Mediagrif Reports Q2 FY2008 Financial Results



    
    - Revenues of $12.1 million compared to $11.5 million in the previous
      year
    - Net earnings of $0.9 million compared to $1.6 million in the previous
      year
    - EPS of $0.05 compared to $0.09 in the previous year
    

    LONGUEUIL, QC, Nov. 6 /CNW Telbec/ - Mediagrif Interactive Technologies
Inc. (TSX: MDF), a world-leading developer of e-business networks and provider
of complete e-business solutions, today announced its financial results for
the second quarter of fiscal year 2008 ended September 30, 2007.
    Revenues for the second quarter amounted to $12.1 million, as compared to
$11.5 million in the corresponding quarter of the previous year. Most of
Mediagrif's major e-business networks experienced good organic growth,
especially the US government e-publishing sector which grew by 16%. Such
growth was partly offset by a decrease in the revenues of Carrus Technologies
and Power Source On-Line, and, foreign exchange variations which again
negatively impacted quarterly revenues by over $0.4 million.
    Operating expenses increased to $8.6 million during the second quarter
from $7.0 million in the corresponding quarter of the previous year mainly due
to the impact of acquisitions, higher headcount, expansion of the corporate
marketing group and growing investments as part of our international expansion
strategy.
    As a result of such increase in operating expenses, earnings from
operations amounted to $1.2 million as compared to $2.3 million for the
corresponding period of the previous year. Net earnings and basic earnings per
share for the second quarter amounted to $0.9 million or $0.05 per share, as
compared to $1.6 million or $0.09 per share for the corresponding quarter of
the previous year.
    "During this quarter we have achieved important milestones that were part
of our strategic plan. In addition to the acquisition of Market Velocity and
the strategic partnership entered into with McGraw-Hill Construction, we have
announced in September the acquisition of epipeline, a leading online source
of research for government contractors. Recognized for providing the most
advanced research services in the industry, epipeline enables us to offer
increased value and consolidate our leading position in North America,"
commented Denis Gadbois, President and Chief Executive Officer of Mediagrif.
"We have also successfully completed a Substantial Issuer Bid of $25 million,
which we believed to be an effective use of our financial resources and
beneficial to all shareholders," concluded Mr. Gadbois.

    KEY OPERATING HIGHLIGHTS OF Q2 FY2008:

    On July 11th, the Company purchased Market Velocity Inc. ("MVI"), the
leading service and technology provider for equipment and trade-in, recycle,
and donation program in the US. MVI is well respected for its expertise in
developing compelling solutions for the trade-in market and will strategically
complement our Parts Exchange division. The acquisition of MVI will solidify
Mediagrif's position as one of the predominant player in this segment and
accelerate its expansion throughout North America.
    On August 6th, the Company announced a strategic partnership with
McGraw-Hill Construction, the premier provider of construction information and
intelligence in North America and part of The McGraw-Hill Companies
(NYSE:   MHP). MERX and McGraw-Hill Construction will work together on the
publishing of construction project data to provide additional value to both
the Building Products Manufacturers and Contractor markets.
    On September 10, 2007, the Company purchased epipeline inc. ("EPI"), a
leading online source of research for government contractors. EPI is also
recognized for providing the most advanced research services in the industry.

    KEY FINANCIAL HIGHLIGHTS OF Q2 FY2008:

