Softchoice Reports Record 2007 Results and 38 Percent Earnings Growth



    
    - Annual earnings grow 38 percent year over year
    - Gross profit expands 27 percent year over year
    - Hardware revenues increase 34 percent year over year
    - Directors declares quarterly dividend of C$0.10 per share
    

    TORONTO, Feb. 13 /CNW/ - Softchoice Corporation (TSX: SO), a leading
North American provider of technology solutions and services, today reported
record financial results for the fourth quarter and 12 months ended
December 31, 2007.
    For the year ended December 31, 2007, Softchoice recorded record net
income of US$22.0 million on revenue of US$777.1 million compared to net
income of US$15.9 million on revenue of US$703.2 million recorded during the
year prior. Earnings per share for the year amounted to US$1.27 per share
basic (or US$1.25 per share fully diluted) compared to US$0.93 per share basic
(or US$0.92 per share fully diluted) recorded in 2006.
    "I am pleased to report that the Softchoice team has delivered another
exceptional set of financial results," said David MacDonald, President and CEO
of Softchoice. "Over the past year we have focused on consolidating market
share, expanding our revenue base and diversifying the offerings we deliver to
our customers. As a leading Microsoft LAR in North America, we have benefited
from the very strong new product pipeline that Microsoft began bringing to
market in 2007. We also seeded our own growth opportunities toward the end of
the year by making a series of strategic acquisitions that are allowing us to
deliver more advanced infrastructure solutions to a larger number of North
American mid-market, enterprise and public sector organizations. Together,
these initiatives do two very important things for Softchoice: they increase
the strategic value of what we do for customers and they lay the foundation
for the next phase of our growth."
    For the three-month period ended December 31, the Company recorded net
income of US$5.2 million compared to US$6.3 million for the same period the
prior year, a decrease of 17 percent as a result of costs related to the
acquisitions in the quarter. Earnings per share were US$0.30 per share basic
(or US$0.30 per share fully diluted), compared to the US$0.36 per share basic
(or US$0.36 per share fully diluted) recorded in the fourth quarter of 2006.
Revenues for the period increased by 24 percent over the same time last year
to US$266.1 million. These results include the results from the following
acquisitions Softchoice made late in the year: the business of NexInnovations
for the period of October 12, 2007, to December 31, 2007, and Software Plus
for the period of December 13 to December 31, 2007.
    On a stand-alone basis, Softchoice recorded revenues of US$225.9 million
for the quarter ended December 31, 2007, representing an increase of 6 percent
over the same period the year prior. Hardware sales amounted to
US$57.6 million, representing an increase by 23 percent over the same quarter
last year. On a stand-alone basis, operating income for the quarter remained
flat year over year at US$6.1 million.
    NexInnovations recorded revenues of US$25.6 million in the period
following the close of this acquisition, including US$22.1 million in hardware
revenues and US$3.5 million in software revenues. As expected, operating costs
had yet to be fully realigned, resulting in a negative contribution from the
business and a reduction in earnings of $1.3 million in the period following
the acquisition, including amortization costs of US$0.3 million.
    Software Plus recorded US$14.7 million in revenues in the period
following the close of this acquisition; 84 percent of this revenue represents
sales of software. This acquisition resulted in a slight increase in earnings
of US$0.3 million.
    "Over the past few months we have also made tremendous strides in the
implementation of our growth strategy with our acquisitions of NexInnovations,
Software Plus and Optimus Solutions," added Mr. MacDonald. "These
transformational transactions are highly complementary to our business,
whether by giving us the opportunity to extend our software licensing
expertise to new accounts or to deepen relationships with existing customers
by delivering and supporting a full spectrum of infrastructure solutions. From
this broader and deeper revenue base, we plan to continue to achieve
above-market growth and to pursue selective acquisition opportunities that
complement our business model."
    On February 12, 2008, the Directors of Softchoice declares a dividend in
the amount of C$0.10 per common share payable on March 31, 2008, to
shareholders of record at the close of business on March 14, 2008.

    
    Acquisition Highlights

    -   On October 12 and October 25, 2007, Softchoice acquired the
        Technology Solutions and Professional Services divisions of
        NexInnovations for US$12.4 million, including fees and expenses of
        US$0.6 million. The acquisition gives the Company the necessary
        capabilities to provide advanced systems infrastructure solutions to
        Canadian enterprise and public sector organizations.
    -   On December 11, 2007, Softchoice completed the acquisition of
        Software Plus, the largest corporate Microsoft reseller in the U.S.
        Midwest, for a purchase price of US$47.1 million, net of cash
        acquired of US$1.8 million and fees and expenses of US$3.8 million.
        The purchase has served to bolster Softchoice's position as the
        fifth-largest Microsoft LAR in North America and a key provider of
        software licensing to U.S. small, mid-market, enterprise and public
        sector organizations.
    -   On January 3, 2008, Softchoice acquired Optimus Solutions for a
        purchase price of US$38.1 million with a deferred payment of
        US$9 million payable in 2008, depending on the financial performance
        of the company. Optimus Solutions is a comprehensive IT products and
        solutions provider focused on helping U.S. enterprise and mid-market
        organizations plan, build and maintain their information technology
        systems infrastructure.

    Financial and Operational Highlights

    -   Softchoice's hardware business demonstrated strong growth, increasing
        from 25 percent of total sales in 2006 to 30 percent of total sales
        in 2007. During the fourth quarter, hardware sales grew by 76 percent
        year over year.
    -   During the year, sales of Microsoft Enterprise Agreements (EAs)
        licensing increased in Canada and the U.S. by 71 percent and 36
        percent, respectively. Softchoice is the fifth-largest Microsoft LAR
        in North America and the number one provider of EA licensing based on
        the number of agreements managed.
    -   Gross profit per employee increased by 23 percent over 2006,
        reflecting the proficiency of Softchoice's sales and marketing
        personnel in providing integrated technology solutions to North
        American organizations.
    -   Over the past year Softchoice completed a total of 275 TechCheck
        assessments, helping a wide range of small, mid-market and enterprise
        organizations to reduce the cost, complexity and risk of managing
        their IT environment.
    -   In 2007, Softchoice became authorized as a North American Corporate
        Tier reseller by VMware, the world's leading provider of
        virtualization software, and successfully attained Diamond Partner
        status in Canada for Hewlett-Packard.
    -   Softchoice was named one of Canada's Best Workplaces by Canadian
        Business magazine and Canada's Top Solution Provider of the Year by
        Computer Dealer News magazine for the second year in a row.
    

    Fourth-Quarter Results Conference Call Details

    Softchoice will hold a conference call to discuss its fourth-quarter
results on February 13, 2008, at 11 a.m. EST.
    Dave MacDonald, Softchoice's President and CEO, and Anne Brace,
Softchoice's Chief Financial Officer, will host the call. The conference call
will begin with a brief presentation followed by a question-and-answer
session.

    To participate in the conference:

    Local/international: 416-849-6185
    Toll-free in North America: 1-866-443-4183

    To listen to the call and view the Web presentation:

    http://events.onlinebroadcasting.com/softchoice/021908/index.php

    To ensure participation, please dial in at least 10 minutes prior to the
start of the conference at 11 a.m. EST.
    For those unable to participate in the call, a link will be made
available on the Softchoice website to an archived Web and audio version on
February 14, 2007.

