Advantex Announces Fiscal Second-Quarter Results

    -   Company continuing to make steady progress in core areas on which it
        is focusing for future growth in revenue and profitability
    -   Financings completed late in second quarter and in January will
        enable a doubling of the Transaction Credits on the Balance Sheet and
        growth of Advance Purchase Marketing Program
    -   Expects future revenue growth to result from higher Transaction
        Credits deployed as more merchants are enrolled in Advance Purchase
        Marketing Program
    -   Conference call and webcast on Friday, February 15 at 8:30 a.m.

    ADX: TSX

    TORONTO, Feb. 14 /CNW/ - Advantex Marketing International Inc. (TSX:ADX),
a leading specialist in merchant funding and loyalty marketing programs, today
announced its results for the fiscal second quarter and six months ended
December 31, 2007. All references to quarters or years are for the fiscal
periods and all currency amounts are in Canadian dollars unless otherwise

    Financial Performance - Highlights
    (millions of $s, except per share amounts)

                                      Three      Three        Six        Six
                                     months     months     months     months
                                      Ended      Ended      Ended      Ended
                                   December   December   December   December
                                   31, 2007   31, 2006   31, 2007   31, 2006
    Revenue                             3.2        3.4        6.1        5.7
    Direct expenses                     1.4        1.2        2.6        2.0
    Gross profit                        1.8        2.2        3.5        3.7
    Sales, general, and
     administrative expenses            1.8        1.7        3.5        3.4
    Contribution from operations        0.0        0.5        0.0        0.3
    Earnings (loss) before
     amortization and interest          0.0       (0.7)      (0.1)      (0.8)
    Net earnings (loss)                (0.3)      (1.0)      (0.7)      (1.3)
    Net earnings (loss) per
     common share                    ($0.00)    ($0.01)    ($0.01)    ($0.02)

    "Through the second quarter, we continued to make steady progress in the
core areas on which Advantex is focusing to achieve future growth and
profitability," said Kelly E. Ambrose, President and Chief Executive Officer.
"The extent of the progress that we are making is not fully evident in the
reported financial results.
    "For example, revenue from our popular Advance Purchase Marketing Program
was down in the 2008 second quarter at $1.1 million, compared with
$1.7 million a year earlier," Mr. Ambrose continued. "This decline is
partially due to our initiative to move merchants already enrolled to either a
Marketing Only program or to the Advance Purchase Marketing program with
larger advances. This realignment resulted in more of the enrolled merchants
being in the Marketing Only program, for which revenue increased 41.0 percent
in the quarter compared with a year ago. The second factor for the decline in
the Advance Purchase Marketing Program was the funding constraints that we had
to manage prior to completing additional financing agreements in December. We
continued to attract merchants to our Advance Purchase Marketing program, but
these funding constraints meant we were unable to activate them which created
a significant backlog of merchants.
    "Since completing in late December our new financing for the Advance
Purchase Marketing Program, we have been addressing this backlog and a ramp-up
in revenue should become evident in future quarters," Mr. Ambrose said. "In
addition to our progress in securing financing to grow the Advance Purchase
Marketing Program, revenue for our Online operations grew 43.3 percent (in
U.S. dollars, the currency of the program; 32.3 percent in Canadian dollars)
in the second quarter, compared with a year ago. The growth is mainly the
result of increased marketing support and stronger awards promotions offered
to online shoppers.
    "We operated at approximately breakeven for the quarter and first half of
2008 in terms of Contribution from Operations," Mr. Ambrose noted. "Our
profitability was however affected by higher direct expenses which rose
15.1 percent in the second quarter because of higher award costs for the CIBC
Advantex business as we increased award levels in selected categories and
increased merchant marketing to improve our value proposition and support
merchant retention. The special award promotions that helped to increase the
Online business were another cost factor. Selling, general and administrative
(SG&A) increases were related to our efforts to strength the company's
business processes and information technology infrastructure. Apart from
focused expenses to support the core programs, we are continuing to control
our costs."
    On December 18, 2007, the company announced a three-year agreement with
Montcap Financial Corporation under which Advantex will be able to draw on at
least $1.5 million for immediate deployment as cash advances to merchants
participating in the Advance Purchase Marketing Program. Advantex also will
have access to up to an additional $3.5 million as it expands the program by
offering participation to retailers across Canada. Advantex estimates that
there are about 100,000 retailers in Canada that would qualify for the
    On December 24, 2007 and January 31, 2008, Advantex announced the
completion of two tranches, respectively, of a further financing that raised
gross proceeds on $2.665 million through the sale Units comprising of $1,000
face value secured non-convertible debentures and a total of 1,975 common
share purchase warrants of Advantex. Each warrant is exercisable to acquire
one common share of Advantex at $0.06 per share during a three-year period.
The debentures will yield 14.0 percent annually, payable quarterly, and mature
on December 31, 2010.
    "With these financings, the strength of the relationships that we have
forged with our business partners, and the positive response that we are
continuing to receive from merchants across Canada, we feel confident about
the outlook for Advantex. One measure of this should be growth in revenue as
the funding enables us to double the level of Transaction Credits on our
Balance Sheet with the increasing number of merchants enrolling in our
program," Mr. Ambrose said.

