Matrikon(TM) releases results for the second quarter of fiscal 2010 and
declares $0.03 quarterly dividend

    
    -------------------------------------------------------------------------
    Highlights
    -------------------------------------------------------------------------
    -   Q2-10 revenue growth of 16% to $22.76 million compared to Q2-09; YTD
        revenue growth of 23% to $48.21 million compared to the first six
        months of FY-09
    -   Q2-10 consulting revenue growth of 50% to a record $14.79 million
        compared to Q2-09; YTD consulting revenue growth of 27% to $27.98
        million compared to the first six months of FY-09
    -   Q2-10 net income of $2.85 million or $0.09 per share compared to
        $2.03 million or $0.07 per share in Q2-09; YTD net income growth of
        17% to $5.61 million or $0.18 per share compared to $4.78 million or
        $0.16 per share in FY-09
    -   Significant Well Performance Monitor contract wins, which are
        evidence of Matrikon's market presence in intelligent oil field
        solutions
    -   Board of directors declares quarterly dividend of $0.03 per common
        share
    -------------------------------------------------------------------------
    

EDMONTON, April 7 /CNW/ - Matrikon Inc. (TSX:MTK), a leading provider of industrial performance monitoring solutions, today reported financial results for the second quarter of fiscal year 2010, which ended February 28, 2010.

Matrikon president and CEO Nizar J. Somji commented on the quarter: "Our second quarter continues the strong results we saw at the beginning of this fiscal year and the gradual return to spending in some of our core industries. Our large contract wins this quarter reaffirm the additional value added by our solutions-now that they are empowered by our next generation technology. These wins are also evidence of our leadership in delivering solutions that not only facilitate collaboration but also drive performance by integrating workflow and enabling action to be taken and monitored.

"We continue to make progress in line with our strategy, with infrastructure and research and development investments made in prior quarters paying off. Our cost structure is well supported by revenue growth, contributing to improved profit margins. In a quarter that is often challenging from a results perspective, everyone at Matrikon has demonstrated their commitment and focus to delivering on the strategy. The first half of this fiscal year has formed a solid foundation on which to grow in the remainder of this fiscal year and beyond."

Second quarter revenue was $22.76 million compared to $19.66 million in Q2-09 and $25.45 million in Q1-10. Net income in the second quarter was a record $2.85 million or $0.09 per share compared to $2.03 million or $0.07 per share in Q2-09 and $2.77 million or $0.09 per share in Q1-10.

Year-to-date (YTD) revenue grew 23% to $48.21 million compared to the first half of FY-09. YTD net income grew 17% to $5.61 million or $0.18 per share, compared to $4.78 million or $0.16 per share in the first half of FY-09.

Matrikon's board of directors declared a quarterly dividend of $0.03 per common share for the second quarter of fiscal year 2010. This dividend is payable on April 27, 2010 to all shareholders of record on April 16, 2010. The dividend is an eligible dividend for Canadian tax purposes.

    
    Additional Highlights:

    -   We achieved record consulting revenue of $14.79 million in Q2-10.
        This reflects a 50% increase compared to Q2-09 and 12% compared to
        Q1-10, despite 10% fewer working days in our second quarter. With
        this growth in consulting revenue, consulting headcount increased by
        4% in Q2-10 compared to Q2-09.
    -   During the quarter, we won and announced a US$15.7 million contract
        to build a remote oil field monitoring program for a Middle East oil
        company based on Matrikon's Well Performance Monitor industry
        application. Also during the quarter, we announced a (euro)4.2
        million contract win with Statoil to deliver Well Performance Monitor
        to 35 offshore assets on the Norwegian Continental Shelf. These
        contract wins, along with ongoing work with other global clients, are
        evidence of Matrikon's market presence in intelligent oil field
        solutions.
    -   Products revenue (comprised of software license and support revenue)
        declined by 19% compared to Q2-09 and by 10% compared to Q1-10.
        Despite this decline, OPC sales experienced growth of 2% compared to
        Q2-09 and increased by 30% compared to Q1-10.
    -   Gross margin in Q2-10 was 55%. Compared to Q2-09, gross margin
        dropped 4 percentage points as a result of the reduced software
        license contribution to the revenue mix. Compared to Q1-10, gross
        margin increased by 1 percentage point as our revenue mix in Q2-10
        included less equipment revenue, which generally carries a lower
        margin. Combined overhead expenses in Q2-10 remained steady at $9.59
        million compared to $9.69 million in Q2-09 and $9.58 million in Q1-
        10. YTD sales and marketing expenses were up 18% compared to the
        first half of FY-09, as we continued to invest in sales and marketing
        to support larger project wins over the past 6 months.
    

MD&A and Financial Statements

The MD&A and Financial Statements for the current quarter can be found on Matrikon's website at http://www.matrikon.com/about/corporate/investors/financial/q-reports.aspx or by contacting Andrea Nwobosi at 1-877-628-7456 x4587.

Conference Call and Webcast

Matrikon President and CEO, Nizar J. Somji and CFO Jonathan Chia will hold a conference call to discuss second quarter results on Wednesday, April 7, 2010 at 5:00pm ET (3:00pm MT). To participate live, call 647-427-7450 in the Toronto area and 1-888-231-8191 in all other areas. The conference ID is 64821695.

A replay will be available until midnight ET, May 2, 2010. To access the playback service, please dial 416-849-0833 in the Toronto area or 1-800-642-1687 in all other areas. The passcode is 64821695.

The conference call will also be webcast and podcast (live and archived) at: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3004760

About Matrikon

Matrikon (www.matrikon.com) delivers industrial performance monitoring solutions that provide visibility into the global operations of oil and gas, energy, mining, power and refining companies. Matrikon products enable users to anticipate and correct problems, identify opportunities for improvement, share best practices and drive the action necessary to achieve and sustain their operational excellence objectives. Matrikon has been empowering excellence since 1988. With offices throughout North America, Australia, Europe and the Middle East and a client base that includes industry leaders in a wide range of process industries, Matrikon's reach is global. Matrikon trades on the Toronto Stock Exchange under the symbol MTK.

Matrikon is a registered trademark of Matrikon Inc.

Forward Looking Statements

    
    -------------------------------------------------------------------------
    In order to provide our investors with an understanding of our current
    results and future prospects, our communications often include written or
    oral forward-looking statements. This new release, our MD&A, and other
    materials filed with the Canadian securities regulators contain
    statements that are forward-looking. These statements are made pursuant
    to the "safe harbor" provisions of applicable Canadian securities
    legislation. These statements represent Matrikon's intentions, plans,
    expectations and beliefs and are based on our experience and our
    assessment of historical and future trends and the application of key
    assumptions relating to future events and circumstances. These statements
    may include, but are not limited to, comments about: our objectives and
    priorities for 2010 and beyond, our strategies, expectations for our
    financial condition, the outlook for our operations, and external factors
    that may impact results, including global economies and industry trends.

