirements of IAS                           
                          39 for the derecognition                          
                          of financial assets and                           
                          liabilities to IFRS 9                             
                          without change.                                   
                                                                            
                          The IASB has deferred                             
                          the mandatory effective                           
                          date of the existing                              
                          chapters of IFRS 9                                
                          Financial Instruments                             
                          (2009) and IFRS 9 (2010)                          
                          to annual periods                                 
                          beginning on or after                             
                          January 1, 2015. The                              
                          early adoption of either                          
                          standard continues to be                          
                          permitted.                                        
----------------------------------------------------------------------------
----------------------------------------------------------------------------
IFRS 10 Consolidated      IFRS 10 replaces the      The Company intends to  
Financial Statements      guidance in IAS 27        adopt IFRS 10 in its    
                          Consolidated and          financial statements for
In May 2011, the IASB     Separate Financial        the annual period       
issued IFRS 10            Statements and SIC-12     beginning on April 1,   
Consolidated Financial    Consolidation - Special   2013.  The Company does 
Statements, which is      Purpose Entities.  IAS    not expect IFRS 10 to   
effective for annual      27 (2008) survives as     have a material impact  
periods beginning on or   IAS 27 (2011) Separate    on the financial        
after January 1, 2013,    Financial Statements,     statements.             
with early adoption       only to carry forward                             
permitted.  If an entity  the existing accounting                           
applies this Standard     requirements for                                  
earlier, it shall also    separate financial                                
apply IFRS 11, IFRS 12,   statements.                                       
IAS 27 (2011) and IAS 28                                                    
(2011) at the same time.  IFRS 10 provides a                                
                          single model to be                                
                          applied in the control                            
                          analysis for all                                  
                          investees, including                              
                          entities that currently                           
                          are SPEs in the scope of                          
                          SIC-12.  In addition,                             
                          the consolidation                                 
                          procedures are carried                            
                          forward substantially                             
                          unmodified from IAS 27                            
                          (2008).                                           
----------------------------------------------------------------------------
----------------------------------------------------------------------------
IFRS 11 Joint             IFRS 11 replaces the      The Company intends to  
Arrangements              guidance in IAS 31        adopt IFRS 11 in its    
                          Interests in Joint        financial statements for
In May 2011, the IASB     Ventures.                 the annual period       
issued IFRS 11 Joint                                beginning on April 1,   
Arrangements, which is    Under IFRS 11, joint      2013.  The Company does 
effective for annual      arrangements are          not expect IFRS 11 to   
periods beginning on or   classified as either      have a material impact  
after January 1, 2013,    joint operations or       on the financial        
with early adoption       joint ventures.  IFRS 11  statements.             
permitted. If an entity   essentially carves out                            
applies this Standard     of previous jointly                               
earlier, it shall also    controlled entities,                              
apply IFRS 10, IFRS 12,   those arrangements which                          
IAS 27 (2011) and IAS 28  although structured                               
(2011) at the same time.  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 are stripped of                          
                          the free choice of                                
                          equity accounting or                              
                          proportionate                                     
                          consolidation; these                              
                          entities must now use                             
                          the equity method.                                
                                                                            