    Conference Call and Webcast

    Advantex will hold a conference call for analysts and investors to
discuss its second-quarter results on February 15, 2008 at 8:30 a.m.
    Kelly Ambrose, President and Chief Executive Officer, and Mukesh
Sabharwal, Vice-President and Chief Financial Officer, will be available to
answer questions during the call.
    To participate in the call, please dial 416-644-3419 or 1-800-731-6941 at
least five minutes prior to the start of the call.
    A live audio webcast of the conference call will be available at and
    An archived recording of the call will be available at 416-640-1917 or
1-877-289-8525 (Passcode 21262985 followed by the number sign) from noon on
February 15 to 11:59 p.m. on February 22. An archived recording of the webcast
will also be available at Advantex's website.
    Advantex will file its fiscal 2008 second-quarter statements and
management's discussion and analysis with SEDAR and they will be posted on the
company's website.

    About Advantex Marketing International Inc.

    Advantex is a specialist in the marketing services industry, managing
white-labeled rewards accelerator programs for major affinity groups through
which their members earn bonus frequent flyer miles and/or other rewards on
purchases at participating merchants. Under the umbrella of each program,
Advantex provides merchants with marketing, customer incentives, and secured
future sales through its Advance Purchase Marketing model. Advantex partners
include more than 700 restaurants, online retailers, golf courses, small inns
and resorts, and major organizations, including CIBC, United Airlines, Delta
Airlines, Alaska Airlines, and Lufthansa Airlines. Advantex is traded on the
Toronto Stock Exchange under the symbol "ADX". For additional information on
Advantex, please visit

    This press release contains certain "forward-looking statements". All
statements, other than statements of historical fact, that address activities,
events or developments that the Company believes, expects or anticipates will
or may occur in the future (including, without limitation, statements
regarding financial and business prospects and financial outlook) are
forward-looking statements. These forward-looking statements reflect the
current expectations or beliefs of the Company based on information currently
available to the Company. Forward-looking statements are subject to a number
of risks, uncertainties and assumptions that may cause the actual results of
the Company to differ materially from those discussed in the forward-looking
statements, and even if such actual results are realized or substantially
realized, there can be no assurance that they will have the expected
consequences to, or effects on the Company. Factors that could cause actual
results or events to differ materially from current expectations include,
among other things, changes in general economic and market conditions, changes
to regulations affecting the Company's activities, uncertainties relating to
the availability and costs of financing needed in the future, and delays in
finalizing retail contract with CIBC. Any forward-looking statement speaks
only as of the date on which it is made and, except as may be required by
applicable securities laws, the Company disclaims any intent or obligation to
update any forward-looking statement, whether as a result of new information,
future events or results or otherwise. Although the Company believes that the
assumptions inherent in the forward-looking statements are reasonable,
forward-looking statements are not guarantees of future performance and
accordingly undue reliance should not be put on such statements due to the
inherent uncertainty therein.