    Revenues for the quarter reached $12.1 million, as compared to        
$11.5 million in the corresponding quarter of the previous year. The foreign
exchange fluctuation negatively impacted the quarterly revenues by
$0.4 million. Most of Mediagrif's major e-business networks experienced good
organic growth, especially the US government e-publishing sector. However, we
continued to experience revenue decrease in Carrus Technologies due to lower
non-recurring revenues as well as in Power Source On-Line, caused by net
additional members generating lower average revenue. During the quarter, the
acquisitions contributed to total revenues for approximately $0.8 million.
    Revenues for the six-month period reached $23.4 million as compared to
$23.0 million in the corresponding period of last year. The foreign exchange
variation remains the main factor offsetting the organic growth with a
negative impact on the revenues of $0.9 million.
    For the quarter ended September 30, 2007, total operating expenses
amounted to $8.6 million as compared to $7.0 million for the previous year.
General and administrative expenses increased from $2.7 million to
$3.2 million mainly due to the impact of the acquisitions and higher
headcount. Sales and marketing expenses increased from $2.0 million last year
to $2.5 million due to the acquisitions, growing marketing activities and
continued investments in international operations. Technology expenses
increased from $1.8 million to $2.3 million mainly due to the acquisitions,
higher amortization charges and to higher headcount.
    For the six-month period ended September 30, 2007, total operating
expenses amounted to $16.3 million as compared to $13.9 million for the
previous year. General and administrative charges increased from $5.0 million
to $6.0 million, mainly due to the impact of the acquisitions, higher
compensation costs due to increased overall headcount and higher variable
remuneration. Sales and marketing expenses increased from $4.0 million last
year to $5.0 million for the six months ended September 30, 2007. This
increase is attributable to the impact of our growing investments made as part
of our international expansion strategy, the expansion of the corporate
marketing team and the acquisitions. Technology expenses increased from
$3.8 million to $4.4 million, due to higher headcount in the technology
department, higher amortization charges and the acquisitions.
    As a result, earnings from operations during the quarter amounted to
$1.2 million, as compared to $2.3 million in the corresponding quarter of the
previous year. As for the six-month period ended September 30, 2007, earnings
from operations amounted to $2.5 million as compared to $4.8 million, due to
higher operating expenses and the negative impact of foreign exchange
variations. Quarterly and year-to-date diluted earnings per share, for the
current year, were $0.05 and $0.09 respectively, as compared to $0.09 and
$0.19 for the same periods last year.
    On September 26, the Company announced the purchase for cancellation of
2,873,563 common shares at a price of $8.70 per share, for a total cost of
approximately $25.0 million as part of a Substantial Issuer Bid.
    As of September 30, 2007, our cash and cash equivalents reached
$28.7 million, an increase from $11.2 million as of March 31, 2007 and a
decrease from $56.4 million as of September 30, 2006. As of September 30,
2007, our short-term investments amounted to $0.1 million as compared to
$53.1 million as of March 31, 2007 and to $2.2 million as of September 30,
2006. Free cash flow, defined as cash flow from operating activities less
capital expenditures, was negative $1.5 million during the second quarter, as
compared to a positive $3.1 million for the previous year, the variation
mainly explained by the variation of earnings and changes in non-cash
working-capital items.
    On March 1, 2007, the Company announced the launch of a normal course
issuer bid whereby it is authorized to purchase for cancellation for the
twelve-month period starting March 5, 2007 up to 1,018,501 common shares. As
such, during the first six months, the Company purchased 68,600 common shares
for cancellation at an average price of $9.41, for total consideration of
$0.6 million. Since the beginning of the program, the Company purchased
114,700 common shares for cancellation.

    ADDITIONAL INFORMATION:

    Management's Discussion and Analysis of second quarter results, along
with detailed financial results, can be accessed on the Corporation's Web site
at www.mediagrif.com.

    A live Web cast of Mediagrif's second quarter FY2008 financial results
conference call can be heard at 10:00 am EST Wednesday, November 7 at the
following link:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2044240
    Please note that the Web cast will be available until January 6, 2008 at
the above link.

    To participate to the conference call:

    Local call-in number: (514) 868-2590
    Toll-free call-in number: 1 866 540-8136

    The conference call will also be available for listening until November
13, 2007 at the following number: 1 800 408-3053, access code 3224488#.

    About Mediagrif Interactive Technologies Inc.