                          Upon application of IFRS                          
                          11, entities which had                            
                          previously accounted for                          
                          joint ventures using                              
                          proportionate                                     
                          consolidation shall                               
                          collapse the                                      
                          proportionately                                   
                          consolidated net asset                            
                          value (including any                              
                          allocation of goodwill)                           
                          into a single investment                          
                          balance at the beginning                          
                          of the earliest period                            
                          presented.  The                                   
                          investment's opening                              
                          balance is tested for                             
                          impairment in accordance                          
                          with IAS 28 (2011) and                            
                          IAS 36 Impairment of                              
                          Assets.  Any impairment                           
                          losses are recognized as                          
                          an adjustment to opening                          
                          retained earnings at the                          
                          beginning of the                                  
                          earliest period                                   
                          presented.                                        
----------------------------------------------------------------------------
----------------------------------------------------------------------------
IFRS 12 Disclosure of     IFRS 12 contains the      The Company intends to  
Interests in Other        disclosure requirements   adopt IFRS 12 in its    
Entities                  for entities that have    financial statements for
                          interests in              the annual period       
In May 2011, the IASB     subsidiaries, joint       beginning on April 1,   
issued IFRS 12            arrangements (i.e. joint  2013.  The Company does 
Disclosure of Interests   operations or joint       not expect the          
in Other Entities, which  ventures), associates     amendments to have a    
is effective for annual   and/or unconsolidated     material impact on the  
periods beginning on or   structured entities.      financial statements,   
after January 1, 2013,    Interests are widely      because of the nature of
with early adoption       defined as contractual    the Company's interests 
permitted. If an entity   and non-contractual       in other entities.      
applies this Standard     involvement that exposes                          
earlier, it needs not to  an entity to variability                          
apply IFRS 10, IFRS 11,   of returns from the                               
IAS 27 (2011) and IAS 28  performance of the other                          
(2011) at the same time.  entity.  The required                             
                          disclosures aim to                                
                          provide information in                            
                          order to enable users to                          
                          evaluate the nature of,                           
                          and the risks associated                          
                          with, an entity's                                 
                          interest in other                                 
                          entities, and the                                 
                          effects of those                                  
                          interests on the                                  
                          entity's financial                                
                          position, financial                               
                          performance and cash                              
                          flows.                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
IFRS 13 Fair Value        IFRS 13 replaces the      The Company intends to  
Measurement               fair value measurement    adopt IFRS 13           
                          guidance contained in     prospectively in its    
In May 2011, the IASB     individual IFRSs with a   financial statements for
published IFRS 13 Fair    single source of fair     the annual period       
Value Measurement, which  value measurement         beginning on April 1,   
is effective              guidance. It defines      2013.  The extent of the
prospectively for annual  fair value as the price   impact of adoption of   
periods beginning on or   that would be received    IFRS 13 has not yet been
after January 1, 2013.    to sell an asset or paid  determined.             
The disclosure            to transfer a liability                           
requirements of IFRS 13   in an orderly                                     
need not be applied in    transaction between                               
comparative information   market participants at                            
for periods before        the measurement date,                             
initial application.      i.e. an exit price. The                           
                          standard also                                     
                          establishes a framework                           
                          for measuring fair value                          
                          and sets out disclosure                           
                          requirements for fair                             
                          value measurements to                             
                          provide information that                          
                          enables financial                                 
                          statement users to                                
                          assess the methods and                            
                          inputs used to develop                            
                          fair value measurements                           
                          and, for recurring fair                           
                          value measurements that                           
                          use significant                                   
                          unobservable inputs                               
                          (Level 3), the effect of                          
                          the measurements on                               
                          profit or loss or other                           
                          comprehensive income.                             
                                                                            
                          IFRS 13 explains 'how'                            
                          to measure fair value                             
                          when it is required or                            
                          permitted by other                                
                          IFRSs. IFRS 13 does not                           
                          introduce new                                     
                          requirements to measure                           
                          assets or liabilities at                          
                          fair value, nor does it                           
                          eliminate the                                     
                          practicability                                    
                          exceptions to fair value                          
                          measurements that                                 
                          currently exist in                                
                          certain standards.                                
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Amendments to IAS 1       The amendments require    The Company intends to  
Presentation of           that an entity present    adopt the amendments in 
Financial Statements      separately the items of   its financial statements
                          OCI that may be           for the annual period   
In June 2011, the IASB    reclassified to profit    beginning on April 1,   
published amendments to   or loss in the future     2013. As the amendments 
IAS 1 Presentation of     from those that would     only require changes in 
Financial Statements:     never be reclassified to  the presentation of     
Presentation of Items of  profit or loss.           items in other          
Other Comprehensive       Consequently an entity    comprehensive income,   
Income, which are         that presents items of    the Company does not    
effective for annual      OCI before related tax    expect the amendments to
periods beginning on or   effects will also have    IAS 1 to have a material
after July 1, 2012 and    to allocate the           impact on the financial 
are to be applied         aggregated tax amount     statements.             
retrospectively.  Early   between these                                     
adoption is permitted.    categories.                                       
                                                                            