    About Softchoice

    As one of North America's leading providers of technology solutions and
services, Softchoice helps businesses and organizations of all sizes to
select, acquire and manage their software and hardware technology resources.
Softchoice offers a full range of capabilities, including face-to-face
consultations and IT asset management services designed to help customers save
time, money and risk in IT procurement. In 2006, Softchoice was named Software
Value Added Reseller (VAR) of the Year by VAR Business magazine. Softchoice
currently has more than 900 employees operating from more than 40 branch
offices located in major cities across the U.S. and Canada.
    Softchoice stock is listed on the Toronto Stock Exchange (TSX) under the
trading symbol "SO." The Common Shares of Softchoice are not registered under
the U.S. Securities Act of 1933 and are not publicly traded in the United
States.

    Forward-Looking Statements

    This press release contains forward-looking statements that involve risks
and uncertainties. These forward-looking statements relate to, among other
things, plans and timing for the introduction and enhancement of our services,
and other expectations, intentions and plans contained in this press release
that are not historical fact. When used in this press release, the words
"anticipate," "expect" and similar expressions generally identify
forward-looking statements. These statements reflect our current expectations
and are subject to a number of risks and uncertainties including, but not
limited to, our ability to integrate the business of Software Plus with our
own, including the ability to maintain its customers, the ability to eliminate
costs, and changes in technology and general market conditions, many of which
are set out or incorporated by reference in the Company's latest Annual
Information Form. Due to the many risks and uncertainties, Softchoice cannot
assure that the forward-looking statements contained in this press release
will be realized.


    
                           Softchoice Corporation
                         Consolidated Balance Sheets

    (IN THOUSANDS OF U.S. DOLLARS)
    AS AT DECEMBER 31                                  2007          2006
                                                  ------------- -------------

    Assets
    Current assets
    Cash                                          $     11,063  $      7,328
    Accounts receivable (note 4)                       214,103       153,331
    Inventories                                            172           240
    Prepaids and other assets (note 5)                   6,891         4,025
    Future income taxes (note 6)                         1,250           997
                                                  ------------- -------------
                                                       233,479       165,921

    Property, plant and equipment (note 7)               8,406         6,280
    Goodwill (note 8)                                   44,720        12,465
    Intangible assets (note 8)                          31,996         4,603
    Future income taxes (note 6)                         1,225         1,478
                                                  ------------- -------------

                                                  $    319,826  $    190,747
                                                  ------------- -------------
                                                  ------------- -------------


    Liabilities
    Current liabilities
    Bank indebtedness (note 9)                    $     29,120  $     10,285
    Accounts payable and accrued liabilities           191,107       122,407
    Deferred revenue                                     2,393           584
    Income taxes  payable                                   61         1,155
                                                  ------------- -------------

                                                       222,681       134,431
    Long-term liabilities
    Deferred lease inducements                             591           189
    Long-term debt (note 9)                             21,854             -
                                                  ------------- -------------
                                                        22,445           189

    Total liabilities                                  245,126       134,620

    Shareholders' Equity
    Capital stock (note 10)                              9,220         8,222
    Contributed surplus (note 11)                        1,343           482
    Retained earnings                                   61,587        46,136
    Accumulated other comprehensive income               2,550         1,287
                                                  ------------- -------------
                                                        74,700        56,127

                                                  $    319,826  $    190,747
                                                  ------------- -------------
                                                  ------------- -------------

    Commitments and contingencies (note 12)
    Related party transactions (note 15)
    See accompanying notes to consolidated financial statements.



                           Softchoice Corporation
          Consolidated Statements of Earnings and Retained Earnings

    (IN THOUSANDS OF U.S. DOLLARS, EXCEPT
     PER SHARE AMOUNTS)
    FOR THE YEARS ENDED DECEMBER 31                    2007          2006
                                                  ------------- -------------
    Revenue
    Software                                      $    494,315  $    494,930
    Hardware                                           231,482       172,745
    Agency Fees                                         51,285        35,562
                                                  ------------- -------------
                                                       777,082       703,237
                                                  ------------- -------------

    Cost of sales                                      651,965       604,683
                                                  ------------- -------------
    Gross profit                                       125,117        98,554
                                                  ------------- -------------

    Expenses
    Salaries and benefits                               56,661        45,871
    Selling, general and administrative                 26,941        23,093
    Amortization of property, plant and equipment        3,173         2,381
    Amortization of intangible assets (note 8)           1,948         1,552
                                                  ------------- -------------
                                                        88,723        72,897

    Operating income                                    36,394        25,657

    Interest expense                                     1,388           528
    Other income - net                                  (1,944)         (956)
                                                  ------------- -------------

    Earnings before income taxes                        36,950        26,085
                                                  ------------- -------------

    Provision for income taxes (note 6)
    Current                                             14,770         9,846
    Future                                                 183           309
                                                  ------------- -------------
                                                        14,953        10,155
                                                  ------------- -------------

    Net earnings for the year                           21,997        15,930
    Retained earnings - Beginning of year               46,136        36,250

    Dividends (note 13)                                 (6,546)       (6,044)
                                                  ------------- -------------
    Retained earnings - End of year               $     61,587  $     46,136
                                                  ------------- -------------
                                                  ------------- -------------

    Net earnings per common share (note 10)
    basic                                         $       1.27  $       0.93
    diluted                                       $       1.25  $       0.92

    Basic weighted average number of shares
     outstanding                                    17,311,251     17,217,458
    Diluted weighted average number of
     shares outstanding                             17,602,205     17,369,578


    See accompanying notes to consolidated financial statements.



                           Softchoice Corporation

    Consolidated Statements of Cash Flows

    (IN THOUSANDS OF U.S. DOLLARS)
     FOR THE YEARS ENDED DECEMBER 31                   2007         2006
                                                  ------------- -------------
     Cash provided by (used in)
     Operating activities
     Net earnings for the year                    $     21,997  $     15,930
     Items not affecting cash
       Amortization of property, plant
        and equipment                                    3,173         2,381
       Stock-based compensation (note 11)                1,166            (6)
       Future income taxes                                 183           309
       Amortization of intangible assets                 1,948         1,552
       Unrealized foreign currency loss                  1,069            17
       Loss on capital assets                               11            77
                                                  ------------- -------------
                                                        29,547        20,260

     Net change in non-cash working capital
      items relating to operations (note 16)             5,517        (8,790)
                                                  ------------- -------------

                                                        35,064        11,470
                                                  ------------- -------------
     Financing activities
       Increase (decrease) in bank indebtedness         15,392        (3,461)
       Increase in long-term debt                       21,854             -
       Payment of cash dividend                         (6,546)       (6,044)
       Proceeds from issuance of common
        shares (note 10)                                   692           483
                                                  ------------- -------------
                                                        31,392        (9,022)
                                                  ------------- -------------

     Investing activities
       Purchase of property, plant and equipment        (3,854)       (4,005)
       Proceeds on disposal of property, plant
        and equipment                                       29             -
       Acquisitions, net of cash acquired (note 3)     (59,498)            -
       Notes receivable                                      -         1,920
                                                  ------------- -------------
                                                       (63,323)       (2,085)
                                                  ------------- -------------

     Effect of exchange rate changes on cash               602           168
                                                  ------------- -------------

     Increase in cash                                    3,735           531
     Cash - Beginning of year                            7,328         6,797
                                                  ------------- -------------
     Cash - End of year                           $     11,063  $      7,328
                                                  ------------- -------------
                                                  ------------- -------------

     See accompanying notes to consolidated financial statements.
     Supplemental disclosures of cash flow information (note 16)