    Mediagrif Interactive Technologies Inc. (TSX: MDF) is a world-leading
operator of e-business networks and provider of complete e-business solutions.
Mediagrif's e-business networks allow buyers and sellers within specific
industries to source, purchase or sell products and to exchange documents more
efficiently using the Internet. Mediagrif operates 15 networks, including
industry leaders www.brokerforum.com, www.powersourceonline.com,
www.telecomfinders.com, www.globalwinespirits.com and www.polygon.net.
Mediagrif also owns MERX, www.merx.com, the exclusive provider of e-publishing
services to the Government of Canada, and is a leading provider of government
bid aggregation services and e-procurement services in the U.S. Headquartered
in Longueuil, Mediagrif has various offices in Canada, the U.S, China, India
and Dubai. For more information, please visit us at www.mediagrif.com or call
1 877 677-9088.

    This press release contains certain forward-looking statements with
respect to the Company. These forward-looking statements, by their nature,
necessarily involve risks and uncertainties that could cause actual results to
differ materially from those contemplated by these forward-looking statements.
We consider the assumptions on which these forward-looking statements are
based to be reasonable, but caution the reader that these assumptions
regarding future events, many of which are beyond our control, may ultimately
prove to be incorrect since they are subject to risks and uncertainties that
affect us. We disclaim any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise, except as required by applicable securities legislation.
All amounts are in Canadian dollars.

    
    MEDIAGRIF INTERACTIVE TECHNOLOGIES INC.
    CONSOLIDATED BALANCE SHEETS

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (Canadian dollars in Thousands)                  September 30,  March 31,
                                                             2007       2007
                                                       (Unaudited)   (Note 1)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                                $          $
    ASSETS
      Cash and cash equivalents                            28,686     11,221
      Short-term investments                                  130     53,099
      Accounts receivable                                   9,273      4,685
      Tax credits receivable                                2,340      1,672
      Prepaid expenses                                        743        741
      Future income taxes                                     254        254
    -------------------------------------------------------------------------
                                                           41,426     71,672

      Premises and equipment                                2,794      2,644
      Intangible assets                                     4,874      5,054
      Acquired intangible assets                            4,444      4,754
      Goodwill                                             32,630     22,261
      Other assets                                            114        156
      Future income taxes                                     932        831
    -------------------------------------------------------------------------
                                                           87,214    107,372
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
      Accounts payable and accrued liabilities              8,624      5,425
      Income taxes payable                                  2,610      2,751
      Deferred revenue                                      8,768      8,371
      Current portion of purchase price payable               530        262
      Current portion of deferred gain on licenses            676        676
      Future income taxes                                     576        476
    -------------------------------------------------------------------------
                                                           21,784     17,961

      Deferred gain on licenses                               141        479
    -------------------------------------------------------------------------

                                                           21,925     18,440
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY
      Capital stock (note 6)                               51,303     60,912
      Share purchase options (Note 6)                       2,054      2,803
      Contributed surplus (Note 6)                            848          -
      Retained earnings                                    11,345     25,476
      Accumulated other comprehensive income (loss)
       (Note 7)                                              (261)      (259)
    -------------------------------------------------------------------------
                                                           65,289     88,932
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                                           87,214    107,372
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    MEDIAGRIF INTERACTIVE TECHNOLOGIES INC.
    CONSOLIDATED STATEMENTS OF RETAINED EARNINGS - UNAUDITED
    FOR THE SIX MONTHS ENDED SEPTEMBER 30,

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (Canadian dollars in Thousands)                          2007       2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                                $          $

    Retained earnings - Beginning of period                25,476     23,245

    Net earnings for the period                             1,679      3,356

    Premium on purchase of common shares for
     cancellation (note 6)                                (15,810)    (2,551)
    -------------------------------------------------------------------------

    Retained earnings - End of period                      11,345     24,050
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    MEDIAGRIF INTERACTIVE TECHNOLOGIES INC.
    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (Canadian dollars in          Three months ended        Six months ended
     Thousands)                       September 30,           September 30,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                       $           $           $           $

    Net earnings for the
     period                          868       1,626       1,679       3,356

    Other comprehensive
     income (loss)
      Change in foreign
       currency translation
       of self-sustaining
       foreign subsidiaries         (268)          3        (652)       (267)
      Change in fair value
       of foreign exchange
       forward contracts
       designated as cash
       flow hedges, net of
       related income taxes          185           -         894           -
      Change in fair value
       of short-term
       investments, net of
       related income taxes          (12)          -         (89)          -
    -------------------------------------------------------------------------