                          The existing option to                            
                          present the profit or                             
                          loss and other                                    
                          comprehensive income in                           
                          two statements has                                
                          remained unchanged.                               
                                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Amendments to IAS 32 and  The amendments to IAS 32  The Company intends to  
IFRS 7, Offsetting        clarify that an entity    adopt the amendments to 
Financial Assets and      currently has a legally   IFRS 7 in its financial 
Liabilities               enforceable right to      statements for the      
                          set-off if that right     annual period beginning 
In December 2011, the     is:                       on April 1, 2013, and   
IASB published                                      the amendments to IAS 32
Offsetting Financial      - not contingent on a     in its financial        
Assets and Financial      future event; and         statements for the      
Liabilities and issued                              annual period beginning 
new disclosure            - enforceable both in     April 1, 2014. The      
requirements in IFRS 7    the normal course of      Company does not expect 
Financial Instruments:    business and in the       the amendments to have a
Disclosures.              event of default,         material impact on the  
                          insolvency or bankruptcy  financial statements.   
The effective date for    of the entity and all                             
the amendments to IAS 32  counterparties.                                   
is annual periods                                                           
beginning on or after     The amendments to IAS 32                          
January 1, 2014. The      also clarify when a                               
effective date for the    settlement mechanism                              
amendments to IFRS 7 is   provides for net                                  
annual periods beginning  settlement or gross                               
on or after January 1,    settlement that is                                
2013. These amendments    equivalent to net                                 
are to be applied         settlement.                                       
retrospectively.                                                            
                          The amendments to IFRS 7                          
                          contain new disclosure                            
                          requirements for                                  
                          financial assets and                              
                          liabilities that are:                             
                                                                            
                          - offset in the                                   
                          statement of financial                            
                          position; or                                      
                                                                            
                          - subject to master                               
                          netting arrangements or                           
                          similar arrangements.                             
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Annual Improvements to    The new cycle of          The Company intends to  
IFRSs 2009-2011 Cycle -   improvements contains     adopt the amendments to 
various standards         amendments to the         the standards in its    
                          following four standards  financial statements for
In May 2012, the IASB     (excluding IFRS 1) with   the annual period       
published Annual          consequential amendments  beginning on April 1,   
Improvements to IFRSs -   to other standards and    2013.  The extent of the
2009-2011 Cycle as part   interpretations.          impact of adoption of   
of its annual                                       the amendments has not  
improvements process to   - IAS 1 Presentation of   yet been determined.    
make non-urgent but       Financial Statements                              
necessary amendments to                                                     
IFRS.                     -- Comparative                                    
                          information beyond                                
These amendments are      minimum requirements                              
effective for annual                                                        
periods beginning on or   --Presentation of the                             
after Jan 1, 2013 with    opening statement of                              
retrospective             financial position                                
application.                                                                
                          - IAS 16 Property, Plant                          
                          and Equipment                                     
                                                                            
                          -- Classification of                              
                          servicing equipment                               
                                                                            
                          - IAS 32 Financial                                
                          Instruments:                                      
                          Presentation                                      
                                                                            
                          -- Income tax                                     
                          consequences of                                   
                          distributions                                     
                                                                            
                          - IAS 34 Interim                                  
                          Financial Reporting                               
                                                                            
                          -- Segment assets and                             
                          liabilities                                       
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Outstanding Share Data

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


As at November 7, 2012                                                      
(thousands)                                                                 
----------------------------------------------------------------------------
Common Shares                                                         37,731
Options                                                                3,348
----------------------------------------------------------------------------

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 November 7, 2012, CMG could grant up to 3,773,000 stock options.

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. These controls and procedures were reviewed and the effectiveness of their design and operation was evaluated in fiscal 2012 in accordance with the COSO control framework. The evaluation confirmed the effectiveness of DC&P and ICFR at March 31, 2012. During our fiscal year 2013, we continue to monitor and review our controls and procedures.

During the six months ended September 30, 2012, 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.

Outlook

Our second quarter of fiscal 2013 has continued to show growth in our annuity/maintenance revenue stream with increases experienced 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 revenue base. During the second quarter, our EBITDA increased by 53% which demonstrates our 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. While oil prices continue to fluctuate, they remain at levels that should allow our customers to move forward on projects involving various types of unconventional reserves and advanced recovery processes. The greater challenges have been with natural gas prices, which have not fared as well, and petroleum producers are faced with uncertainty related to the fears of another worldwide economic recession, political unrest in several petroleum producing countries and environmental issues that have threatened to increase the costs of development and production.

CMG's joint project to develop the newest generation of dynamic reservoir modelling systems ("DRMS Project") continued to make progress in the second quarter of fiscal 2013. The problems encountered during the stabilization period, prior to the initial beta release, were identified and resolved during the second quarter. It is our expectation that another beta release will be completed later this year. During the first quarter we reported that Rob Eastick had been promoted to the position of Vice President, DRMS and Visualization, taking on the role of Project Manager for the DRMS Project. Since then, Rob has quickly come up to speed on the project, and, with the full support of the entire DRMS team, has begun driving the project toward the anticipated limited commercial release of the software by the end of calendar 2013. CMG and its partners remain committed to funding the ongoing development and to the future success of the project.