                           Softchoice Corporation
             Consolidated Statements of Comprehensive Income and
                   Accumulated Other Comprehensive Income

    (IN THOUSANDS OF U.S. DOLLARS)
    AS AT DECEMBER 31                                  2007          2006
                                                  ------------- -------------

    Comprehensive Income
    Net earnings for the period                   $     21,997  $     15,930
    Foreign currency translation adjustment              1,263           201
                                                  ------------- -------------

    Comprehensive Income                          $     23,260  $     16,131
                                                  ------------- -------------
                                                  ------------- -------------

    Accumulated Other Comprehensive Income

    Balance - beginning of period                 $      1,287  $      1,086
    Foreign currency translation adjustment              1,263           201
                                                  ------------- -------------

    Balance - end of period                       $      2,550  $      1,287
                                                  ------------- -------------
                                                  ------------- -------------



    Softchoice Corporation
    Notes to Consolidated Financial Statements
    December 31, 2007 and 2006
    -------------------------------------------------------------------------
    (in thousands of U.S. dollars, except per share amounts)

    1.  Nature of operations

        Softchoice Corporation (the "Company") was formed on May 15, 2002
        pursuant to an amalgamation with Ukraine Enterprise Corporation
        (UEC). The Company was incorporated under the Canada Business
        Corporations Act. The Company is a North American business-to-
        business direct marketer of technology products.

        Softchoice's United States operations are carried on by Softchoice
        Corporation ("Softchoice U.S."), a corporation incorporated under
        the laws of the state of New York. On December 10, 2007, Softchoice
        incorporated a wholly owned subsidiary, Softchoice Holding
        Corporation ("Holdco"). Holdco is incorporated under the laws of
        Delaware. Softchoice transferred its ownership in Softchoice US into
        Holdco in exchange for the common shares of Holdco. Holdco is not an
        operating company. Softchoice U.S. has also issued preferred shares,
        which are entirely owned by the Company.

    2.  Significant accounting policies

        These consolidated financial statements have been prepared by
        management in accordance with Canadian generally accepted accounting
        principles.

        Principles of consolidation

        These consolidated financial statements include the accounts of
        Softchoice Corporation and its wholly owned subsidiary, Holdco, and
        its wholly owned subsidiary Softchoice U.S.

        Accounting changes

        On January 1, 2007, the Company adopted Section 1506 of the CICA
        Handbook, Accounting Changes, which prescribes the criteria for
        changing accounting policies, together with the accounting treatment
        and disclosure of changes in accounting policies, changes in
        accounting estimates and corrections of errors. This standard did not
        affect the Company's consolidated financial position or results of
        operations.

        Cash

        Cash consists of cash on hand and cash balances with major financial
        institutions. Book overdrafts are included in bank indebtedness.

        Accounts receivable and allowance for doubtful accounts

        Trade accounts receivable are recorded at the invoiced amount net of
        provisions for doubtful accounts.

        The Company maintains an allowance for doubtful accounts at an amount
        estimated to be sufficient to provide adequate protection against
        losses resulting from collecting less than full payment on its
        accounts receivable. Individual overdue accounts are reviewed, and
        allowances are recorded when determined necessary to state accounts
        receivable at net realizable value. Additionally, the Company
        assesses the overall adequacy of the allowance for doubtful accounts
        by considering various factors including the aging of receivables,
        historical bad debt experience, and the general economic environment.
        Management's judgment is required when the Company assesses the
        realization of accounts receivable, including assessing the
        probability of collection and the current credit worthiness of each
        customer.

        Sales returns allowance

        At the end of each period, the Company records an estimate for sales
        returns based on historical experience. If actual sales returns are
        greater than estimated by management, additional expense may be
        incurred. The historical estimate is revisited twice a year to ensure
        it reflects the most relevant data available.

        Deferred revenue

        Deferred revenue includes revenue that is not yet earned on sales to
        customers with extended payment terms beyond 180 days. Revenue is
        recognized as the funds are received from the customer.

        Revenue recognition

        The Company generates revenue from selling technology products and
        licensing the rights to software products to end-users. Sales of
        product in which the Company acts as a principal are presented on a
        gross basis. As a principal, the Company obtains and validates a
        customer order, purchases the product from the supplier at a
        negotiated price, arranges for shipment of product, collects payment
        from customers, ensures that product reaches customers and processes
        returns. The Company's product is shipped directly to customers using
        third party carriers. Sales of product in which the Company acts as
        an agent are presented on a net basis. As an agent, the Company
        obtains the order and refers the order to a supplier for a fee.

        Revenue is recorded when the product is shipped to customers, FOB
        shipping point, or when customers acquire the right to use or copy
        software under license, but in no case prior to the commencement of
        the term of the software license agreement or service contract, and
        when the price is fixed and determinable and collection is reasonably
        assured. The Company estimates the level of anticipated returns based
        on historical experience and makes appropriate reserves at the time
        the revenue is recognized.

        The Company also generates revenue from providing professional
        services to end-users based on a pre-determined time and materials
        basis contract. Time incurred on the contract is tracked and billings
        are processed based on the percentage-of-completion method of
        accounting. Costs associated with the interim billings are tracked
        and recorded against the associated revenue.

        Cost of sales

        Rebates and market development funds received from vendors are
        included in cost of sales and are recorded as earned based on the
        contractual arrangements with the suppliers.

        Marketing development funds

        The Company receives funds from vendors to support the marketing and
        sale of their products. When these funds represent the reimbursement
        of a specific, incremental and identifiable cost, the related costs
        are netted against these funds and excess profits, if any, are
        recorded as a reduction of cost of sales. When the funds are not
        related to specific, incremental and identifiable costs, the amounts
        received are recorded as a reduction of cost of sales. Funds are
        recorded at the later of the date that the vendor is invoiced,
        according to the terms of the agreement with the vendor, or when the
        marketing effort is completed.

        Inventories

        Inventory is comprised of finished goods and is valued at the lower
        of cost and net realizable value. Cost is determined on a first-in,
        first-out basis.

        The new Section 3031, Inventories, relates to the accounting for
        inventories and revises and enhances the requirements for assigning
        costs to inventories. The new standard applies to interim and annual
        financial statements relating to fiscal years beginning on or after
        January 1, 2008. This standard is not expected to have a significant
        effect on the Company consolidated financial statements.

        Property, plant and equipment

        Property, plant and equipment are recorded at cost less accumulated
        amortization. Amortization is provided on a straight-line basis over
        their estimated useful lives as follows:

          Office equipment                                      three years
          Computer equipment                                    three years
          Computer software                                     three years
          Leasehold improvements         over the term of the related lease

        Property, plant, and equipment are reviewed for impairment whenever
        events or changes in circumstances indicate that the carrying amount
        of an asset may not be recoverable. An estimate of undiscounted
        future cash flows produced by assets, or the appropriate grouping of
        assets, is compared with the carrying value to determine whether an
        impairment exists. If an impairment is determined to exist, the
        assets are written down to their fair value.

        Goodwill

        Goodwill represents consideration on acquisitions in excess of the
        fair value of tangible and identifiable intangible assets acquired.

        Goodwill is not amortized; however it is tested annually for
        impairment or more frequently if circumstances indicate goodwill may
        be impaired. The Company determines any impairment in value primarily
        on the ability to recover the balance from expected future operating
        cash flows on an undiscounted basis. Any permanent impairment in the
        value of goodwill is written off against income.