    Forward-looking statements require assumptions and involve risks and
    uncertainties related to our business and the general economic
    environment, many beyond our control. There is significant risk that the
    predictions, forecasts, conclusions or projections we make will not prove
    to be accurate and that our actual results will be materially different
    from the targets, expectations, estimates or intentions expressed in the
    forward-looking statements. We caution readers of this news release and
    our MD&A not to place undue reliance on our forward-looking statements.
    The future outcomes that relate to forward-looking statements may be
    influenced by many factors, including but not limited to: general
    economic conditions in the countries in which we operate; currency
    fluctuations; market demand for our products and services; our ability to
    execute projects and deliver solutions; our ability to execute our
    strategic plans and to complete and integrate acquisitions; the degree of
    competition in the geographic and business areas in which we operate; our
    ability to attract and retain qualified employees and contain payroll
    costs; our ability to contain expenses; technological changes and
    research and development; the length of the sales cycle required to close
    larger solution contracts; availability of financial resources to carry
    out our strategy; our ability to protect our intellectual and intangible
    properties; legal claims; critical accounting estimates; the possible
    effects on our business of war or terrorist activities; disease or
    illness that affects local, national or international economies; and
    disruptions to public infrastructure, such as transportation,
    communications, power or water supply. We caution that this list is not
    exhaustive of all possible factors.

    Other factors could adversely affect our results. For more information,
    please see the discussion on the principal risks that could affect our
    results on pages 45 - 48 of Matrikon's 2009 Annual Report.

    The assumptions in this news release and MD&A pertaining to: our positive
    outlook for the remainder of 2010, our belief that business opportunities
    remain strong, and our expected effective tax rate to be in the range of
    27% to 32% include: global economic and political stability at current
    levels, that certain opportunities in our pipeline will materialize as
    contracts, that our clients will continue to invest in initiatives that
    support efficiency and reduce costs, foreign exchange rates do not
    fluctuate excessively, and that we will continue to be able to inspire,
    motivate and maintain our employee base at a sufficient level to deliver
    on our objectives.

    When relying on forward-looking statements to make decisions with respect
    to Matrikon, investors should carefully consider these factors, as well
    as other uncertainties and potential events, and the inherent uncertainty
    of forward-looking statements. Unless required by law, we do not
    undertake to update any forward-looking statement, whether written or
    oral, that may be made from time to time by the company or on its behalf.
    -------------------------------------------------------------------------

    Management's Discussion and Analysis

    April 7, 2010
    -------------------------------------------------------------------------
    The following Management's Discussion & Analysis should be read in
    conjunction with the financial statements and notes to the consolidated
    financial statements for the quarter ended February 28, 2010 and the
    Management's Discussion & Analysis and notes to the consolidated
    financial statements appearing in the Annual Report for the fiscal year
    ended August 31, 2009.

    Matrikon's Board of Directors, on the recommendation of the Audit
    Committee, approved the content of this MD&A on April 7, 2010.

    All dollar amounts included in this MD&A are Canadian dollars unless
    otherwise specified.
    -------------------------------------------------------------------------

    Non-GAAP Measures
    -------------------------------------------------------------------------
    We refer to terms that are not specifically defined in the CICA Handbook
    and do not have any standardized meaning prescribed by GAAP. These non-
    GAAP measures may not be comparable to similar measures presented by
    other companies.

    We believe that these non-GAAP measures are useful in assisting investors
    in understanding components of our financial results. The non-GAAP terms
    that we refer to in this analysis are defined below.

    Gross margin is our total revenue minus the cost of sales, divided by the
    total revenue, and is expressed as a percentage. This measure is used to
    indicate the relative efficiency with which we earn revenue. Gross margin
    is a percentage based on two GAAP measures and as such has no
    quantitative reconciliation. Gross margin within our segmented reporting
    includes intercompany revenue/expenses as part of total revenue.

    Overhead expenses are the indirect costs of operating our business and
    cannot be directly attributed to earning revenue. Overhead expenses are
    divided into 6 major categories, which include consulting general and
    administrative, sales and marketing, research and development, general
    and administrative, amortization and stock-based compensation.

    Operating income (loss) is our income or loss before foreign exchange,
    other income, income taxes and non-controlling interest.

    Net margin is our total net income (loss) divided by total revenue and is
    expressed as a percentage. This measure is used to indicate the relative
    efficiency with which we earn net income. Net margin is a percentage
    based on two GAAP measures and as such has no quantitative
    reconciliation.

    Utilization or utilization rate measures the consulting time for each
    employee against the total available time, based on a standard 260 work
    days per year and is expressed as a percentage. Utilization is used to
    demonstrate capacity to increase output rate in our Solutions business
    without adding resources. Utilization is a measure of working capacity
    and not a financial measure and therefore has no reconciliation to GAAP.

    Average daily rate is consulting revenue divided by consulting people
    multiplied by utilization rate divided by working days available in the
    period described. This measure is used by management to monitor overall
    project profitability and as an indication of progress in the transition
    of our business to higher margin engagements based on Matrikon
    technology. Average daily rate is based on non-financial measures and has
    no reconciliation to GAAP.
    -------------------------------------------------------------------------

    Other Information
    -------------------------------------------------------------------------
    Additional information about Matrikon, including our annual information
    form, information circular and quarterly reports, is available on SEDAR
    at www.sedar.com and in the investor relations section of our website at
    www.matrikon.com/investors.
    -------------------------------------------------------------------------

    Comparative Figures
    -------------------------------------------------------------------------
    We have reclassified certain figures for FY-09 and Q2-09 to reflect the
    financial presentation adopted in the current quarter.
    -------------------------------------------------------------------------

    Forward Looking Statements
    -------------------------------------------------------------------------
    In order to provide our investors with an understanding of our current
    results and future prospects, our communications often include written or
    oral forward-looking statements. This new release, our MD&A, and other
    materials filed with the Canadian securities regulators contain
    statements that are forward-looking. These statements are made pursuant
    to the "safe harbor" provisions of applicable Canadian securities
    legislation. These statements represent Matrikon's intentions, plans,
    expectations and beliefs and are based on our experience and our
    assessment of historical and future trends and the application of key
    assumptions relating to future events and circumstances. These statements
    may include, but are not limited to, comments about: our objectives and
    priorities for 2010 and beyond, our strategies, expectations for our
    financial condition, the outlook for our operations, and external factors
    that may impact results, including global economies and industry trends.

    Forward-looking statements require assumptions and involve risks and
    uncertainties related to our business and the general economic
    environment, many beyond our control. There is significant risk that the
    predictions, forecasts, conclusions or projections we make will not prove
    to be accurate and that our actual results will be materially different
    from the targets, expectations, estimates or intentions expressed in the
    forward-looking statements. We caution readers of this news release and
    our MD&A not to place undue reliance on our forward-looking statements.
    The future outcomes that relate to forward-looking statements may be
    influenced by many factors, including but not limited to: general
    economic conditions in the countries in which we operate; currency
    fluctuations; market demand for our products and services; our ability to
    execute projects and deliver solutions; our ability to execute our
    strategic plans and to complete and integrate acquisitions; the degree of
    competition in the geographic and business areas in which we operate; our
    ability to attract and retain qualified employees and contain payroll
    costs; our ability to contain expenses; technological changes and
    research and development; the length of the sales cycle required to close
    larger solution contracts; availability of financial resources to carry
    out our strategy; our ability to protect our intellectual and intangible
    properties; legal claims; critical accounting estimates; the possible
    effects on our business of war or terrorist activities; disease or
    illness that affects local, national or international economies; and
    disruptions to public infrastructure, such as transportation,
    communications, power or water supply. We caution that this list is not
    exhaustive of all possible factors.