    Other comprehensive
     income (loss)                   (95)          3         153        (267)
    ------------------------------------------------- -----------------------

    Comprehensive income
     (loss)                          773       1,629       1,832       3,089
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    MEDIAGRIF INTERACTIVE TECHNOLOGIES INC.
    CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME -
    UNAUDITED
    FOR THE SIX MONTHS ENDED SEPTEMBER 30,

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (Canadian dollars in Thousands)                          2007       2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                                $          $

    Balance - Beginning of period                            (259)      (165)

    Cumulative impact of accounting changes (Note 1)         (155)         -
    Other comprehensive income (loss)                         153       (267)
    -------------------------------------------------------------------------

    Accumulated Other Comprehensive Income (Note 7)          (261)      (432)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    MEDIAGRIF INTERACTIVE TECHNOLOGIES INC.
    CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (Canadian dollars in          Three months ended        Six months ended
     Thousands,                       September 30,           September 30,
    except per share amounts)       2007        2006        2007        2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                       $           $           $           $

    Revenues                      12,102      11,484      23,374      22,984

    Cost of Revenues               2,326       2,198       4,595       4,281
    -------------------------------------------------------------------------

    Gross Margin                   9,776       9,286      18,779      18,703
    -------------------------------------------------------------------------

    Operating expenses
    General and
     Administrative                3,203       2,652       5,955       5,022
    Sales and Marketing            2,541       2,017       4,995       4,020
    Technology                     2,263       1,830       4,407       3,798
    Amortization of acquired
     intangible assets               391         316         686         629
    Stock-based compensation         195         178         249         399
    -------------------------------------------------------------------------
                                   8,593       6,993      16,292      13,868
    -------------------------------------------------------------------------
    Earnings from operations       1,183       2,293       2,487       4,835

    Other income, net
     (note 3 b))                     461         553         842         847
    -------------------------------------------------------------------------

    Earnings before income
     taxes                         1,644       2,846       3,329       5,682

    Provision for income
     taxes                           776       1,220       1,650       2,326
    -------------------------------------------------------------------------

    Net earnings for the
     period                          868       1,626       1,679       3,356
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per share
      Basic                         0.05        0.09        0.09        0.19
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------
      Diluted                       0.05        0.09        0.09        0.19
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

    Weighted average number
     of shares outstanding
     (note 6 c))
      Basic                   17,643,912  17,479,348  17,688,134  17,591,645
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------
      Diluted                 17,729,608  17,790,524  17,790,273  17,923,129
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------

    Number of shares
     outstanding - End of
     period (note 6 b))
      Basic                   14,881,246  17,481,666  14,881,246  17,481,666
                              ----------- ----------- ----------- -----------
                              ----------- ----------- ----------- -----------


    MEDIAGRIF INTERACTIVE TECHNOLOGIES INC.
    CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (Canadian dollars in          Three months ended        Six months ended
     Thousands)                       September 30,           September 30,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                       $           $           $           $
    CASH FLOWS FROM

    OPERATING ACTIVITIES
    Net earnings for the
     period                          868       1,626       1,679       3,356
    Adjustments for
      Amortization of premises
       and equipment                 422         350         799         707
      Amortization of
       intangible assets             725         608       1,419       1,250
      Amortization of acquired
       intangible assets             391         316         686         629
      Amortization of gains
       on licenses                  (169)       (169)       (338)       (338)
      Stock-based compensation       195         178         249         399
      Future income taxes             42         810        (307)        601
      Unrealized foreign
       exchange loss on
       long-term receivable            -         (23)          -         (23)
    Changes in non-cash working
     capital items (note 3 a))    (3,001)        231      (4,933)     (1,113)
    -------------------------------------------------------------------------