We will continue to extend our reach globally and focus our efforts on increasing our license sales to both existing and new clients. The excellent reputation behind our Company and its product suite offering will continue to enable us to grow and sustain a healthy market share while generating solid software license revenue. With our strong working capital position, we are well positioned to continue to invest in all aspects of our business in order to continue to grow and diversify our revenue base and to ultimately return value to our shareholders in the form of regular quarterly dividend payments and growth in share value.

Kenneth M. Dedeluk

President and Chief Executive Officer

November 7, 2012


COMPUTER MODELLING GROUP LTD.                                               
                                                                            
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION                     
                                                                            
                                                                            
UNAUDITED (thousands of Canadian $)        September 30, 2012 March 31, 2012
----------------------------------------------------------------------------
                                                                            
Assets                                                                      
Current assets:                                                             
  Cash                                                 50,694         55,374
  Trade and other receivables                          12,412         15,494
  Prepaid expenses                                      1,186          1,195
  Prepaid income taxes                                     65              -
----------------------------------------------------------------------------
                                                       64,357         72,063
Property and equipment                                  3,477          2,829
----------------------------------------------------------------------------
Total assets                                           67,834         74,892
----------------------------------------------------------------------------
                                                                            
Liabilities and Shareholders' Equity                                        
Current liabilities:                                                        
  Trade payables and accrued liabilities                4,149          5,358
  Income taxes payable                                      -          1,404
  Deferred revenue                                     18,241         21,693
----------------------------------------------------------------------------
                                                       22,390         28,455
Deferred tax liability (note 7)                           201            358
----------------------------------------------------------------------------
Total liabilities                                      22,591         28,813
----------------------------------------------------------------------------
                                                                            
Shareholders' equity:                                                       
  Share capital                                        36,182         31,751
  Contributed surplus                                   4,044          3,535
  Retained earnings                                     5,017         10,793
----------------------------------------------------------------------------
Total shareholders' equity                             45,243         46,079
----------------------------------------------------------------------------
Total liabilities and shareholders' equity             67,834         74,892
----------------------------------------------------------------------------
                                                                            
See accompanying notes to condensed consolidated financial statements.      
                                                                            
                                                                            
COMPUTER MODELLING GROUP LTD.                                               
                                                                            
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME    
                                                                            
                                      Three months ended    Six months ended
                                            September 30        September 30
                                         2012       2011     2012       2011
UNAUDITED (thousands of Canadian $                                          
 except per share amounts)                                                  
----------------------------------------------------------------------------
Revenue (note 4)                       16,073     11,982   32,539     27,921
----------------------------------------------------------------------------
                                                                            
Operating expenses                                                          
  Sales, marketing and professional                                         
   services                             3,592      3,042    7,555      6,167
  Research and development (note 5)     3,028      2,393    5,925      4,888
  General and administrative            1,421      1,321    2,922      2,548
----------------------------------------------------------------------------
                                        8,041      6,756   16,402     13,603
----------------------------------------------------------------------------
Operating profit                        8,032      5,226   16,137     14,318
                                                                            
Finance income (note 6)                   131        870      276      1,018
Finance costs (note 6)                   (460)         -     (133)         -
----------------------------------------------------------------------------
Profit before income and other taxes    7,703      6,096   16,280     15,336
Income and other taxes (note 7)         2,342      1,778    4,829      4,355
----------------------------------------------------------------------------
                                                                            
Net and total comprehensive income      5,361      4,318   11,451     10,981
----------------------------------------------------------------------------
                                                                            
Earnings Per Share                                                          
Basic (note 8(e))                        0.14       0.12     0.31       0.30
Diluted (note 8(e))                      0.14       0.11     0.30       0.29
----------------------------------------------------------------------------
                                                                            
See accompanying notes to condensed consolidated financial statements.      
                                                                            
                                                                            
COMPUTER MODELLING GROUP LTD.                                               
                                                                            
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY                      
                                                                            
UNAUDITED (thousands of       Common Share Contributed    Retained    Total 
 Canadian $)                       Capital     Surplus    Earnings   Equity 
----------------------------------------------------------------------------
                                                                            
Balance, April 1, 2011              24,801       2,655       8,314   35,770 
Total comprehensive income                                                  
 for the period                          -           -      10,981   10,981 
Dividends paid                           -           -     (11,572) (11,572)
Shares issued for cash on                                                   
 exercise of stock options                                                  
(note 8(b))                          2,669           -           -    2,669 
Common shares buy-back (notes                                               
 8(b) & (c))                           (25)          -        (413)    (438)
Stock-based compensation:                                                   
  Current period expense                 -         867           -      867 
  Stock options exercised              501        (501)          -        - 
----------------------------------------------------------------------------
Balance, September 30, 2011         27,946       3,021       7,310   38,277 
----------------------------------------------------------------------------
                                                                            