    Other factors could adversely affect our results. For more information,
    please see the discussion on the principal risks that could affect our
    results on pages 45 - 48 of Matrikon's 2009 Annual Report.

    The assumptions in this news release and MD&A pertaining to: our positive
    outlook for the remainder of 2010, our belief that business opportunities
    remain strong, and our expected effective tax rate to be in the range of
    27% to 32% include: global economic and political stability at current
    levels, that certain opportunities in our pipeline will materialize as
    contracts, that our clients will continue to invest in initiatives that
    support efficiency and reduce costs, foreign exchange rates do not
    fluctuate excessively, and that we will continue to be able to inspire,
    motivate and maintain our employee base at a sufficient level to deliver
    on our objectives.

    When relying on forward-looking statements to make decisions with respect
    to Matrikon, investors should carefully consider these factors, as well
    as other uncertainties and potential events, and the inherent uncertainty
    of forward-looking statements. Unless required by law, we do not
    undertake to update any forward-looking statement, whether written or
    oral, that may be made from time to time by the company or on its behalf.
    -------------------------------------------------------------------------

    Strategic Progress Update
    -------------------------------------------------------------------------
    Note: This section is forward-looking by nature. It is qualified entirely
    by the Forward Looking Statements disclaimer at the beginning of this
    MD&A. It is also qualified by the principal risks that could affect our
    business (see pages 45 - 48 of our 2009 Annual Report).
    -------------------------------------------------------------------------

    Each year, we present a set of performance indicators to communicate our
    priorities and serve as a benchmark to measure our progress against our
    strategy. The following table shows our progress on the performance
    indicators and objectives we set for 2010.

    -------------------------------------------------------------------------
    2010 Objectives        On Track?    6 Month Results
    -------------------------------------------------------------------------
    Grow top line while    Yes          - Revenue increased by 23% to $48.21
    maintaining                           million compared to Q2-09
    profitability                       - Net income increased by 17% to
                                          $5.61 million compared to Q2-09
    -------------------------------------------------------------------------
    Continue building      In Progress  - We continue to build our Matrikon
    Matrikon Suite                        Suite applications to be Empowered
    applications on the                   by Intuition
    Intuition platform
    -------------------------------------------------------------------------
    Revenue from licenses  In Progress  - YTD software license and support
    & support of 35-40%                   revenue represent 25% of total
    of total revenue                      revenue
    -------------------------------------------------------------------------
    Continue to sell and   In Progress  - Well Performance Monitor: one new
    deploy industry                       corporate client
    applications                        - Mobile Equipment Monitor: one new
                                          pilot site
    -------------------------------------------------------------------------

    Items of Note in Q2-10
    -   Record consulting revenue: In Q2-10, we achieved record consulting
        revenue of $14.79 million compared to $9.85 million in Q2-09 and
        $13.19 million in Q1-10. This reflects a 50% increase compared to Q2-
        09 and an increase of 12% compared to Q1-10, despite 10% fewer
        working days in our second quarter. With this growth in consulting
        revenue, consulting headcount increased by 4% in Q2-10 compared to
        Q2-09. We continue to build capacity, mainly in the EMEA region, to
        execute the large projects won during the quarter.
    -   Significant contract wins: During the quarter, we won and announced a
        US$15.7 million contract to build a remote oil field monitoring
        program for a Middle East oil company based on Matrikon's Well
        Performance Monitor industry application. Also during the quarter, we
        announced a (euro)4.2 million contract win with Statoil to deliver
        Well Performance Monitor to 35 offshore assets on the Norwegian
        Continental Shelf. These contract wins, along with ongoing work with
        other global clients, are evidence of Matrikon's market presence in
        intelligent oil field solutions.
    -   Products revenue: Products revenue (comprised of software license and
        support revenue) declined by 19% compared to Q2-09 and by 10%
        compared to Q1-10. Despite this, OPC sales experienced marginal
        growth of 2% compared to Q2-09 and increased by 30% compared to Q1-
        10. As we continue to execute our strategy and win large industry
        application contracts, consulting revenue tends to be realized sooner
        than products revenue during initial project stages. We expect the
        software component of the industry application contract wins
        announced throughout the quarter to contribute to Products revenue
        into FY-11.
    -   Tax rate: Our effective income tax rate has been reduced as a result
        of tax recoveries realized from research and development credits in
        Australia. Year-to-date, our effective tax rate is 19.7% compared to
        18.4% in the first six months of FY-09.