        Intangible assets

        Intangible assets are related to acquisitions and are recorded at
        their fair value at the acquisition date. These assets include
        customer relationships, non-compete agreements, and acquired
        contracts, which have finite lives. These intangible assets are
        amortized over the estimated economic lives of 5 to 10 years, unless
        indicated otherwise.

        Management reviews the carrying value of its intangible assets
        annually, or more frequently if events or changes in circumstances
        indicate that the asset might be impaired. If an impairment is
        determined to exist, the assets are written down to fair value.

        Income taxes

        The Company follows the asset and liability method of accounting for
        income taxes. Under this method, future tax assets and liabilities
        are determined based on the differences between the financial
        reporting and income tax bases of assets and liabilities and are
        measured using the substantively enacted tax rates and laws. The
        Company provides a valuation allowance for future tax assets when it
        is more likely than not that some portion or all of the future tax
        assets will not be realized.

        Foreign currency transactions

        Assets and liabilities denominated in currencies other than the
        respective functional currency are translated at exchange rates in
        effect at the balance sheet date into the functional currency.
        Revenue and expense items are translated at average rates of exchange
        for the period. Translation gains or losses are included in the
        determination of earnings.

        The Company is considered to be a self-sustaining foreign operation
        whose financial results are translated using the current rate, under
        which all assets and liabilities are translated at the exchange rate
        prevailing at the balance sheet date, and revenues and expenses are
        translated at average rates of exchange during the period. Resulting
        translation gains and losses are included in the Foreign Currency
        Translation Adjustment in the Consolidated Statements of
        Comprehensive Income and Accumulated Other Comprehensive Income.

        Capital disclosures

        The new Section 1535, Capital Disclosures, requires that an entity
        disclose information that enables users of its financial statements
        to evaluate an entity's objectives, policies and processes for
        managing capital, including disclosures of any externally imposed
        capital requirements and the consequences of non-compliance. The new
        standard applies to interim and annual financial statements relating
        to fiscal years beginning on or after October 1, 2007, specifically
        January 1, 2008 for the Company. This standard will impact the
        Company's disclosures provided but will not affect the Company
        consolidated results or financial position.

        Use of estimates

        Financial statements prepared in conformity with Canadian generally
        accepted accounting principles require management to make estimates
        and assumptions that affect the reported amount of assets and
        liabilities at the date of the financial statements, disclosure of
        contingent assets and liabilities, and amounts of revenue and
        expenses reported during the reporting period. Management must also
        make estimates and judgments about future results of operations,
        related specific elements of the business and operations in assessing
        recoverability of assets and recorded value of liabilities. Actual
        results could differ from those estimates.

        Earnings per share

        Financial statements prepared in conformity with Canadian generally
        accepted accounting principles require management to make estimates
        and assumptions that affect the reported amount of assets and
        liabilities at the date of the financial statements, disclosure of
        contingent assets and liabilities, and amounts of revenue and
        expenses reported during the reporting period. Management must also
        make estimates and judgments about future results of operations,
        related specific elements of the business and operations in assessing
        recoverability of assets and recorded value of liabilities. Actual
        results could differ from those estimates.

        Pension Plan

        The Company has a defined contribution plan providing retirement
        benefits for its employees. Employees may contribute subject to
        certain limits based on federal tax laws. The Company contributes 25%
        of the employees contribution up to 1% of the employee's base
        compensation. The Company contributions vest 50% after 2 years but
        before 3 years, 75% after 3 years but before 4 years, and 100% after
        4 years.

        Employees that joined the Company as part of the Software Plus
        acquisition still remain under their existing plan as of December 31,
        2007. All non-contract employees were moved onto the Company's
        pension plan as of January 1, 2008.

        Financial instruments

        Effective January 1, 2007 the Company adopted new recommendations
        from the Canadian Institute of Chartered Accountants (CICA) Handbook
        Section 3855, Financial Instruments - Recognition and Measurement;
        Section 1530, Comprehensive Income; Section 3861, Financial
        Instruments - Disclosure and presentation; Section 3251, Equity and
        Section 3865, Hedges. The adoption of these new standards resulted in
        changes in the accounting for financial instruments as well as the
        recognition of certain transition adjustments that have been recorded
        in opening accumulated other comprehensive income as described below.
        The standards are applied retroactively with prospective presentation
        except for adjustments relating to the cumulative translation
        adjustments account for foreign self-sustaining subsidiaries which
        are applied and presented retroactively. The principal changes in the
        accounting for financial instruments due to the adoption of these
        accounting standards are described below.

        The new Sections 3862 and 3863 replace CICA Handbook Section 3861
        Financial Instruments - Disclosure and Presentation, revising and
        enhancing its disclosure requirements, and carrying forward unchanged
        its presentation requirements. These new sections place increased
        emphasis on disclosures about the nature and extent of risks arising
        from financial instruments and how the entity manages those risks.
        The new standards apply to interim and annual financial statements
        relating to fiscal years beginning on or after October 1, 2007,
        specifically January 1, 2008 for the Company. This standard will
        impact the Company's disclosures provided but will not affect the
        Company's consolidated results or financial position.

        (a)  Financial assets and financial liabilities

        Under the new standards, financial assets and financial liabilities
        are initially recognized at fair value and are subsequently measured
        based on their classification as described below. The classification
        depends on the purpose for which the financial instruments were
        acquired and their characteristics. The classification generally
        cannot be changed subsequent to designation at initial recognition of
        the instruments.

        Held for trading

        Financial assets that are purchased and held with the intention of
        generating profits in the near term are classified as held for
        trading. These instruments are accounted for at fair value with the
        change in fair value recognized in net earnings during the period.
        Cash is classified as held for trading.

        Held-to-maturity

        Securities that have a fixed maturity date and which the Company has
        positive intention and the ability to hold to maturity are classified
        as held-to-maturity and accounted for at amortized cost using the
        effective interest rate method. No investments are classified as
        held-to-maturity on December 31, 2007.

        Receivables

        On the adoption of the new recommendation, accounts receivables are
        carried at amortized cost. This classification is consistent with the
        classification under the prior accounting standard.

        Available-for-sale

        Financial assets designated to be available-for-sale or not
        designated as one of the above categories are classified as
        available-for-sale. These assets are accounted for at fair value,
        with changes in fair value recognized in other comprehensive income.
        When a decline in fair value is determined to be other-than-
        temporary, the cumulative loss included in accumulated other
        comprehensive income is removed and recognized in net earnings. Gains
        and losses realized on disposal of available-for-sale securities are
        recognized in other income in net earnings. No investments are
        classified as available-for-sale on December 31, 2007.

        Financial Liabilities

        Bank indebtedness, accounts payable, accrued liabilities, deferred
        revenue and income taxes payable have been classified as other
        financial liabilities on the adoption of the new recommendations.
        Financial liabilities are initially recognized at fair value and are
        subsequently measured at amortized cost.

        (b) Embedded derivatives

        Derivatives may be embedded in other financial and non-financial
        instruments (the "host instrument"). Prior to the adoption of the
        new standards, embedded derivatives were not accounted for separately
        from the host instrument. Under the new standard, embedded
        derivatives are treated as separate derivatives when their economic
        characteristics and risks are not clearly and closely related to
        those of the host instrument, the terms of the embedded derivative
        are the same as those of a stand-alone derivative, and the combined
        contract is not held for trading or designated at fair value. These
        embedded derivatives are measured at fair value with subsequent
        changes recognized in the Statement of Earnings and Retained Earnings
        as an element of administrative expenses.