    Cash flows from (used in)
     operating activities           (527)      3,927        (746)      5,468
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Business acquisition
     (note 4)                     (6,175)     (2,456)     (6,362)     (2,456)
    Acquisition of premises
     and equipment and
     intangible assets              (936)       (809)     (1,913)     (1,671)
    Short-term investments,
     net                          17,756      17,808      52,969      34,120
    Long-term receivable               -           -           -         290
    -------------------------------------------------------------------------

    Cash flows from investing
     activities                   10,645      14,543      44,694      30,283
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Purchase of common shares
     for cancellation
     (note 6 b))                 (25,263)          -     (25,908)     (3,942)
    Issuance of common
     shares (note 6 b))              102          26         339         563
    Repayment of purchase
     price payable                  (262)       (259)       (262)       (259)
    -------------------------------------------------------------------------

    Cash flows from (used in)
     financing activities        (25,423)       (233)    (25,831)     (3,638)
    -------------------------------------------------------------------------

    Net increase in cash and
     cash equivalents            (15,305)     18,237      18,117      32,113
    -------------------------------------------------------------------------

    Effect of exchange rate
     changes on cash and
     cash equivalents               (269)          2        (652)       (267)

    Cash and cash
     equivalents - Beginning
     of period                    44,260      38,152      11,221      24,545
    -------------------------------------------------------------------------

    Cash and cash
     equivalents - End of
     period                       28,686      56,391      28,686      56,391
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

    September 30, 2007 and 2006

    1) Accounting Policies

    The consolidated interim financial statements have been prepared by the
Company in accordance with Canadian generally accepted accounting principles
("GAAP") applicable to interim financial statements and follow the same
accounting policies and methods of their application found in the audited
financial statements for the year ended March 31, 2007, with the exceptions
for changes mentioned below. The March 31, 2007 balance sheet figures have
been derived from the audited financial statements of the Company for the year
ended March 31, 2007. These interim financial statements are unaudited and
have not been reviewed by the Company's external auditors. The disclosures in
these unaudited interim financial statements do not conform in all material
respects to the requirements of GAAP for annual financial statements;
therefore, these interim financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto included
in the Company's Annual Report for fiscal year 2007.

    Changes to accounting policies

    a) Financial Instruments

    On April 1, 2007, the Company adopted Section 3855 of the Canadian
Institute of Chartered Accountants (CICA) Handbook, Financial Instruments -
Recognition and Measurement. It establishes standards for recognition and
measurement of financial assets, financial liabilities and non-financial
derivatives. The standard specifies when and at which amount a financial
instrument is to be recorded on the balance sheet. Financial instruments are
to be recorded at fair value in some cases, and at cost in others. The section
also provides guidance for disclosure of gains and losses on financial
instruments. Upon the adoption of this section, the Company has made the
following classification:
    Short-term investments have been classified as available for sale and are
measured at fair value. Resulting gains or losses are recorded in Accumulated
Other Comprehensive Income until realization.

    b) Comprehensive Income

    On April 1, 2007, the Company adopted Section 1530 of the CICA Handbook,
Comprehensive Income. It establishes standards for reporting and display of
comprehensive income. Comprehensive income represents the change in the net
assets of an entity for a period, other than changes attributable to
transactions with shareholders. Comprehensive income has two components - Net
Income and Other Comprehensive Income and its components should be presented
in a financial statement with the same prominence as other financial
statements. The comparative statements have been adjusted to reflect
application of this section for changes in the balances of foreign currency
translation of self-sustaining foreign operations.
    On April 1, 2007, the initial adoption of this standard resulted in an
increase in short-term investments of $131,085, an increase in Accounts
payable of $358,329 and an accumulated other comprehensive loss of $154,640,
net of related income taxes.

    c) Hedges

    On April 1, 2007, the Company adopted Section 3865 of the CICA Handbook,
Hedges. It includes and replaces the guidance on hedging relationships that
was previously contained in AcG-13, mostly those relating to the designation
of hedging relationships and its documentation. The new standard specifies how
to apply hedge accounting and which information has to be disclosed by the
entity.
    Foreign exchange forward contracts represent cash flow hedge of future
anticipated sales denominated in foreign currency. Gains or losses from these
derivatives financial instruments are recorded in Accumulated Other
Comprehensive Income net of related income taxes and are reclassified to
earnings as adjustments to sales in the same period as the respective hedged
item affects earnings.