    Summary of Results
    -------------------------------------------------------------------------
    3 Months       28-Feb-10       28-Feb-09       30-Nov-09    Q2-10  Q2-10
    Ended                 %               %               %      vs     vs
    (CAD $000s) (Q2-10) revenue (Q2-09) revenue (Q1-10) revenue Q2-09  Q1-10
    -------------------------------------------------------------------------
    Total
     Revenue  $22,757   100%  $19,661   100%  $25,450   100%     16%   (11%)
    -------------------------------------------------------------------------
    Consulting
     fees      14,791    65%    9,852    50%   13,190    52%     50%    12%
    -------------------------------------------------------------------------
      Margin on
       consulting
       fees       44%             42%             44%
    -------------------------------------------------------------------------
    Equipment
     sales      2,095     9%    2,345    12%    5,632    22%    (11%)  (63%)
    -------------------------------------------------------------------------
      Margin on
       equipment
       sales      28%             27%             31%
    -------------------------------------------------------------------------
    Total
     Solutions
     revenue   16,886    74%   12,197    62%   18,822    74%     38%   (10%)
    -------------------------------------------------------------------------
    Software
     license
     fees       3,214    14%    4,695    24%    3,738    14%    (32%)  (14%)
    -------------------------------------------------------------------------
      Margin on
       software
       license
       fees       99%             99%             99%
    -------------------------------------------------------------------------
    Support     2,597    11%    2,498    13%    2,729    11%      4%    (5%)
    -------------------------------------------------------------------------
      Margin on
       support    86%             93%             89%
    -------------------------------------------------------------------------
    Total
     Products
     revenue    5,811    25%    7,193    37%    6,467    25%    (19%)  (10%)
    -------------------------------------------------------------------------
    Interest
     income        60     1%      271     1%      161     1%    (78%)  (63%)
    -------------------------------------------------------------------------
      Consulting
       headcount  290             280             295             4%    (2%)
    -------------------------------------------------------------------------
      Gross
       margin     55%             59%             54%
    -------------------------------------------------------------------------
    Total
     Expenses   9,585    42%    9,692    49%    9,579    38%     (1%)    0%
    -------------------------------------------------------------------------
    Consulting  1,032     5%    1,474     7%    1,299     5%    (30%)  (21%)
    -------------------------------------------------------------------------
    Sales &
     marketing  2,065     9%    1,902    10%    2,329     9%      9%   (11%)
    -------------------------------------------------------------------------
    Research &
     develop-
     ment       1,463     6%    1,754     9%    1,560     6%    (17%)   (6%)
    -------------------------------------------------------------------------
    General &
     adminis-
     trative    4,393    19%    3,919    20%    3,822    15%     12%    15%
    -------------------------------------------------------------------------
      Operations
       headcount  298             262             275            14%     8%
    -------------------------------------------------------------------------
    Stock-based
     compensation 125     1%      352     2%       92     1%    (64%)   36%
    -------------------------------------------------------------------------
    Amortization  507     2%      291     1%      477     2%     74%     6%
    -------------------------------------------------------------------------
    Foreign
     exchange
     translation
     gain (loss)    3     0%      468     2%     (208)   -1%    (99%) (101%)
    -------------------------------------------------------------------------
    Net income  2,845    13%    2,027    10%    2,768    11%     40%     3%
    -------------------------------------------------------------------------
    Earnings per
     share -
     basic       0.09            0.07            0.09            29%     0%
    -------------------------------------------------------------------------
    Earnings per
     share -
     diluted     0.09            0.06            0.09            50%     0%
    -------------------------------------------------------------------------
    Weighted
     average
     shares
     outstanding
     (000s)    31,311          30,968          31,298             1%     0%
    -------------------------------------------------------------------------
    Total
     assets    68,808          66,040          67,269             4%     2%
    -------------------------------------------------------------------------
    Total long
     term
     liabilities  520             203             500           156%     4%
    -------------------------------------------------------------------------
    Deferred
     revenue    9,160           9,114           6,670             1%    37%
    -------------------------------------------------------------------------
    Contracts
     in
     progress   6,214           8,375           7,049           (26%)  (12%)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    6 Months Ended                   28-Feb-10         28-Feb-09     2010 vs
    (CAD $000s)                    (YTD) % revenue   (YTD) % revenue   2009
    -------------------------------------------------------------------------
    Total Revenue                 $48,207     100%  $39,240     100%     23%
    -------------------------------------------------------------------------
    Consulting fees                27,981      58%   22,004      56%     27%
    -------------------------------------------------------------------------
      Margin on consulting fees       44%               43%
    -------------------------------------------------------------------------
    Equipment sales                 7,727      16%    3,361       9%    130%
    -------------------------------------------------------------------------
      Margin on equipment sales       30%               27%
    -------------------------------------------------------------------------
    Total Solutions revenue        35,708      74%   25,365      65%     41%
    -------------------------------------------------------------------------
    Software license fees           6,952      14%    8,388      21%    (17%)
    -------------------------------------------------------------------------
      Margin on software
       license fees                   99%               97%
    -------------------------------------------------------------------------
    Support                         5,326      11%    5,019      13%      6%
    -------------------------------------------------------------------------
      Margin on support               88%               93%
    -------------------------------------------------------------------------
    Total Products revenue         12,278      25%   13,407      34%     (8%)
    -------------------------------------------------------------------------
    Interest income                   221       1%      468       1%    (53%)
    -------------------------------------------------------------------------
      Consulting headcount (average)  285               274               4%
    -------------------------------------------------------------------------
      Gross margin                    55%               60%
    -------------------------------------------------------------------------
    Total Expenses                 19,164      40%   19,016      49%      1%
    -------------------------------------------------------------------------
    Consulting                      2,331       5%    3,142       8%    (26%)
    -------------------------------------------------------------------------
    Sales & marketing               4,394       9%    3,738      10%     18%
    -------------------------------------------------------------------------
    Research & development          3,023       6%    3,164       8%     (4%)
    -------------------------------------------------------------------------
    General & administrative        8,215      17%    7,635      19%      8%
    -------------------------------------------------------------------------
      Operations headcount
       (average)                      276               262               5%
    -------------------------------------------------------------------------
    Stock-based compensation          217       1%      670       2%    (68%)
    -------------------------------------------------------------------------
    Amortization                      984       2%      667       2%     48%
    -------------------------------------------------------------------------
    Foreign exchange translation
     gain (loss)                     (205)      0%    1,612       4%   (113%)
    -------------------------------------------------------------------------
    Net income (loss)               5,613      12%    4,784      12%     17%
    -------------------------------------------------------------------------
    Earnings per share - basic       0.18              0.16              13%
    -------------------------------------------------------------------------
    Earnings per share - diluted     0.18              0.15              20%
    -------------------------------------------------------------------------
    Weighted average shares
     outstanding (000s)            31,305            30,958               1%
    -------------------------------------------------------------------------
    Total Assets                   68,808            66,040               4%
    -------------------------------------------------------------------------
    Total Long Term Liabilities       520               203             156%
    -------------------------------------------------------------------------
    Deferred revenue                9,160             9,114               1%
    -------------------------------------------------------------------------
    Contracts in progress           6,214             8,375             (26%)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Note: This section is forward-looking by nature. It is qualified entirely
    by the Forward Looking Statements disclaimer at the beginning of this
    MD&A. It is also qualified by the principal risks that could affect our
    business (see page 45 - 48 of our 2009 Annual Report).
    -------------------------------------------------------------------------
    

Revenue

We achieved record consulting revenue as we earned $14.79 million in Q2-10. This reflects a 50% increase compared to Q2-09 and an increase of 12% compared to Q1-10, despite 10% fewer working days in our second quarter. We continue to build capacity, mainly in the EMEA region, to execute the large projects won during the quarter as consulting headcount increased by 4% compared to Q2-09.

Our equipment revenues declined by 63% compared to Q1-10 as a result of the majority of third party hardware and software being delivered for our cyber security project during the first quarter. Equipment revenues are ancillary to our business and will continue to fluctuate period-by-period.

Year-to-date consulting and equipment revenues have increased by 41% as a result of higher utilization and average daily rates driven from executing the significant contracts we have won over the past 6 months.

Our total Products revenue (comprised of Software License and Support revenue) declined by 19% compared to Q2-09 and by 10% compared to Q1-10. Despite this, OPC sales experienced marginal growth of 2% compared to Q2-09 and increased by 30% compared to Q1-10. As we continue to execute our strategy and win enterprise-wide industry application contracts, consulting revenue tends to be realized sooner than products revenue during initial project stages. Software license revenues related to our industry applications continue to be lumpy. We expect the software component of the industry application contract wins announced throughout the quarter to contribute to Products revenue into FY-11.

Year-to-date Products revenue declined by 8% compared to FY-09. The economic slowdown caused our sales cycle to lengthen as many of our clients required additional time and due diligence to obtain approval for contracts. With the gradual return to spending in some of our core industries, we expect to see a recovery in Products revenue.

Gross Margin

Gross margin in Q2-10 was 55%. Compared to Q2-09, gross margin dropped 4 percentage points as a result of the reduced software license contribution to the revenue mix. Compared to Q1-10, gross margin increased by 1 percentage point as our revenue mix in Q2-10 included less equipment revenue, which generally carries a lower margin.