        From time to time, the Company enters into certain contracts for the
        purchase or sale of non-financial items that are denominated in
        currencies other than the Canadian dollar. In cases where the foreign
        exchange component is not leveraged and does not contain an option
        feature and the contract is denominated in the functional currency of
        the counter-party, the embedded derivative is considered to be
        closely related and is not accounted for separately.

        If the contract is neither in Canadian currency nor the functional
        currency of the counter-party, the embedded foreign currency
        derivative is separated unless the non-functional item delivered
        under the contract is routinely denominated in the currency of the
        contract in international commerce or the currency the contract is
        denominated in is commonly used in the economic environment in which
        the transaction takes place.

        The change in accounting policy related to embedded derivatives did
        not result in any material changes to the December 31, 2006 financial
        statements. As of December 31, 2007, the fair market value of
        embedded derivatives was not material and did not have a significant
        impact on earnings.

        (c)  Comprehensive income

        The Canadian Institute of Chartered Accountants (CICA) issued section
        1530 of the CICA Handbook, Comprehensive Income, effective for fiscal
        years beginning on or after October 1, 2006. Comprehensive income is
        described as the change in a company's net assets that results from
        transactions, events and circumstances related to sources other than
        the company's shareholders. The CICA also made changes to section
        3250 of the CICA Handbook, Surplus, and reissued it as section 3251,
        Equity. The section is also effective for fiscal years beginning on
        or after October 1, 2006. The Company has adopted these sections
        effective January 1, 2007.

        Credit risk

        The Company's financial instruments that are exposed to
        concentrations of credit risk consist primarily of accounts
        receivable and other receivables. The Company performs ongoing credit
        evaluations of its customers' financial condition.

        Foreign exchange and interest rate risk

        The Company operates in both the U.S. and Canada, which gives rise to
        a risk that its earnings and cash flows may be adversely impacted by
        fluctuations in foreign exchange conversion rates. From time-to-time,
        the Company may use derivatives to manage this foreign exchange risk.

        The Company's policy is to use derivatives for risk management
        purposes only, and it does not enter into such contracts for trading
        purposes. The Company enters into derivatives only with high credit
        quality financial institutions.

        There is one outstanding derivative financial instrument as at
        December 31, 2007 relating to an interest rate swap (note 9). There
        were no outstanding derivative financial instruments as at
        December 31, 2006. This swap is classified as held for trading.

        Fair value of financial instruments

        The book values of cash, bank indebtedness, prepaids, accounts
        receivable, accounts payable, future income taxes, income taxes
        payable and accrued liabilities approximate their respective fair
        values due to the short-term nature of these instruments.

        Deferred Share Unit Plan and Long Term Incentive Plan

        On May 7, 2007 the shareholders approved the implementation of a
        Deferred Share Unit Plan (DSU) and Long Term Incentive Plan (LTIP)
        for directors and key employees respectively. The Company is accruing
        for the costs of the DSU and LTIP programs based on projected
        payments under the respective plans. The details of the plan are
        described in note 10.

        Share based compensation

        The Company has a share based compensation plan. The Company accounts
        for this plan, which calls for settlement by the issuance of equity
        instruments, using the fair value based method. Under the fair value
        based method, compensation cost attributed to the options to
        employees is measured at fair value at the grant date and amortized
        over the vesting period. Compensation cost attributable to awards to
        employees that call for settlement in cash that is measured at the
        intrinsic value between the grant date and measurement date results
        in a change in compensation cost.

        For options that vest at the end of a vesting period, compensation
        cost is recognized on a straight-line basis over the vesting period.
        No compensation cost is recognized for options that employees forfeit
        if they fail to satisfy the service requirement for vesting.

    3.  Acquisitions

        On October 12 and 26, 2007, the Company completed the acquisition of
        the technology solutions and products division of NexInnovations
        Inc., in exchange for total cash consideration of $12,428, including
        acquisition costs of $624. Under the terms of the Agreement,
        Softchoice is acquiring the records, authorizations and
        certifications related to NexInnovations' technology solutions and
        products division. The agreement does not include the NexInnovations'
        break-fix services division, which was subsequently sold to Brains II
        on October 16, 2007.

        The acquisition has been accounted for using the purchase method of
        accounting and, accordingly, the operations of Nexinnovations have
        been included in the consolidated financial statements since the date
        of acquisition. The Company expects to finalize the allocation of the
        purchase price during 2008 and the preliminary allocation may change.
        The intangibles arising form this acquisition will be amortized into
        income over their estimated useful life of 10 years.

        The following is the fair value of the assets and liabilities
        acquired at the date of acquisition:

          Intangible assets
            Customer relationships                              $ 12,428

          Goodwill                                                     -
                                                                ---------
          Total purchase consideration                          $ 12,428
                                                                ---------
                                                                ---------


        On December 11, 2007, the Company completed the share purchase of
        Software Plus in exchange for total cash consideration of $47,070,
        net of cash acquired including acquisition costs of $2,093. Software
        Plus is the largest corporate reseller of computer software in the
        U.S. Midwest and the industry's ninth largest Microsoft Large Account
        Reseller (LAR).

        The acquisition has been accounted for using the purchase method of
        accounting and, accordingly, the operations of Software Plus have
        been included in the consolidated financial statements since the date
        of acquisition. The Company expects to finalize the allocation of the
        purchase price during 2008 and the preliminary allocation may change.
        The intangibles arising from this acquisition will be amortized into
        income over their estimated useful life of 10 years.

        The following is the fair value of the assets and liabilities
        acquired at the date of acquisition:

          Net assets acquired
            Accounts receivable                         $ 24,341
            Other current assets                             974
            Property, plant and equipment                    497
            Accounts payable  and accrued liabilities    (24,513)
            Other current liabilities                     (1,893)     (594)
                                                        ---------

          Intangible assets
            Customer relationships                                  16,397

          Goodwill                                                  31,267
                                                                  ---------
          Total purchase consideration, net
           of cash acquired                                       $ 47,070
                                                                  ---------
                                                                  ---------

    4.  Accounts receivable

        Accounts receivable are comprised of the following:

                                                          2007          2006

        Trade accounts receivable - net of
          provision of $2,099 (2006 - $1,224)     $    193,439  $    135,268
        Other receivables - net of provision
          of $591 ( 2006 - $580 )                       20,664        18,063
                                                  ---------------------------
                                                  $    214,103  $    153,331
                                                  ---------------------------
                                                  ---------------------------

    5.  Prepaids and other assets

        Prepaids and other assets include cash deposits, deferred costs and
        prepaid expenses.

    6.  Income tax expense and future income taxes

        The Company's income tax provision has been determined as follows:

                                                          2007          2006

          Earnings before income taxes            $     36,950  $     26,085
                                                  ---------------------------
                                                  ---------------------------
          Combined basic federal and provincial
           income tax rate                              35.47%        35.48%
          Expected income tax expense             $     13,106  $      9,255
          Foreign tax rates differential                 1,671         1,093
          Items not deductible for tax purposes
           (permanent differences)                         668           248
          U.S. state tax deductible for federal
           purposes                                       (626)         (422)
          Other                                            134           (19)
                                                  ---------------------------
          Provision for income taxes              $     14,953  $     10,155
                                                  ---------------------------
                                                  ---------------------------

        The significant components of future income tax assets and
        liabilities

                                                          2007          2006

          Future income tax assets
            Amortization                          $      1,225  $      1,456
            Share issue and Reverse-take-over
             costs                                           0            22
            Reserves                                     1,250           997
                                                  ---------------------------
          Net future income tax assets            $      2,475  $      2,475
                                                  ---------------------------
                                                  ---------------------------

        Net future income tax assets are classified as follows:

                                                          2007          2006

          Current                                 $      1,250  $        997
          Long-term                                      1,225         1,478
                                                  ---------------------------
                                                  $      2,475  $      2,475
                                                  ---------------------------
                                                  ---------------------------

        The Company has not recorded a valuation allowance against its future
        income tax assets because it believes it is more likely than not that
        sufficient taxable income will be realized during future periods to
        utilize the future tax assets. Realization of the future tax benefit
        is dependent upon many factors including the Company's ability to
        generate taxable income in the applicable jurisdictions in future
        periods.