Balance, April 1, 2012              31,751       3,535      10,793   46,079 
Total comprehensive income                                                  
 for the period                          -           -      11,451   11,451 
Dividends paid                           -           -     (15,756) (15,756)
Shares issued for cash on                                                   
 exercise of stock options                                                  
(note 8(b))                          3,788           -           -    3,788 
Common shares buy-back (notes                                               
 8(b) & (c))                           (80)                 (1,471)  (1,551)
Stock-based compensation:                                                   
  Current period expense                 -       1,232           -    1,232 
  Stock options exercised              723        (723)          -        - 
----------------------------------------------------------------------------
Balance, September 30, 2012         36,182       4,044       5,017   45,243 
----------------------------------------------------------------------------
                                                                            
See accompanying notes to condensed consolidated financial statements.      
                                                                            
COMPUTER MODELLING GROUP LTD.                                               
                                                                            
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                             
                                                                            
                                     Three months ended    Six months ended 
                                           September 30        September 30 
UNAUDITED (thousands of Canadian $)      2012      2011      2012      2011 
----------------------------------------------------------------------------
                                                                            
Cash flows from operating activities                                        
  Net income                            5,361     4,318    11,451    10,981 
Adjustments for:                                                            
  Depreciation                            393       282       711       556 
  Income and other taxes (note 7)       2,342     1,778     4,829     4,355 
  Stock-based compensation (note                                            
   8(d))                                  664       457     1,232       867 
  Interest income (note 6)               (131)     (111)     (276)     (218)
----------------------------------------------------------------------------
                                        8,629     6,724    17,947    16,541 
Changes in non-cash working capital:                                        
  Trade and other receivables          (1,483)    4,889     3,079     2,745 
  Trade payables and accrued                                                
   liabilities                           (300)      118    (1,209)   (1,323)
  Prepaid expenses                        (56)     (217)        9      (276)
  Deferred revenue                       (538)     (726)   (3,452)   (2,155)
----------------------------------------------------------------------------
Cash generated from operating                                               
 activities                             6,252    10,788    16,374    15,532 
  Interest received                       136       106       280       212 
  Income taxes paid                    (2,851)   (2,572)   (6,456)   (4,582)
----------------------------------------------------------------------------
Net cash from operating activities      3,537     8,322    10,198    11,162 
----------------------------------------------------------------------------
                                                                            
Cash flows from financing activities                                        
Proceeds from issue of common shares    2,564     1,232     3,788     2,669 
Dividends paid                         (6,020)   (4,053)  (15,756)  (11,572)
Common shares buy-back (note 8(c))          -      (438)   (1,551)     (438)
----------------------------------------------------------------------------
Net cash used in financing                                                  
 activities                            (3,456)   (3,259)  (13,519)   (9,341)
----------------------------------------------------------------------------
                                                                            
Cash flows used in investing                                                
 activities                                                                 
Property and equipment additions         (922)     (100)   (1,359)     (264)
----------------------------------------------------------------------------
Increase (decrease) in cash              (841)    4,963    (4,680)    1,557 
Cash, beginning of period              51,535    38,347    55,374    41,753 
----------------------------------------------------------------------------
Cash, end of period                    50,694    43,310    50,694    43,310 
----------------------------------------------------------------------------


See accompanying notes to condensed consolidated financial statements.      

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three and six months ended September 30, 2012 and 2011 (unaudited).

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 condensed consolidated financial statements as at and for the three and six months ended September 30, 2012 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 condensed consolidated financial statements have been prepared on a going concern basis in accordance with International Accounting Standard ("IAS") 34, Interim Financial Reporting, as issued by the International Accounting Standards Board ("IASB"), and using the accounting policies disclosed in note 3 of the Company's annual consolidated financial statements as at and for the year ended March 31, 2012. Accordingly, the condensed consolidated financial statements do not include all of the information required for full annual financial statements, and should be read in conjunction with the Company's most recent annual consolidated financial statements as at and for the year ended March 31, 2012, prepared in accordance with International Financial Reporting Standards ("IFRS").

The unaudited condensed consolidated financial statements as at and for the three and six months ended September 30, 2012 were authorized for issuance by the Board of Directors on November 7, 2012.