Year-to-date gross margin was 55% compared to 60% in the first six months of FY-09. The decrease in gross margin is due to significantly higher consulting and equipment revenue contributions to the revenue mix, which represented 74% of overall revenue, compared to 65% in Q2-09.

Overhead Expenses

The returns on our infrastructure investments are beginning to materialize as combined overhead expenses have remained steady in Q2-10, despite the significant increase in revenue compared to Q2-09. Expenses in Q2-10 were $9.59 million (42% of revenue), compared to $9.69 million (49% of revenue) in Q2-09 and $9.58 million (38% of revenue) in Q1-10.

Consulting G&A expenses have declined by 30% compared to Q2-09 and 21% compared to Q1-10. The decline is primarily attributed to decreased third-party consulting costs and employee expenses.

We continue to invest in sales and marketing functions to drive top-line growth and to support the large project wins over the past 6 months. Sales and marketing expenses have increased by 9% compared to Q2-09, and by 18% year-to-date, primarily due to increased headcount of 9% and 12%, respectively.

Research and development (R&D) costs decreased by 17% compared to Q2-09 and by 6% compared to Q1-10. Excluding the Canadian Scientific Research and Experimental Development (SR&ED) tax credits, R&D costs in Q2-10 are $1.95 million, which is a decrease of 7% compared to Q2-09 and an increase of 4% compared to Q1-10. The reduction in expenses compared to Q2-09 is a result of buying out the Indian joint venture company and leveraging our talent pool in India. Headcount in the R&D function increased compared to Q2-09 and Q1-10 as we continue the development of our next generation technology.

General and administrative expenses have increased by 12% compared to Q2-09 and by 15% compared to Q1-10, primarily due to incentive payments accrued for performance in Q2-10.

Net Income

We achieved record net income of $2.85 million and a corresponding net margin of 13% in Q2-10. Compared to Q2-09, this is an increase of 40%, and 3% compared to Q1-10 when we achieved net income of $2.77 million. Year-to-date net income increased by 17% to $5.61 million with a net margin of 12%, compared to $4.78 million and net margin of 12% in the first six months of FY-09.

The following factors positively impacted our net margins in both the quarter and year-to-date periods:

    
    -   The makeup of our consulting revenue is shifting as a result of our
        focus on high value consulting engagements, resulting in improvements
        to average daily rate and improved gross margins, with a strong
        consulting gross margin of 44% in Q2-10.

    -   Our overhead expenses are in line with expectations and we are
        beginning to realize efficiencies following infrastructure and R&D
        investments made in prior quarters.

    -   We experienced a recovery of AUD$0.68 million in income tax
        associated with research and development incentive tax programs in
        Australia.

    -   There was a decrease in stock-based compensation expenses compared to
        Q2-09 as the majority of outstanding Restricted Share Units (RSUs)
        have vested.
    

These positive influences to net margin were offset by the strengthening of the Canadian dollar compared to the US dollar. In addition, other income including interest income relating to cash and cash equivalents and gains relating to the sale of assets decreased by $0.08 million compared to Q2-09 and by $0.23 million compared to FY-09. We earned less interest on cash and cash equivalents than in prior quarters due to lower cash balances throughout the period.

The following tables show the percentage of revenue by the various currencies in which we do business, and the period-end exchange rates.

    
    -------------------------------------------------------------------------
                                                            Period End
                              % Billings by Currency      Exchange Rate
                                  (3 Months Ended)        for $1.00 CAN
    -------------------------------------------------------------------------
                               Q2-10   Q2-09   Q1-10   Q2-10   Q2-09   Q1-10
    -------------------------------------------------------------------------
    Australian Dollar            28%     15%     31%  0.9428  0.8104  0.9638
    -------------------------------------------------------------------------
    British Pound                 8%     12%     10%  1.6038  1.7969  1.7538
    -------------------------------------------------------------------------
    Canadian Dollar              12%     12%      7%  1.0000  1.0000  1.0000
    -------------------------------------------------------------------------
    Euro                         13%     10%      5%  1.4346  1.5997  1.5926
    -------------------------------------------------------------------------
    United States Dollar         36%     50%     46%  1.0523  1.2600  1.0620
    -------------------------------------------------------------------------
    Other Currencies              3%      1%      1%       -       -       -
    -------------------------------------------------------------------------
    

Comprehensive Income

In FY-08, we began to report other comprehensive income. Other comprehensive income accounts for currency translation related to our self-sustaining foreign operations and resulted in a foreign currency translation loss of $0.77 million in the quarter and a loss of $0.52 million year-to-date as the Canadian dollar gained strength against the Australian dollar, British pound and Euro.

Segment Results

We report four strategic business segments based on how we monitor and assess performance internally: North America; Asia-Pacific; Europe, Middle East & Africa (EMEA); and Products. A fifth segment, Corporate, captures corporate expenses. External revenue represents sales derived from arms-length customers. Intercompany revenues and expenses represent the product commissions that are payable to the region that owns the intellectual property and fees for borrowed consulting labor.