    7.  Property, plant and equipment

                                                                        2007
                                    -----------------------------------------
                                                   Accumulated
                                            Cost  amortization           Net

        Office equipment            $      7,387  $      5,669  $      1,718
        Computer equipment                 4,891         2,792         2,099
        Computer software                  5,850         3,802         2,048
        Leasehold improvements             3,197           656         2,541
                                    -----------------------------------------
                                    $     21,325  $     12,919  $      8,406
                                    -----------------------------------------
                                    -----------------------------------------

                                                                        2006
                                    -----------------------------------------
                                                   Accumulated
                                            Cost  amortization           Net

        Office equipment            $      5,589  $      4,417  $      1,172
        Computer equipment                 4,250         2,794         1,456
        Computer software                  5,007         3,663         1,344
        Leasehold improvements             3,921         1,613         2,308
                                   -----------------------------------------
                                    $     18,767  $     12,487  $      6,280
                                   -----------------------------------------
                                   -----------------------------------------

    8.  Goodwill and intangible assets

                                                      Goodwill   Intangibles

        Balance as at December 31, 2006           $     12,465  $      4,603
                                                  ---------------------------
        Additions (note 3)                              31,267        28,825
        Amortization                                         -        (1,948)
        Foreign exchange                                   988           516
                                                  ---------------------------
        Balance as at December 31, 2007           $     44,720  $     31,996
                                                  ---------------------------
                                                  ---------------------------


                                                                        2007
                                    -----------------------------------------
                                                   Accumulated
                                            Cost  amortization           Net

          Acquired contracts        $      2,144  $      1,907  $        237
          Customer relationships          34,893         4,171        30,722
          Favourable lease contract          110           110             0
          Foreign exchange impact          1,709           672         1,037
                                    -----------------------------------------
                                    $     38,856  $      6,860  $     31,996
                                    -----------------------------------------
                                    -----------------------------------------


                                                                        2006
                                    -----------------------------------------
                                                   Accumulated
                                            Cost  amortization           Net

          Acquired contracts        $      2,144  $      1,758  $        386
          Customer relationships           6,068         2,375         3,693
          Favourable lease contract          110           108             2
          Foreign exchange impact            558            36           522
                                    -----------------------------------------
                                    $      8,880  $      4,277  $      4,603
                                    -----------------------------------------
                                    -----------------------------------------

    9.  Bank indebtedness and long-term debt

                                                          2007          2006

          Revolving credit facility               $     25,505  $     10,285
          Term debt - current                            3,615             -
          Term debt - long-term                         21,854             -
                                                  ---------------------------
                                                  $     50,974  $     10,285
                                                  ---------------------------
                                                  ---------------------------

        On December 11, 2007 the Company increased its revolving credit
        facility to support the acquisition of Software Plus and the working
        capital needs of the Company. The credit facility is with a large
        American financial institution and its Canadian subsidiary and
        provides for credit to both the Company and its US subsidiary in the
        combined amount of $70,000. $25,000 of this amount is provided under
        a term loan payable in semi-annual installments over five years with
        interest payable monthly. Availability under the remaining facility
        is subject to a formula based on eligible accounts receivable. The
        interest charged on the facility fluctuates from prime to prime less
        0.75 percent. The facility is subject to various covenant
        requirements that have been met for the current period.

        The Company had also used $1,500 of its available credit as security
        for letters of credit issued to various institutions.

        The Company has entered into an interest rate swap to convert a total
        of $7,500 of the floating rate credit facility to a fixed rate of
        interest. Under the terms of the swap, the Company receives interest
        based on the CAD-BA-CDOR rate and pays a fixed rate of 5.20% on a
        monthly basis. The swap went into effect on July 11, 2007 and will
        terminate on January 11, 2009. As of December 31, 2007, the interest
        rate swap had a negative fair market value of $82. This loss has
        been recorded in the Consolidated Statement of Earnings.

    10. Capital stock

        Authorized
          Unlimited number of common shares

        Issued                                            2007          2006

          17,407,631 (December 31,
           2006 - 17,267,446)                     $      9,220  $      8,222
                                                  ---------------------------
                                                  $      9,220  $      8,222
                                                  ---------------------------
                                                  ---------------------------

                                                     Class A common shares
                                                        Shares        Amount

          Balance as at December 31, 2005           17,166,499  $      7,615

          Issued for options exercised (a)             100,947           483

          Transfer from contributed surplus
           (note 11)                                         -           124
                                                  ---------------------------
          Balance as at December 31, 2006           17,267,446  $      8,222
                                                  ---------------------------
                                                  ---------------------------

          Issued for options exercised (a)             140,185           692
          Transfer from contributed surplus
           (note 11)                                         -           305
                                                  ---------------------------
          Balance as at December 31, 2007           17,407,631  $      9,220
                                                  ---------------------------
                                                  ---------------------------

        a) Common shares issued for options vested and exercised in the year
           were 140,185 (2006 - 100,947) at a weighted average share price of
           $4.94 (2006 - $4.79 ).

        Net earnings per common share

        Weighted average number of common shares:

                                                          2007          2006
          Issued and outstanding - Beginning
           of year                                  17,267,446    17,166,499
          Weighted average number of shares
           issued in the year - net of share
           redemptions                                  43,805        50,959
                                                  ---------------------------
          Weighted average number of shares
           used in computing basic earnings per
           share                                    17,311,251    17,217,458
          Assumed exercise of stock options -
           net of shares repurchased from
           proceeds                                    290,954       152,120
                                                  ---------------------------
          Weighted average number of shares used
           in computing diluted earnings per share  17,602,205    17,369,578
                                                  ---------------------------
                                                  ---------------------------

        Stock option plan

        The Board of Directors approved an Employee Stock Option Plan under
        which 1,706,000 common shares were reserved for issuance to
        employees. The options' vesting period is determined by the Board of
        Directors at the time of grant and expires within six to eight years
        after the date of grant. All options currently outstanding have
        vested. The Directors cancelled this plan in November 2006.