                  For the three month and six month period
                           Ended December 31, 2007

    The accompanying consolidated financial statements have been prepared by
management and approved by the Board of Directors of the Company. Management
is responsible for the information and representations contained in these
consolidated financial statements and other sections of this report.
    An auditor has not performed a review of these financial statements.

                         CONSOLIDATED BALANCE SHEETS

                                                  DECEMBER 31,       JUNE 30,
                                                  -----------        -------
                                                         2007           2007
                                                         ----           ----

      Cash and cash equivalents                    $2,259,842       $910,995
      Accounts receivable                           1,389,410        737,485
      Transaction credits                           5,413,246      5,390,412
      Prepaid expenses and sundry assets               97,794        185,955
                                                       ------        -------
                                                    9,160,292      7,224,847
                                                    ---------      ---------
      Property, plant and equipment and
       other assets                                   925,595        775,733

    TOTAL ASSETS                                  $10,085,887     $8,000,580
                                                  -----------     ----------
                                                  -----------     ----------
      Loan payable                                   $529,160            $ -
      Accounts payable and accrued liabilities      3,987,438      3,707,243
                                                    ---------      ---------
                                                    4,516,598      3,707,243
                                                    ---------      ---------
      Other liabilities                               272,658        450,856
      Non-convertible debenture payable             1,781,355              -
      Convertible debenture payable                 4,240,064      4,042,335
                                                    ---------      ---------
                                                    6,294,077      4,493,191
                                                    ---------      ---------

                                                   10,810,675      8,200,434
                                                   ----------      ---------

    Capital Stock
      Class A preference shares                         3,815          3,815
      Common shares                                24,106,281     24,106,281
                                                   ----------     ----------
                                                   24,110,096     24,110,096

    Contributed surplus                               444,623        412,223
    Equity portion of debentures (note 7)           2,252,986      2,114,341
                                                    ---------      ---------

    Deficit                                       (27,532,493)   (26,836,514)
                                                  ------------   ------------

                                                     (724,788)      (199,854)
                                                     ---------      ---------

     (DEFICIENCY) EQUITY                          $10,085,887     $8,000,580
                                                  -----------     ----------
                                                  -----------     ----------
    (see accompanying notes)


                              Three Months Ended         Six Months Ended
                                  December 31               December 31
                                  -----------               -----------
                               2007         2006         2007         2006

    REVENUE                 3,236,840    3,415,333    6,081,527    5,677,117
      Direct expenses       1,438,816    1,248,881    2,592,049    1,974,526
                            ---------    ---------    ---------    ---------

    GROSS PROFIT            1,798,024    2,166,452    3,489,478    3,702,591
                            ---------    ---------    ---------    ---------

      Selling and marketing   795,594      800,099    1,587,001    1,605,010
      General and
       administrative         974,789      909,917    1,919,837    1,767,723
                              -------      -------    ---------    ---------
                            1,770,383    1,710,016    3,506,838    3,372,733

     OPERATIONS                27,641      456,436      (17,360)     329,858

      Restructuring costs           -    1,026,156            -    1,026,156
       compensation            16,200      124,975       32,400      136,375
                               ------      -------       ------      -------

     AMORTIZATION              11,441     (694,695)     (49,760)    (832,673)

      Amortization of
       property, plant
       and equipment           72,618       58,936      120,052      114,907
                               ------       ------      -------      -------

     INTEREST                 (61,177)    (753,631)    (169,812)    (947,580)