    
    -------------------------------------------------------------------------
    3 Months Ended
    28-Feb-10                 North    Asia-                  Corp-
    CAN$ (000s)             America  Pacific   EMEA  Products orate    Total
    -------------------------------------------------------------------------
    External revenue          10,378   5,303   5,337   1,739       -  22,757
    -------------------------------------------------------------------------
    Intercompany revenue
     (cost of sales)            (810)   (155)   (682)  1,647       -       -
    -------------------------------------------------------------------------
    % of external revenue        46%     23%     23%      8%       -    100%
    -------------------------------------------------------------------------
    Gross profit               4,749   2,314   2,746   2,753       -  12,562
    -------------------------------------------------------------------------
    Gross margin                 50%     45%     59%     81%       -     55%
    -------------------------------------------------------------------------
    Expenses                  (1,957) (1,692) (1,371) (2,247) (2,318) (9,585)
    -------------------------------------------------------------------------
    Other income (loss) &
     foreign exchange
     gain (loss)                  (9)     28      20       -     (13)     26
    -------------------------------------------------------------------------
    Income (loss) before
     taxes                     2,783     650   1,395     506  (2,331)  3,003
    -------------------------------------------------------------------------
    External revenue change %
     (Q2-10 vs Q2-09)            62%     26%     17%    (61%)      -     16%
    -------------------------------------------------------------------------
    Employees at 28-Feb-10       141     121      86     165      75     588
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    3 Months Ended
    28-Feb-09                 North    Asia-                  Corp-
    CAN$ (000s)             America  Pacific   EMEA  Products orate    Total
    -------------------------------------------------------------------------
    External revenue           6,417   4,196   4,580   4,468       -  19,661
    -------------------------------------------------------------------------
    Intercompany revenue
     (cost of sales)             129    (287)   (874)  1,032       -       -
    -------------------------------------------------------------------------
    % of external revenue        33%     21%     23%     23%       -    100%
    -------------------------------------------------------------------------
    Gross profit               3,038   1,495   2,235   5,142    (275) 11,635
    -------------------------------------------------------------------------
    Gross margin                 46%     38%     60%     93%       -     59%
    -------------------------------------------------------------------------
    Expenses                  (1,040) (1,510) (1,379) (2,691) (3,072) (9,692)
    -------------------------------------------------------------------------
    Other income (loss) &
     foreign exchange
     gain (loss)                 162     (59)    (41)      -     509     571
    -------------------------------------------------------------------------
    Income (loss)
     before taxes              2,160     (74)    815   2,451  (2,838)  2,514
    -------------------------------------------------------------------------
    Employees at 28-Feb-09       133     133      83     132      61     542
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    6 Months Ended
    28-Feb-10                 North    Asia-                  Corp-
    CAN$ (000s)             America  Pacific   EMEA  Products orate    Total
    -------------------------------------------------------------------------
    External revenue          22,998  10,680  10,737   3,792       -  48,207
    -------------------------------------------------------------------------
    Intercompany revenue
     (cost of sales)          (1,283)   (332) (1,814)  3,429       -       -
    -------------------------------------------------------------------------
    % of external revenue        48%     22%     22%      8%       -    100%
    -------------------------------------------------------------------------
    Gross profit              10,431   4,502   5,445   5,977       -  26,355
    -------------------------------------------------------------------------
    Gross margin                 48%     44%     61%     83%       -     55%
    -------------------------------------------------------------------------
    Expenses                  (3,707) (3,525) (2,823) (4,392) (4,717)(19,164)
    -------------------------------------------------------------------------
    Other income (loss) &
     foreign exchange
     gain (loss)                 (11)     16      34       -    (232)   (193)
    -------------------------------------------------------------------------
    Income (loss)
     before taxes              6,713     993   2,656   1,585  (4,949)  6,998
    -------------------------------------------------------------------------
    External revenue change %
     (YTD-10 vs YTD-09)          58%     17%     18%    (41%)      -     23%
    -------------------------------------------------------------------------
    Average employees at
     28-Feb-10                   142     123      84     143      69     561
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    6 Months Ended
    28-Feb-09                 North    Asia-                  Corp-
    CAN$ (000s)             America  Pacific   EMEA  Products orate    Total
    -------------------------------------------------------------------------
    External revenue          14,520   9,114   9,132   6,474       -  39,240
    -------------------------------------------------------------------------
    Intercompany revenue
     (cost of sales)            (748)   (481) (1,370)  2,599       -       -
    -------------------------------------------------------------------------
    % of external revenue        37%     23%     23%     16%       -    100%
    -------------------------------------------------------------------------
    Gross profit               6,998   3,692   4,878   8,209    (275) 23,502
    -------------------------------------------------------------------------
    Gross margin                 51%     43%     63%     90%       -     60%
    -------------------------------------------------------------------------
    Expenses                  (2,810) (3,143) (2,994) (4,613) (5,456)(19,016)
    -------------------------------------------------------------------------
    Other income (loss) &
     foreign exchange
     gain (loss)                   -      66     120       -   1,664   1,850
    -------------------------------------------------------------------------
    Income (loss)
     before taxes              4,188     615   2,004   3,596  (4,067)  6,336
    -------------------------------------------------------------------------
    Average employees at
     28-Feb-09                   139     133      80     119      65     536
    -------------------------------------------------------------------------
    

North America: External revenues in North America made up 46% of the global revenue mix, compared to 33% in Q2-09. This increase is a result of a 146% increase in consulting revenue as we continue to execute and complete the large cyber security project won in Q4-09. This strong consulting revenue is offset by lower software license revenue, which decreased by 34% compared to Q2-09.

Compared to Q1-10, external revenue declined by 17%, a direct result of the record equipment revenue earned in the first quarter. Excluding equipment revenue, external revenue increased by 23% despite 10% fewer working days in the second quarter. This decrease was offset with higher software license revenue recognized in the quarter.

Overhead costs increased by $0.92 million compared to Q2-09 and by $0.30 million compared to Q1-10. The increase compared to Q2-09 is a result of a 6% increase in headcount as we decentralized certain corporate functions by allocating resources directly into this region. Compared to Q1-10, expenses increased due to an increase in office expenses, travel and marketing costs.

Asia-Pacific: Asia-Pacific results were positively impacted by foreign exchange rates as the Canadian dollar weakened relative to the Australian dollar, the primary currency in which we transact business in Asia-Pacific (0.9428 at February 28, 2010 compared to 0.8104 at February 28, 2009). External revenue increased by 26% compared to Q2-09 and decreased slightly by 2% compared to Q1-10, despite the company-wide holiday closure that spans the summer months in the Asia-Pacific region. In natural currency, revenue increased by 14% compared to Q2-09 and decreased by 1% compared to Q1-10.

The increase in external revenue compared to Q2-09 is attributed to higher consulting revenue, which increased by 14%. The acquisition of Integration Automation and Control Pty Ltd. (IAC) in Q1-10 increased consulting headcount by 8%. We start to observe a slow recovery in the mining industry - the primary market we serve in the region - with an improvement of 24% in utilization. Equipment revenue also positively impacted the Asia-Pacific revenue, increasing by 21% compared to Q2-09 and by 24% compared to Q1-10.

Gross margin increased by 7 percentage points compared to Q2-09 and 2 percentage points compared to Q1-10. The increase in gross margin compared to Q2-09 is a result of equipment revenue being a smaller component of the revenue mix (15% in Q2-10 compared to 17% in Q2-09).

As a result of the acquisition of IAC, year-to-date overhead expenses increased in line with our expectations compared to FY-09.

EMEA: External revenue in the EMEA region increased by 17% compared to Q2-09 and decreased by 2% compared to Q1-10. EMEA revenue was significantly impacted by the strengthening of the Canadian dollar relative to the British pound, Euro and US dollar. In natural currency, external revenue increased by 32% compared to Q2-09 and by 6% compared to Q1-10.

During Q2-10, we began execution of the project won with the Middle East oil company that was announced earlier in the quarter. In natural currencies, consulting revenue for the Middle East region increased by 53% compared to Q2-09 and by 45% compared to Q1-10. Offsetting this increase is a decrease in software license revenue of 26% compared to Q2-09 and 50% compared to Q1-10.

Expenses have remained consistent in natural currency, and any fluctuations are primarily due to fluctuations in foreign exchange rates.

Year-to-date, external revenue increased by 18% due to increased consulting revenue. The overall number of consulting employees in the region has increased by 40% primarily in the Middle East, as we continue to build our resource base in this region.

Products: External revenue in the Products segment represents software license and support sales and implementation services executed by our direct product sales group. Intercompany revenue represents the software license and support fees paid by the other segments.

While we saw growth in off-the-shelf software license sales over the past year, total Products revenue in Q2-10 has decreased by 38% compared to Q2-09 and by 15% compared to Q1-10. OPC license sales continue to make positive contributions, growing by 2% compared to Q2-09 and by 30% compared to Q1-10.

Overhead expenses have decreased compared to Q2-09 as a result of lower costs associated with acquiring operations in India.

Corporate: The Corporate segment includes all shared corporate services (including executive management, finance, information technology and human resources) that are not allocated to other segments. In addition, the Corporate segment includes stock-based compensation, other income or expenses, foreign exchange translation gains and losses, and amortization. Expenses in this segment fluctuate period-by-period based on corporate activity and foreign exchange rate fluctuations.