    2) Related party transactions

    Details of related party transactions not otherwise disclosed in the
financial statements are as follows:

    (Canadian dollars in Thousands)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                      September 30,           September 30,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                       $           $           $           $
    Revenues
    Joint ventures                   344         322         731         664

    Accounts receivable
    Joint ventures                   400         119         400         119

    Balances and transactions with the joint ventures represent the amounts
corresponding to the joint venturers' interest therein. All related party
transactions occurred in the normal course of operations and were measured at
the exchange amount, which is the amount of consideration agreed upon by the
parties. Revenues with joint ventures include amortization of gains on
licenses which derive from the creation of Polygon DMCC.


    3) Changes in non-cash working capital items and Other income

    a) Changes in non-cash working capital items are as follows:

    (Canadian dollars in Thousands)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                      September 30,           September 30,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                       $           $           $           $

    Decrease (Increase) in
      Accounts receivable           (684)        246        (261)        622
      Tax credits receivable        (395)       (268)       (668)       (784)
      Prepaid expenses                45         117          80          33
    Increase (Decrease) in
      Accounts payable and
       accrued liabilities        (1,766)        455      (3,188)     (1,911)
      Income taxes                   183        (201)       (141)        709
      Deferred revenues             (384)       (118)       (755)        218
    -------------------------------------------------------------------------
                                  (3,001)        231      (4,933)     (1,113)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    b) Other income consists of the following:

    (Canadian dollars in Thousands)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                      September 30,           September 30,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                       $           $           $           $

    Interest income                  715         585       1,398       1,166
    Interest expense                 (83)        (99)       (169)       (205)
    Foreign exchange gain (loss)    (106)        132        (257)         16
    Other                            (65)        (65)       (130)       (130)
    -------------------------------------------------------------------------
                                     461         553         842         847
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    4) Business Acquisition

    a) On April 17, 2007, the Company purchased the customer base of Telephone
International ("TI"), an advertising and listing publication focused on the
telecom industry for a cash consideration of US$ 165,480 ($186,893).

    b) On July 11, 2007, the Company purchased Market Velocity Inc. (MVI), a
leading service and technology provider for equipment trade-in, recycle, and
donation programs in the US for a cash consideration of $5,693,586
(US$ 5,392,675).

    c) On September 10, 2007, the Company purchased epipeline Inc. (EPI), a
leading online source of research for U.S. government contractors for a cash
consideration of $4,089,000 ($US3,885,000), including the repurchase of
long-term notes of $2,030,000, which have been reimbursed at the moment of the
acquisition.

    The fiscal 2008 allocation of the purchase price to the identifiable
assets acquired and liabilities assumed is detailed as follows:

    (Canadian dollars in Thousands)

                                                     MVI      EPI      Total
    -------------------------------------------------------------------------

    Current assets                                 4,150      351      4,501
    Premises and equipment and intangible assets     227      195        422
    -------------------------------------------------------------------------

                                                   4,377      546      4,923
    -------------------------------------------------------------------------

    Current liabilities                            4,101    3,439      7,540
    -------------------------------------------------------------------------

    Net identifiable assets acquired                 276   (2,893)    (2,617)
    Goodwill                                       5,417    4,952     10,369
    -------------------------------------------------------------------------

    Purchase price                                 5,693    2,059      7,752
    Less: cash and cash equivalents acquired       1,021       27      1,048
    Less: Balance of purchase price payable           63      467        530
    -------------------------------------------------------------------------

    Net cash paid                                  4,610    1,565      6,175
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    With respect to above allocations, the company is currently in the process
of finalizing the amounts to be allocated to intangible assets. Accordingly,
the above allocations are preliminary, the completion of which in the near
future is expected to result in changes to the amounts allocated to intangible
assets and goodwill.