(b) BASIS OF MEASUREMENT:

The condensed 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 condensed 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. In preparing these condensed consolidated financial statements, the significant judgments made by management in applying the Company's accounting policies and the key sources of estimation uncertainty are the same as those applied in the annual IFRS consolidated financial statements for the year ended March 31, 2012.

3. Significant Accounting Policies:

The condensed consolidated financial statements should be read in conjunction with the Company's annual financial statements for the year ended March 31, 2012 prepared in accordance with IFRS applicable to those annual consolidated financial statements. The same accounting policies, presentation and methods of computation have been followed in these condensed consolidated financial statements as were applied in the Company's first annual IFRS consolidated financial statements for the year ended March 31, 2012.


4. Revenue:                                                                 
                                                                            
   For the three months ended September 30,                2012        2011 
   (thousands of $)                                                         
   -------------------------------------------------------------------------
   Software licenses                                     14,683      10,904 
   Professional services                                  1,390       1,078 
   -------------------------------------------------------------------------
                                                         16,073      11,982 
   -------------------------------------------------------------------------
                                                                            
                                                                            
   For the six months ended September 30,                  2012        2011 
   (thousands of $)                                                         
   -------------------------------------------------------------------------
   Software licenses                                     29,933      25,292 
   Professional services                                  2,606       2,629 
   -------------------------------------------------------------------------
                                                         32,539      27,921 
   -------------------------------------------------------------------------
                                                                            
5. Research and Development Costs:                                          
                                                                            
   For the three months ended September 30,                2012        2011 
   (thousands of $)                                                         
   -------------------------------------------------------------------------
   Research and development                               3,487       2,753 
   Scientific research and experimental development                         
    ("SR&ED") investment tax credits                       (459)       (360)
   -------------------------------------------------------------------------
                                                          3,028       2,393 
   -------------------------------------------------------------------------
                                                                            
                                                                            
   For the six months ended September 30,                  2012        2011 
   (thousands of $)                                                         
   -------------------------------------------------------------------------
   Research and development                               6,872       5,552 
   Scientific research and experimental development                         
    ("SR&ED") investment tax credits                       (947)       (664)
   -------------------------------------------------------------------------
                                                          5,925       4,888 
   -------------------------------------------------------------------------
                                                                            
                                                                            
6. Finance Income and Finance Costs:                                        
                                                                            
   For the three months ended September 30,                2012        2011 
   (thousands of $)                                                         
   -------------------------------------------------------------------------
   Interest income                                          131         111 
   Net foreign exchange gain                                  -         759 
   -------------------------------------------------------------------------
   Finance income                                           131         870 
   -------------------------------------------------------------------------
                                                                            
   Net foreign exchange loss                               (460)          - 
   -------------------------------------------------------------------------
   Finance costs                                           (460)          - 
   -------------------------------------------------------------------------
                                                                            
                                                                            
   For the six months ended September 30,                  2012        2011 
   (thousands of $)                                                         
   -------------------------------------------------------------------------
   Interest income                                          276         218 
   Net foreign exchange gain                                  -         800 
   -------------------------------------------------------------------------
   Finance income                                           276       1,018 
   -------------------------------------------------------------------------
                                                                            
   Net foreign exchange loss                               (133)          - 
   -------------------------------------------------------------------------
   Finance costs                                           (133)          - 
   -------------------------------------------------------------------------
                                                                            
7. Income and Other Taxes:                                                  
                                                                            
   The major components of income tax expense are as follows:               
                                                                            
   For the six months ended September 30,                   2012        2011
   (thousands of $)                                                         
   -------------------------------------------------------------------------
   Current year income taxes                               4,416       4,285
   Adjustment for prior year                                  68           -
   -------------------------------------------------------------------------
   Current income taxes                                    4,484       4,285
                                                                            
   Deferred tax recovery                                   (157)       (134)
   Foreign withholding and other taxes                       502         204
   -------------------------------------------------------------------------
                                                           4,829       4,355
   -------------------------------------------------------------------------

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:


                                                                            
For the six months ended September 30,                      2012        2011
(thousands of $, unless otherwise stated)                                   
----------------------------------------------------------------------------
Combined statutory tax rate                               25.00%      26.13%
----------------------------------------------------------------------------
Expected income tax                                        4,070       4,007
Non-deductible costs                                         320         237
Withholding taxes                                            377         143
Adjustment for prior year                                     68           -
Other                                                        (6)        (32)
----------------------------------------------------------------------------
                                                           4,829       4,355
----------------------------------------------------------------------------
                                                                            