Corporate expenses decreased by 25% compared to Q2-09 as employee expenses, administration costs and expenses associated with the start-up of the joint entity operation in India were included in the prior period. We also incurred contractor costs of $0.35 million to support the transition to a new enterprise resource planning (ERP) system that was introduced in Q2-09.

Compared to Q1-10, Corporate expenses declined by 7% as a result of lower consulting costs for marketing and information technology services. Year-to-date, Corporate expenses decreased by 14% as a result of lower employee expenses and third party consultancy fees.

Quarterly Results

The following table presents a summary of our unaudited consolidated operating results for the past eight quarters. This information should be read in conjunction with the applicable interim financial statements, notes to the financial statements and management's discussion and analysis.

Management has not noted any change to the seasonality of our business as reported in the 2009 annual MD&A.

    
    -------------------------------------------------------------------------
    CAN $000s
    except per
    share             FY 08                   FY 09                  FY 10
    amounts        Q3      Q4      Q1      Q2      Q3      Q4      Q1      Q2
    -------------------------------------------------------------------------
    Revenue    20,536  20,162  19,579  19,661  16,376  17,622  25,450  22,757
    -------------------------------------------------------------------------
    Gross
     profit    11,533  11,903  11,867  11,635   8,107   9,446  13,793  12,562
    -------------------------------------------------------------------------
    Gross
     margin       56%     59%     61%     59%     50%     54%     54%     55%
    -------------------------------------------------------------------------
    Operating
     income
     (loss)     3,103   2,842   2,543   1,943  (1,770)    528   4,214   2,977
    -------------------------------------------------------------------------
    Net income
     (loss)     2,467   2,583   2,757   2,027  (2,959)    489   2,768   2,845
    -------------------------------------------------------------------------
    Net margin    12%     13%     14%     10%    -18%      3%     11%     13%
    -------------------------------------------------------------------------
    Shares
     outstanding
     (000s)    30,548  30,636  30,949  30,968  30,932  30,936  31,298  31,311
    -------------------------------------------------------------------------
    Diluted
     shares
     outstanding
     (000s)    31,467  31,494  31,649  31,622  30,932  31,302  31,524  31,478
    -------------------------------------------------------------------------
    EPS (loss)
     - basic     0.08    0.09    0.09    0.07   (0.10)   0.02    0.09    0.09
    -------------------------------------------------------------------------
    EPS (loss)
     - diluted   0.08    0.08    0.09    0.06   (0.10)   0.02    0.09    0.09
    -------------------------------------------------------------------------
    Headcount     506     521     545     542     559     523     570     588
    -------------------------------------------------------------------------


    Liquidity & Capital Resources
    -------------------------------------------------------------------------
    At                                                     Q2-10      Q2-10
    (CAN $000s except                                    vs Q1-10   vs Q2-09
     ratios)              28-Feb-10 29-Feb-09 30-Nov-09  % Change   % Change
    -------------------------------------------------------------------------
    Cash & equivalents       9,378     8,793     5,165        82%         7%
    -------------------------------------------------------------------------
    Accounts receivable     28,955    25,848    29,287        (1%)       12%
    -------------------------------------------------------------------------
    Trade receivables       21,609    19,326    22,133        (2%)       12%
    -------------------------------------------------------------------------
    Average collection
     period
    (trade receivables)    87 days   82 days   88 days     -1 day     5 days
    -------------------------------------------------------------------------
    Contracts in progress    6,214     8,375     7,049       (12%)      (26%)
    -------------------------------------------------------------------------
    Deferred revenue         9,160     9,114     6,670        37%         1%
    -------------------------------------------------------------------------
    Current liabilities     21,622    20,056    21,417         1%         8%
    -------------------------------------------------------------------------
    Cash flow from
     operations (YTD)        5,882    (1,792)     (932)      731%       428%
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Note: This section is forward-looking by nature. It is qualified entirely
    by the Forward Looking Statements disclaimer at the beginning of this
    MD&A. It is also qualified by the principal risks that could affect our
    business (see pages 45 - 48 of our 2009 Annual Report).
    -------------------------------------------------------------------------
    

The rolling 12-month average collection period (on trade receivables) was 87 days at the end of Q2-10, an increase of 5 days compared to the end of Q2-09 and a decrease of 1 day compared to Q1-10. This is a result of increased revenues in the first six months of FY-10 and the timing of invoicing milestones on our large projects. Our aged receivables over 90 days, as a percentage of our overall aged receivables, remains consistent with Q1-10.

Current liabilities increased to $21.62 million at the end of Q2-10, compared to $21.42 million at the end of Q1-10 and $20.06 million at the end of Q2-09. Compared to Q2-09, this increase is a result of higher deferred revenue balances. Deferred revenue at the end of the Q2-10 includes $5.69 million in deferred support revenue and $3.47 million in unearned software license, services and equipment revenue, compared to $5.32 million in deferred support revenue and $1.21 million in unearned software license, services and equipment revenue in Q1-10.

Cash provided by operating activities was $6.81 million in Q2-10, compared to cash used by operations of $0.93 million in Q1-10 and cash used by operations of $1.24 million in Q2-09. The increase over Q1-10 is a result of an increase in accounts payable, accrued liabilities, deferred revenue and an increase in net income.

Our overall cash position increased by $4.21 million compared to Q1-10. Two business acquisitions reduced our cash balance by $2.28 million.

In Q2-10, we paid two quarterly dividends each in the amount of $0.03 per common share, respectively related to Q4-09 and Q1-10.

Our effective income tax rate was 5.2% for Q2-10. Our effective income tax rate during Q2-10 has been reduced as a result of tax recoveries realized of AUD$0.68 million realized from research and development tax credits in Australia. Excluding the research and development credits from Australia, our effective income tax rate is 22.5% for Q2-10. Year-to-date, our effective tax rate is 19.7% (and 26.79%, excluding tax credits from Australia) compared to 18.4% in the first six months of FY-09. Our expected range for FY-10 of 27% to 32%, excluding tax credits, remains unchanged.

We believe that we have the capital resources and liquidity necessary to meet our commitments, support our operations and finance our current growth strategies. Please refer to pages 45 - 48 of Matrikon's 2009 Annual Report covering Risks Related to our Business, which address the risks associated with our company's capital resources and liquidity.

Acquisitions

Acquisitions completed subsequent to August 31, 2009 are accounted for under the acquisition method of accounting, unless otherwise stated, and the results of earnings since the respective dates of acquisition are included in the consolidated statements of income.

On September 1, 2009, we acquired all of the issued and outstanding shares of Integration Automation and Control Pty Ltd. (IAC), an automation and information systems service company located in Newcastle, Australia, for consideration of $1.81 million in cash. The acquisition of IAC further establishes Matrikon's automation and information systems expertise within Hunter Valley's coal industry.

On November 11, 2009, we acquired the remaining 51% of the issued and outstanding shares of Matrikon-SoftDEL India Pvt Ltd. (MSPL), a joint entity based in Pune, India, for consideration of $0.58 million in cash.