        A summary of the status of the Company's employee stock option plan
        is as follows in Canadian dollars :

                                            2007                        2006
                      -------------------------------------------------------
                                        Weighted                    Weighted
                                         average                     average
                         Number of      exercise     Number of      exercise
                           options         price       options         price
                      -------------------------------------------------------


        Outstanding -
         Beginning of
                 year      337,400  $       5.87       464,294  $       5.69
           Granted               -             -             -             -
           Expired          (1,769)         5.89       (25,947)         4.01
           Exercised      (140,185)         5.08      (100,947)         5.54
                      -------------------------------------------------------
        Outstanding -
          End of year      195,446  $       6.43       337,400  $       5.87
                      -------------------------------------------------------
                      -------------------------------------------------------
        Exercisable -
          End of year      195,446  $       6.43       337,400  $       5.87
                      -------------------------------------------------------
                      -------------------------------------------------------

         Options held
         by employees       92,821          5.80       150,575          5.80
         Options held
          by officers      102,625          5.93       186,825          5.93
                      -------------------------------------------------------
                           195,446  $       6.43       337,400  $       5.87
                      -------------------------------------------------------
                      -------------------------------------------------------


                                                         Options outstanding
                  -----------------------------------------------------------
                                                      Weighted
                                          Number       average
                                     outstanding     remaining      Weighted
        Range of                           as at   contractual       average
        exercise                     December 31,         life      exercise
          prices                            2007       (years)         price

            4.10                          10,525          0.39          4.10
            4.75                          31,575          1.25          4.75
            5.20                          28,357          1.19          5.20
            6.82                          74,989          0.40          6.82
            8.10                          50,000          2.12          8.10
                      --------------------------- ---------------------------
                                         195,446          1.20  $       6.43
                      --------------------------- ---------------------------
                      --------------------------- ---------------------------


                                                         Options exercisable
                  -----------------------------------------------------------


                                                      Weighted
                                          Number       average
                                     outstanding     remaining      Weighted
        Range of                           as at   contractual       average
        exercise                     December 31,         life      exercise
          prices                            2007       (years)         price

            4.10                          10,525          0.39          4.10
            4.75                          31,575          1.25          4.75
            5.20                          28,357          1.19          5.20
            6.82                          74,989          0.40          6.82
            8.10                          50,000          2.12          8.10
                      --------------------------- ---------------------------
                                         195,446          1.20  $       6.43
                      --------------------------- ---------------------------
                      --------------------------- ---------------------------

        The exercise price of stock options granted is determined by the
        Board of Directors, but cannot be less than 100% of the market price
        of the common shares at the date of grant.

        For the purposes of calculating the stock option expense, the fair
        value of each option granted for each year was estimated using the
        Black-Scholes option pricing model. The Company has not granted stock
        options during the twelve-month period ended December 31, 2007 (2006
        - nil). The 2003 stock options were valued using the following
        assumptions: expected volatility of 75%, risk free interest rates of
        5%, expected lives of 4 years; and expected dividend yields of nil
        percent. The weighted average grant date fair value of the options
        issued in 2003 is $5.57, net of cancellations. There have been no
        additional stock options issued since 2003.

        On May 7, 2007, the shareholders approved the implementation of a
        Deferred Share Unit Plan (DSU) and Long Term Incentive Plan (LTIP)
        for directors and key employees respectively, the details of each
        plan are as follows :

        Deferred Share Unit Plan

        The Company offers a Deferred Share Unit Plan (DSU) for members of
        the Board of Directors. For each calendar year, the Board of
        Directors shall determine the amount of compensation for non-
        executive directors that shall be paid in Deferred Share Units. At
        the beginning of each calendar quarter, the number of DSUs to be
        credited to the account of each eligible director will be determined
        by dividing one-quarter of that portion of the annual compensation
        that is to be paid in DSUs by the Fair Market Value of the Common
        Shares. The Fair Market Value is the volume weighted average trading
        price per common share of the Company on the Toronto Stock Exchange
        during the five trading days immediately preceding such quarter if
        the Common Shares are then traded on the Toronto Stock Exchange or
        the fair market value as determined by the Board.

        Each DSU represents the right to receive one Common Share of the
        Company when the holder ceases to be a non-executive director of the
        Company. To satisfy this obligation, the Company shall at its option
        either (i) issue Common Shares from treasury to the director, or (ii)
        direct the Plan Trustee (an independent trust company selected by the
        Company) to acquire Common Shares in the market at the direction of
        the Company for the purpose of share compensation arrangements,
        including the DSU Plan to deliver Common Shares to the director. The
        cost to the Company of the DSU's granted for the twelve month period
        ended December 31, 2007 was $224, respectively.

        Long Term Incentive Plan

        Under Softchoice's Long Term Incentive Plan (LTIP), executives and
        other senior employees are granted awards to receive Softchoice
        common shares as a portion of their total compensation. For each
        year, the participating employee shall elect the number of Common
        Shares he or she will agree to hold (the ""invested shares"") between
        a minimum number and a maximum number determined by the Human
        Resource and Corporate Governance Committee. At the end of a
        stipulated performance period (which is December 31, 2009 in the case
        of the initial grants), the Company will deliver a multiple of the
        number of invested shares that were owned by the participating
        employee throughout the period, where the matching multiple depends
        on several factors.

        LTIP awards will  not vest until the end of the applicable
        performance period. The Company may fulfill its obligations to
        deliver Common Shares under the LTIP at its option by either (i)
        issuing Common Shares from treasury to the participating employee, or
        (ii) directing the Plan Trustee (an independent trust company
        selected by the Company) to acquire Common Shares in the market at
        the direction of the Company for the purpose of share compensation
        arrangements, including the LTIP to deliver Common Shares to the
        participating employees. As at December 31, 2007, there were no
        awards made from the LTIP program. The cost of the LTIP program
        accrued for the twelve month period ended December 31, 2007 was
        $941.

    11. Contributed surplus

        For stock options granted to employees and directors after January 1,
        2002, the Company records compensation expense using the fair value
        method. Fair values are determined using the Black-Scholes option
        pricing model. Compensation costs are recognized over the three year
        vesting period as an increase to stock-based compensation expense and
        contributed surplus. When options are exercised, the proceeds
        received by the Company, together with the fair-value amount in
        contributed surplus are credited to capital stock.

                                                                      Amount

        Balance of Contributed Surplus as at January 1, 2005    $        612
        Stock based compensation expense                                  (6)
        Stock options exercised (note 10)                               (124)
                                                                -------------
        Balance of Contributed Surplus as at December 31, 2006  $        482

        Stock based compensation expense                               1,166
        Stock options exercised (note 10)                               (305)
                                                                -------------
        Balance of Contributed Surplus as at December 31, 2007  $      1,343
                                                                -------------
                                                                -------------

    12. Commitments and contingencies

        During the normal course of business, there have been various claims
        instituted against the Company. Management is unaware of any matters
        that have a material adverse effect on the financial position of the
        Company or its results of operations. No amount has been provided in
        these financial statements in respect of these claims. Loss, if any,
        sustained upon their ultimate resolution will be accounted for
        prospectively in the period of settlement in the consolidated
        statements of earnings.

        The Company is obligated to make future minimum annual lease payments
        under operating leases for office equipment and premises as well as a
        commitment for the implementation of a new tax software package as
        follows:

                                                                      Amount
          2008                                                  $      7,198
          2009                                                         5,641
          2010                                                         4,895
          2011                                                         4,307
          2012                                                         4,278
          Thereafter                                                  12,136
                                                                -------------
                                                                $     38,455
                                                                -------------
                                                                -------------

    13. Dividend

        In 2006 and 2007 the Company paid an annual dividend of CAD$0.40 per
        common share in instalments of CAD$0.10 each quarter.

    14. Defined contribution plan

        The Company has a defined contribution plan providing retirement
        benefits for its employees. Employees may contribute subject to
        certain limits based on federal tax laws. The Company contributes 25%
        of the employees contribution up to 1% of the employee's base
        compensation. The Company contributions vest 50% after 2 years but
        before 3 years, 75% after 3 years but before 4 years, and 100% after
        4 years. The total pension expense for 2007 was $120  (2006 - $89).