The components of the Company's deferred tax liability are as follows:      
                                                                            
                                                   September 30,   March 31,
(thousands of $)                                            2012        2012
----------------------------------------------------------------------------
Tax liability on SR&ED investment tax credits              (152)       (267)
Tax liability on property and equipment                     (49)        (91)
----------------------------------------------------------------------------
Deferred tax liability                                     (201)       (358)
----------------------------------------------------------------------------

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

8. Share Capital:

(a) AUTHORIZED:

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

(b) ISSUED:


(thousands of shares)                                         Common Shares 
----------------------------------------------------------------------------
Balance, April 1, 2011                                               36,427 
Issued for cash on exercise of stock options                            467 
Common shares buy-back                                                  (33)
----------------------------------------------------------------------------
Balance, September 30, 2011                                          36,861 
----------------------------------------------------------------------------
                                                                            
Balance, April 1, 2012                                               37,307 
Issued for cash on exercise of stock options                            459 
Common shares buy-back                                                  (91)
----------------------------------------------------------------------------
Balance, September 30, 2012                                          37,675 
----------------------------------------------------------------------------

Subsequent to September 30, 2012, 56,000 stock options were exercised for cash proceeds of $487,000.

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

(c) COMMON SHARES BUY-BACK:

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

On April 16, 2012, the Company announced a NCIB commencing on April 18, 2012 to purchase for cancellation up to 3,416,000 of its Common Shares. During the six months ended September 30, 2012, a total of 91,000 Common Shares were purchased at market price for a total cost of $1,551,000.

(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 combined outstanding Common and Non-Voting Shares at the date of grant. Based upon this calculation, at September 30, 2012, the Company could grant up to 3,767,000 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:


                                        For the six                 For the 
                                       months ended              year ended 
(thousands except per share                                                 
 amounts)                        September 30, 2012          March 31, 2012 
----------------------------------------------------------------------------
                                           Weighted                Weighted 
                                            Average                 Average 
                                           Exercise                Exercise 
                                Options       Price     Options       Price 
                                Granted    ($/share)    Granted    ($/share)
----------------------------------------------------------------------------
Outstanding at beginning of                                                 
 period                           2,903        9.85       2,825        7.41 
Granted                           1,000       18.18       1,071       13.43 
Exercised                          (459)       8.24        (913)       6.43 
Forfeited/cancelled                 (38)      14.07         (80)      10.57 
----------------------------------------------------------------------------
Outstanding at end of period      3,406       12.46       2,903        9.85 
----------------------------------------------------------------------------
Options exercisable at end                                                  
 of period                        1,650        9.25       1,120        7.31 
----------------------------------------------------------------------------

The range of exercise prices of stock options outstanding and exercisable at September 30, 2012 is as follows:


                                        Outstanding             Exercisable 
----------------------------------------------------------------------------
                               Weighted                                     
                                Average    Weighted                Weighted 
                              Remaining     Average                 Average 
                  Number of Contractual    Exercise   Number of    Exercise 
                    Options        Life       Price     Options       Price 
Exercise Price                                                              
 ($/option)      (thousands)     (years)  ($/option) (thousands)  ($/option)
----------------------------------------------------------------------------
4.52 - 5.63             278         0.8        5.40         278        5.40 
5.64 - 7.80             444         1.9        7.80         444        7.80 
7.81 - 9.07             745         2.9        9.07         493        9.07 
9.08 - 13.43            926         3.9       13.40         433       13.40 
13.44 - 18.18         1,013         4.8       18.08           2       14.24 
----------------------------------------------------------------------------
                      3,406         3.4       12.46       1,650        9.25 
----------------------------------------------------------------------------

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


                               For the six months ended   For the year ended
                                     September 30, 2012       March 31, 2012
----------------------------------------------------------------------------
Fair value at grant date                                                    
 ($/option)                                2.45 to 3.81         1.23 to 3.42
Share price at grant date                                                   
 ($/share)                               17.90 to 18.18       13.00 to 16.35
Risk-free interest rate (%)                1.13 to 1.26         0.99 to 2.06
Estimated hold period prior to                                              
 exercise (years)                                2 to 4               2 to 4
Volatility in the price of                                                  
 common shares (%)                             28 to 36             24 to 37
Dividend yield per common                                                   
 share (%)                                 3.57 to 4.12         3.20 to 4.94
----------------------------------------------------------------------------

The Company recognized total stock-based compensation expense for the three and six months ended September 30, 2012 of $664,000 and $1,232,000 respectively (three and six months ended September 30, 2011 - $457,000 and $867,000 respectively).