Off Balance Sheet Arrangements

Matrikon is a lessee under several operating type leases for office space, office equipment and motor vehicles and is also a party to research funding arrangements with educational institutions in Canada and Australia. The future cash flow impacts of these arrangements are summarized in the table below. Matrikon is not party to any undisclosed off balance sheet arrangements.

    
                          ---------------------------------------------------
                                               Payment Due
                                  Less than                            After
    At February 28, 2010   Total     1 year  2-3 years  4-5 years    5 years
    -------------------------------------------------------------------------
    Operating lease
     obligations
     (CAN $000s)           5,635      1,871      3,330        415         19
    -------------------------------------------------------------------------
    Other long term
     obligations
     (CAN $000s)             100        100          -          -          -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total contractual
     obligations           5,735      1,971      3,330        415         19
    -------------------------------------------------------------------------
    

Normal Course Issuer Bid

Matrikon announced a normal course issuer bid on January 14, 2009. Under the bid, Matrikon may acquire up to 1,547,595 common shares, representing 5% of current issued and outstanding shares as at January 14, 2009. The bid commenced January 16, 2009 and ended January 15, 2010. No shares were purchased for the first half of FY-10.

Share Data

Matrikon is listed on the Toronto Stock Exchange under the trading symbol "MTK." As at April 1, 2010 there were 31,328,736 common shares of the corporation issued and outstanding and 166,550 options and 491,425 restricted share units outstanding, each convertible into one common share upon exercise or exchange.

Critical Accounting Estimates

These interim financial statements were prepared with the same critical accounting estimates and methods as fiscal year 2009 (please see pages 42 - 44 of Matrikon's annual MD&A for the fiscal year ended August 31, 2009 dated November 6, 2009 for a discussion of these estimates), along with the adoption of the CICA Handbook sections:

    
    -   1582 - Business Combinations
    -   1601 - Consolidated Financial Statements
    -   1602 - Non-Controlling Interests
    -   3251 - Equity
    -   1506 - Accounting Changes
    -   3855 - Financial Instruments - Recognition and Measurement
    

Basis of Presentation

During the quarter we commenced operations with Matrikon Kuwait (MKU) in which we own a 49% equity interest. As a result of our equity interest and operational agreements, we have determined that we are the primary beneficiary as defined by the Canadian Institute of Chartered Accountants (CICA) Handbook's Accounting Guideline 15 (AcG-15), "Consolidation of Variable Interest Entities." Pursuant to AcG-15, we have consolidated the results of MKU.

Recent Accounting Pronouncements Issued and Not Applied

Comprehensive Revaluation of Assets and Liabilities

In August 2009, the CICA amended Handbook Section 1625, "Comprehensive Revaluation of Assets and Liabilities" as a result of issuing Section 1582, "Business Combinations," Section 1601, "Consolidated Financial Statements," and Section 1602, "Non-Controlling Interests" in January 2009. The amendments apply prospectively to comprehensive revaluations of assets and liabilities occurring in fiscal years beginning on or after January 1, 2011. Earlier adoption is permitted provided that section 1582 is also adopted. We are currently evaluating the impact of the amendments to the standard.

Financial Instruments - Disclosure

In June 2009, the CICA amended Handbook Section 3862, "Financial Instruments - Disclosures," to include additional disclosure requirements about fair value measurements of financial instruments and to enhance liquidity risk disclosure requirements. The amendments apply to annual financial statements relating to the fiscal years ending after September 30, 2009. We are currently evaluating the impact of the amendments to the standard.

Convergence with International Financial Reporting Standards

In February 2008, CICA's Accounting Standards Board ("AcSB") confirmed that Canadian publicly accountable enterprises will be required to adopt International Financial Reporting Standards ("IFRS") as promulgated by the International Accounting Standards Board ("IASB"), replacing Canadian GAAP effective January 1, 2011. The transition from Canadian GAAP to IFRS will be applicable for our Company for the first quarter of fiscal 2012, that being November 30, 2011, when our Company will prepare both the current and comparative financial information using IFRS.

In addressing the impact and implementation of IFRS, we have completed preliminary planning and scoping and are currently working with external consultants to establish a detailed assessment of the conversion process. As at February 28, 2010, we have performed a preliminary assessment of the accounting and reporting differences under IFRS compared to Canadian GAAP, and have established various alternatives relating to our Enterprise Resource Planning (ERP) system on which we will commence testing.

We expect the implementation process and solutions development to be finalized before the end of fiscal 2010. At this time, we are not able to quantify the full financial reporting impact of the differences between Canadian GAAP and IFRS on our operations, except for the adoption of CICA Handbook section 1582, which is disclosed in Note 2(a(ii)). We will continue to assess the impact of the proposed standards on the consolidated financial statements and disclosure as additional information becomes available.

Risks Related to Our Business

There has been no significant change to our risk factors from those described in our 2009 Annual Report. Please see pages 45 - 48 of Matrikon's 2009 Annual Report.

Internal Control over Financial Reporting and Disclosure Controls

Management has evaluated whether there were changes in our Internal Controls over Financial Reporting (ICFR) during the three month period ended November 30, 2009 that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

At August 31, 2009, we reported that we did not sufficiently design and maintain effective controls over the identification of projects that should be accounted for using Contract Accounting as defined by FASB 605-35 (formerly SOP 81-1).

During Q1-10, we began to implement procedures that require certain contracts to be reviewed, prior to commencement, to identify projects that require contract accounting treatment. In Q2-10, we have taken steps to remediate this process by having the appropriate processes and checklists in place to review significant contracts and assess the terms as defined by FASB 605-35 (formerly SOP 81-1).

Please see page 49 of Matrikon's 2009 Annual Report for a discussion of internal controls over financial reporting and disclosure controls.

Subsequent Event

Subsequent to the quarter, our Board of Directors declared a quarterly dividend of $0.03 per common share for the second quarter of fiscal year 2010. This dividend is payable on April 27, 2010 to all shareholders of record on April 16, 2010. The dividend is an eligible dividend for Canadian tax purposes.

About Matrikon

    
    -------------------------------------------------------------------------
    Matrikon delivers industrial performance monitoring solutions that
    provide visibility into the global operations of oil and gas, energy,
    mining, power and refining companies. Matrikon products enable users to
    anticipate and correct problems, identify opportunities for improvement,
    share best practices and drive the action necessary to achieve and
    sustain their operational excellence objectives. Matrikon has been
    empowering excellence since 1988. With offices throughout North America,
    Australia, Europe and the Middle East and a client base that includes
    industry leaders in a wide range of process industries, Matrikon's reach
    is global.

    At February 28, 2010, Matrikon had 588 employees, including 104 in
    corporate and administrative services, 73 in sales and marketing, 116 in
    product development and support and 295 in professional services
    (Solutions).
    -------------------------------------------------------------------------
    

SOURCE MATRIKON INC.

For further information: For further information: Nicole Sayler, Corporate Communications Director, (780) 945-4010, 1-877-628-7456 x4010, nicole.sayler@matrikon.com

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