    15. Related party transactions

        Included in accounts receivable is an amount due from a related
        party:

        $549 (2006 - $83) due from a major shareholder for product sales with
        shareholder were $834 (2006 - $450). This related party transaction
        is in the normal course of operations and has been recorded at the
        exchange amount, which is the amount of consideration established and
        agreed between the related parties. The Company offers a Deferred
        Share Unit Plan (DSU) for members of the Board of Directors. Refer to
        note 10 for a description of this plan and the amounts recorded in
        the financial statements.

    16. Supplemental disclosures of cash flow information

                                                          2007          2006

          Interest paid                           $        708  $        308
          Taxes paid                                    15,984        10,168

          Net change in non-cash working capital
           items relating to operations:

                                                          2007          2006

          Accounts receivable                     $    (25,404) $    (15,683)
          Inventories                                      112           (68)
          Prepaids and other assets                     (1,643)        1,240
          Accounts payable and accrued liabilities      31,442         6,052
          Deferred revenue                               1,809             -
          Deferred lease inducements                       402             -
          Income taxes recoverable                      (1,201)         (331)
                                                  ---------------------------
                                                  $      5,517  $     (8,790)
                                                  ---------------------------
                                                  ---------------------------

    17. Segmented information

        Industry segments

        The Company operates in two reportable business segments: (a)
        software, selling technology products, consulting and licensing the
        rights to software products to end-users; and (b) hardware, selling
        computer hardware products to end-users.

                                                   December 31,  December 31,
                                                        2007          2006

          Software revenue                        $    545,600  $    530,492
          Hardware revenue                             231,482       172,745
                                                 ----------------------------
          Total revenue                           $    777,082  $    703,237
                                                 ----------------------------
                                                 ----------------------------

        The Company's assets, operations and employees are located in Canada
        and the United States. Revenues are attributed to customers based on
        where the products are shipped.

        Geographic Information

        Geographic segments of revenue are as follows:

                                                   December 31,  December 31,
                                                        2007          2006

        Canada(1)                                 $    334,451  $    289,208
        United States                                  442,631       414,029
        ---------------------------------------------------------------------
                                                  $    777,082  $    703,237
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        (1)   Revenue for the twelve months ended December 31, 2007 and 2006,
              is CAD$355,209 and CAD$328,000, respectively.


        Geographic segments of property and equipment are located as follows:

                                                   December 31,  December 31,
                                                        2007          2006

        Canada                                    $      7,166  $      5,423
        United States                                    1,240           857
        ---------------------------------------------------------------------
                                                  $      8,406  $      6,280
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Geographic segments of goodwill are as follows:

                                                   December 31,  December 31,
                                                        2007          2006

        Canada                                    $      6,491  $      5,504
        United States                                   38,229         6,961
        ---------------------------------------------------------------------
                                                  $     44,720  $     12,465
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Geographic segments of intangible assets are as follows:

                                                   December 31,  December 31,
                                                        2007          2006

        Canada                                    $     15,599  $      4,603
        United States                                   16,397             -
        ---------------------------------------------------------------------
                                                  $     31,99   $      4,603
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    18. Economic dependence

        Approximately 37% (December 31, 2006 - 43%), of the Company's sales
        in the period relate to products published by one software publisher.

    19. Subsequent events

        On January 2, 2008 the Company announced that it had reached a
        definitive agreement to acquire Optimus Solutions for an estimated
        purchase price of $38,100 in cash with a deferred payment of up to
        $9,000 payable in 2008 depending on the financial performance of
        Optimus Solutions. Optimus Solutions is a comprehensive IT products
        and solutions company focused on helping enterprise and mid-market
        clients plan, build and maintain their information technology
        infrastructure with headquarters in Norcross Georgia, and nine
        offices in the United States. The acquisition has been funded by a
        term loan in the amount of $44,500 CAD from a major Canadian
        financial institution. The debt has a one year term with interest
        charges of prime plus 2.5% in the first quarter of 2008 and rising by
        50 basis points each quarter thereafter.

        In order to support the working capital requirements of this
        acquisition the Company has increased its revolving credit facility
        with a major American financial institution for its U.S. subsidiary
        by $15,000. The total available credit under the revised facility is
        $85,000, including the term debt referred to in note 9.

        On February 12, 2008, the Directors declared a dividend in the amount
        of CAD$0.10 per common share payable on March 31, 2008 to
        shareholders of record at the close of business on March 14, 2008.

    20. Comparative figures

        Certain figures for previous years have been reclassified to conform
        with the current year's financial statement presentation.


    Softchoice Issues Supporting Materials for 2007 Q4 Earnings Call

    Toronto - Feb. 13, 2008 - Softchoice Corporation (TSX: SO), a leading
North American provider of technology solutions and services, will host its
annual and fourth quarter results earnings today at 11 a.m. EST. The
supporting materials for the call can be accessed in advance by clicking on
the following link: http://files.newswire.ca/681/Q4EarningsCallv8.pdf

    Fourth-Quarter Results Conference Call Details

    Softchoice will hold a conference call to discuss its fourth-quarter
results on February 13, 2008, at 11 a.m. EST.
    Dave MacDonald, Softchoice's President and CEO, and Anne Brace,
Softchoice's Chief Financial Officer, will host the call. The conference call
will begin with a brief presentation followed by a question-and-answer
session.
    To participate in the conference:

    Local/international: 416-849-6185
    Toll-free in North America: 1-866-443-4183

    To listen to the call and view the Web presentation:

    http://events.onlinebroadcasting.com/softchoice/021908/index.php

    To ensure participation, please dial in at least 10 minutes prior to the
start of the conference at 11 a.m. EST.
    For those unable to participate in the call, a link will be made available
on the Softchoice website to an archived Web and audio version on February 14,
2007.

    About Softchoice

    As one of North America's leading providers of technology solutions and
services, Softchoice helps businesses and organizations of all sizes to
select, acquire and manage their software and hardware technology resources.
Softchoice offers a full range of capabilities, including face-to-face
consultations and IT asset management services designed to help customers save
time, money and risk in IT procurement. In 2006, Softchoice was named Software
Value Added Reseller (VAR) of the Year by VAR Business magazine. Softchoice
currently has more than 900 employees operating from more than 40 branch
offices located in major cities across the U.S. and Canada.
    Softchoice stock is listed on the Toronto Stock Exchange (TSX) under the
trading symbol "SO." The Common Shares of Softchoice are not registered under
the U.S. Securities Act of 1933 and are not publicly traded in the United
States.

    Forward-Looking Statements

    This press release contains forward-looking statements that involve risks
and uncertainties. These forward-looking statements relate to, among other
things, plans and timing for the introduction and enhancement of our services,
and other expectations, intentions and plans contained in this press release
that are not historical fact. When used in this press release, the words
"anticipate," "expect" and similar expressions generally identify forward-
looking statements. These statements reflect our current expectations and are
subject to a number of risks and uncertainties including, but not limited to,
our ability to integrate the business of Software Plus with our own, including
the ability to maintain its customers, the ability to eliminate costs, and
changes in technology and general market conditions, many of which are set out
or incorporated by reference in the Company's latest Annual Information Form.
Due to the many risks and uncertainties, Softchoice cannot assure that the
forward-looking statements contained in this press release will be realized.

    




For further information:

For further information: Anne Brace, Chief Financial Officer, Softchoice
Corporation, (416) 588-9986, investor_relations@softchoice.com; Eric Gardiner,
Softchoice Corporation, (416) 588-9002 x2358, Contact Softchoice Corporate
Communications

Organization Profile

Softchoice Corporation

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