(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:


For the three                                                               
 months ended                                                               
 September 30,                         2012                             2011
(thousands except                                                           
 per share amounts)                                                         
----------------------------------------------------------------------------
                       Weighted                         Weighted            
                        Average    Earnings              Average    Earnings
           Earnings      Shares   Per Share Earnings      Shares   Per Share
                ($) Outstanding   ($/share)      ($) Outstanding   ($/share)
----------------------------------------------------------------------------
Basic         5,361      37,504        0.14    4,318      36,759        0.12
Dilutive                                                                    
 effect of                                                                  
 stock                                                                      
 options                  1,099                              999            
----------------------------------------------------------------------------
Diluted       5,361      38,603        0.14    4,318      37,758        0.11
----------------------------------------------------------------------------
                                                                            
                                                                            
For the six months                                                          
 ended September                                                            
 30,                                   2012                             2011
(thousands except                                                           
 per share amounts)                                                         
----------------------------------------------------------------------------
                       Weighted                         Weighted            
                        Average    Earnings              Average    Earnings
           Earnings      Shares   Per Share Earnings      Shares   Per Share
                ($) Outstanding   ($/share)      ($) Outstanding   ($/share)
----------------------------------------------------------------------------
Basic        11,451      37,429        0.31   10,981      36,646        0.30
Dilutive                                                                    
 effect of                                                                  
 stock                                                                      
 options                  1,086                            1,074            
----------------------------------------------------------------------------
Diluted      11,451      38,515        0.30   10,981      37,720        0.29
----------------------------------------------------------------------------

During the three and six months ended September 30, 2012, 147,000 and Nil options respectively (three and six months ended September 30, 2011 - 199,000, and 193,000 respectively) were excluded from the computation of the weighted-average number of diluted shares outstanding because their effect was not dilutive.

9. Commitments:

(a) RESEARCH COMMITMENTS:

The Company is the operator of the DRMS research and development project (the "DRMS project"), a collaborative effort with its partners Shell International Exploration and Production BV ("Shell") and Petroleo Brasileiro S.A. ("Petrobras"), to jointly develop the newest generation of reservoir and production system simulation software. The project has been underway since 2006 and, with the ongoing support of the participants, it is expected to continue until ultimate delivery of the software. The Company's share of costs associated with the project is estimated to be $4.0 million ($1.9 million net of overhead recoveries) for fiscal 2013.

(b) LEASE COMMITMENTS:

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


Six months ended September 30,                              2012        2011
(thousands of $)                                                            
----------------------------------------------------------------------------
Less than one year                                           995         960
Between one and five years                                 6,960       5,378
----------------------------------------------------------------------------
                                                           7,955       6,338
----------------------------------------------------------------------------

10. 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 September 30, 2012, US $165,000 (2011 - US $165,000) had been reserved on this line of credit for the letter of credit supporting a performance bond.

11. 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
----------------------------------------------------------------------------
                            For the six months ended                        
                                       September 30,     As at September 30,
                                    2012        2011        2012        2011
----------------------------------------------------------------------------
                                                                            
Canada                            12,958       9,034       3,332       2,034
United States                      5,830       4,800          64          96
South America                      5,501       3,878          54          97
Eastern Hemisphere(1)              8,250      10,209          27          35
----------------------------------------------------------------------------
                                  32,539      27,921       3,477       2,262
                                                                            
(1)  Includes Europe, Africa, Asia and Australia.                           

In the six months ended September 30, 2012, the Company derived 7.4% (2011 - 13.7%) of its revenue from one customer.

12. Joint Venture:

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 condensed consolidated statements of operations and comprehensive income.

For the three and six months ended September 30, 2012, CMG included $0.9 million and $1.8 million, respectively (2011 - $0.7 million and $1.4 million, respectively) of costs in its condensed 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 $0.4 million and $0.9 million during the three and six months ended September 30, 2012 (2011 - $0.4 million and $0.9 million, respectively).

13. Subsequent Events:

On November 7, 2012, the Board of Directors declared a cash dividend of $0.16 per share on its Common Shares, payable on December 14, 2012, to all shareholders of record at the close of business on December 7, 2012.

Contacts: Computer Modelling Group Ltd. Kenneth M. Dedeluk President & CEO (403) 531-1300ken.dedeluk@cmgl.ca Computer Modelling Group Ltd. John Kalman Vice President, Finance & CFO (403) 531-1300john.kalman@cmgl.ca www.cmgl.ca



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