    5) Segmented Information

    Geographical information

    The geographical information is as follows:

    For the three months ended September 30,
                                                2007                    2006
    -------------------------------------------------------------------------
                                        Premises and            Premises and
    (Canadian dollars in                   equipment,              equipment,
     Thousands)                           intangible              intangible
                                          assets and              assets and
                                Revenues    goodwill    Revenues    goodwill
                                       $           $           $           $
    -------------------------------------------------------------------------
      Canada                       3,880       6,931       3,966       8,313
      United States                5,499      37,704       4,737      26,909
      Europe                         768           -         864           -
      Asia and other               1,954         107       1,917          45
                              -----------------------------------------------

                                  12,102      44,742      11,484      35,267
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    For the six months ended September 30,
                                                2007                    2006
    -------------------------------------------------------------------------
                                        Premises and            Premises and
                                           equipment,              equipment,
                                          intangible              intangible
                                          assets and              assets and
                                Revenues    goodwill    Revenues    goodwill
                                       $           $           $           $
    -------------------------------------------------------------------------
      Canada                       7,666       6,931       7,914       8,313
      United States               10,218      37,704       9,410      26,909
      Europe                       1,483           -       1,759           -
      Asia and other               4,007         107       3,901          45
                              -----------------------------------------------

                                  23,374      44,742      22,984      35,267
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Revenues are attributed to geographic areas based on the location of the
business places of the customers.


    6) Capital Stock

    (Number in Thousands, Canadian dollars in Thousands, except per share
    amounts)

    a) Authorized, unlimited as to number
         Common shares
         Preferred shares, non-voting, retractable and redeemable

    b) The following table summarizes the common shares activity for the
periods ended September 30:

                              -----------------------------------------------
                              -----------------------------------------------
                                        Six months ended September 30,
                                                2007                    2006
                                  Number     Amounts      Number     Amounts
                                                   $                       $
                              -----------------------------------------------
                              -----------------------------------------------

    Balance before share
     purchase financing
     agreements -
      Beginning of period         17,802      61,036      18,021      61,069

      Purchased for
       cancellation (i) & (ii)    (2,942)    (10,099)       (416)     (1,392)

      Exercise of stock
       options (iii)                  80         490         103         665
                              -----------------------------------------------
    Balance before share
     purchase financing
     agreements                   14,940      51,427      17,708      60,342

      Share purchase financing
       agreements (iv)               (59)       (124)       (226)       (476)
                              -----------------------------------------------

    Balance - End of period       14,881      51,303      17,482      59,866
                              -----------------------------------------------
                              -----------------------------------------------

    i) During the six-month period ending September 30, 2007, the Company
purchased 68,600 (2007 - 415,600) of its own shares for cancellation for a
cash consideration totaling $645,224 (2007 - 3,942,147). Capital stock has
been reduced by the average issue price per share before the buy-back of $3.43
(2007 - $3,35) totaling $235,305 (2007 - 1,391,504) and the remaining amounts
have been recorded against the retained earnings.

    ii) On September 25, 2007, as part of a substantial issuer bid, the
Company purchased 2,873,563 of its own common shares for cancellation, at a
price of $8,70 per share totaling $25M. The company incurred $263,074 of costs
in respect of this share buy-back, which represents $0.09 per share. Share
capital has been reduced by the average cost per share before the buy-back of
$3.43 per share totaling $9,862,509 and the remaining amounts as well as costs
related to the share buy-back have been recorded against the retained
earnings.

    iii) During the six-month period ended September 30, 2007, 80,250 (2007 -
102,600) stock options were exercised to purchase 80,250 (2007 - 102,600)
common shares for a cash consideration of $339,275 (2007 - $543,167) or
$4.23 per share (2007 - $5.29).

    The balance of $150,268 (2007 - $121,523) credited to capital stock
represents the stock-based compensation recorded for these options.

    iv) As at September 30, 2007, the Company had a receivable from its
employees of $123,839 (2007 - $476,835) related to share purchase loans to
them under this plan. At the end of the quarter, there were 58,936 shares
(2007 - 226,064) outstanding in respect to employee loans for which the market
value was $480,326 (2007 - $1,923,805). The related shares are considered to
be issued as the loan is repaid by the holder and the decrease in the loans
has therefore been presented as an issuance of shares in the consolidated
statement of cash flows, of $0 for the six months ended September 30, 2007
(2007 - $19,974), in addition to the exercise price of stock options.


    c) The following table summarizes the share purchase option activity for
the periods ended September 30 :

                                                -----------------------------
                                                -----------------------------
                                                             2008       2007
                                                -----------------------------
                                                -----------------------------
                                                                $          $

    Balance - Beginning of year                             2,803      2,521
    Compensation expense related to stock
     options                                                  249        399
    Transfer of accumulated compensation cost
     upon exercise of stock options                          (150)      (122)
    Transfer of accumulated compensation cost
     upon forfeiture of stock options                        (848)         -
                                                -----------------------------

    Balance - End of year                                   2,054      2,798
                                                -----------------------------
                                                -----------------------------


    Stock-based compensation plan

    The Company has a stock option plan as described in note 9 to the
consolidated financial statement in the 2007 Annual Report.

    During the six-month period ended September 30, 2007, the Company granted
499,500 stock options to certain directors and employees at a weighted average
exercise price of $9.45. The estimated fair value of the stock options issued
under this grant amounts to $1,634,903, and will be expensed over their
vesting period which do not exceed three years.

    For stock options granted to employees and directors, the fair value of
share purchase options was estimated using the Black-Scholes option pricing
model with the following assumptions:

                                         Fiscal 2008             Fiscal 2007
                              -----------------------------------------------
      Risk-free interest rate            4.2% to 4.7%            3.9% to 4.2%
      Expected life of options      3.0 to 5.0 years        3.0 to 5.0 years
      Volatility                       33.8% to 33.9%          37.3% to 37.9%
      Dividend rate                                0%                      0%
      Weighted average fair
       value of options
       granted per unit                        $3.27                   $3.31


    d) Weighted average number of shares outstanding

    The following table outlines the weighted average number of shares used in
the calculations of the basic and diluted net earnings per share:

                              -----------------------------------------------
                              -----------------------------------------------
                                  Three months ended        Six months ended
                                      September 30,           September 30,
                                    2007        2006        2007        2006
                              -----------------------------------------------
                              -----------------------------------------------

    Basic weighted average
     number of shares
     outstanding                  17,644      17,479      17,688      17,592

    Dilutive effect of stock
     options                          41         141          57         157

    Dilutive effect of share
     purchase financing
     agreements                       45         171          45         174
                              -----------------------------------------------

    Diluted weighted average
     number of shares
     outstanding                  17,730      17,791      17,790      17,923
                              -----------------------------------------------
                              -----------------------------------------------

    Options to purchase 1,078,200 shares (2007 - 483,000) at a weighted
average price of $9.87 per share (2007 - $9.83) were outstanding during the
six-month period ending September 30, 2007, but were not included in the
calculation of diluted earnings per share because the options' exercise price
was greater than the average price of the shares.


    7) Accumulated Other Comprehensive Income (loss)

    Details of Accumulated Other Comprehensive Income are as follows:

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                            Six months ended
                                                              September 30,
    (Canadian dollars in Thousands)                          2007       2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                                $          $

    Change in foreign currency translation of
     self-sustaining foreign subsidiaries                    (911)      (432)
    Change in fair value of foreign exchange
     forward contracts designated as cash flow
     hedges, net of related income taxes                      650          -
    -------------------------------------------------------------------------

                                                             (261)      (432)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    8) Comparative figures

    Certain figures for fiscal 2007 have been reclassified in order to comply
with the basis of presentation adopted in the current year.
    



    %SEDAR: 00014324EF




For further information:

For further information: Mediagrif Interactive Technologies Inc.:
Catherine Allard, Chief Financial Officer, (450) 677-8797 ext. 2133,
callard@mediagrif.com; Kathy Roberge, Director, Communications, (450) 677-8797
ext. 3014, kroberge@mediagrif.com


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