    Interest expense
      Loan payable, and Non
       convertible debenture   10,167            -       10,167            -
      Stated interest on
       convertible debenture  158,796      130,646      318,269      226,099
      Accretion charge on
       convertible debenture
       and amortization of
       deferred financing
       charges                 99,552       89,955      197,731      169,814
                               ------       ------      -------      -------

     FOR THE PERIOD         $(329,692)   $(974,232)   $(695,979) $(1,343,493)
                            ----------   ----------   ---------- ------------
                            ----------   ----------   ---------- ------------

     COMMON SHARE              $(0.00)      $(0.01)      $(0.01)      $(0.02)
                               -------      -------      -------      -------
                               -------      -------      -------      -------

    (see accompanying notes)


                              Three Months Ended         Six Months Ended
                                  December 31               December 31
                                  -----------               -----------
                               2007         2006         2007         2006

     OF PERIOD            (27,202,801) (24,611,474) (26,836,514) (24,242,213)
    Net loss for the
     Period                  (329,692)    (974,232)    (695,979)  (1,343,493)
                             ---------    ---------    ---------  -----------
     OF PERIOD            (27,532,493) (25,585,706) (27,532,493) (25,585,706)
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    (see accompanying notes)


                              Three Months Ended         Six Months Ended
                                  December 31               December 31
                                  -----------               -----------
                               2007         2006         2007         2006


      Net loss for the
       period               $(329,692)   $(974,232)   $(695,979) $(1,343,493)
    Items not
     affecting cash
      Amortization of
       property, plant
       and equipment           72,618       58,936      120,051      114,907
      Accretion charge on
       convertible debenture   78,186       67,561      154,999      121,288
      Amortization of
       deferred financing
       charges                 21,366       22,394       42,732       48,526
       compensation            16,200      124,975       32,400      136,375
                               ------      -------       ------      -------
                             (141,322)    (700,366)    (345,797)    (922,397)

    Changes in non-cash
     working capital items
      Accounts receivable    (593,573)    (591,424)    (651,925)    (694,962)
      Transaction credits    (257,278)  (1,136,048)     (22,834)  (2,221,503)
      Prepaid expenses and
       sundry assets           67,638         (311)      88,161       22,143
      Accounts payable and
       accrued liabilities    413,808    1,656,657      280,196    1,449,903
                              -------    ---------      -------    ---------
                             (369,405)     (71,126)    (306,402)  (1,444,419)

    Decrease in Long-term
     other liabilities        (64,067)    (569,021)    (178,200)    (569,021)
                              --------    ---------    ---------    ---------
    Cash utilized in
     operating activities    (574,794)  (1,340,513)    (830,399)  (2,935,837)

      Proceeds from
       debenture, net               -    1,659,725            -    1,659,725
      Proceeds from
       debenture, net       1,920,000            -    1,920,000            -
      Proceeds from
       initial draw of
       credit facility        706,490            -      706,490            -
      Credit facility
       costs                 (177,330)           -     (177,330)           -
                             ---------    ---------    ---------    ---------
                            2,449,160    1,659,725    2,449,160    1,659,725

      Purchase of property,
       plant and equipment   (116,904)    (129,282)    (269,914)    (199,664)

     DURING THE PERIOD      1,757,462      189,930    1,348,847   (1,475,776)

    Cash and cash
     equivalents at the
     beginning of the
     period                   502,380      141,336      910,995    1,807,042

     OF PERIOD             $2,259,842     $331,266   $2,259,842     $331,266

      Interest paid          $300,000      $97,000     $300,000     $295,000

    (see accompanying notes)

    Six Months Ended December 31, 2007


    The accompanying interim financial statements of Advantex Marketing
    International Inc. and its subsidiaries ("Advantex" or the "Company")
    have been prepared in accordance with Canadian generally accepted
    accounting principles ("Canadian GAAP") for interim financial
    information. Accordingly, they do not include all of the information and
    footnotes required by Canadian GAAP for annual consolidated financial

    The accompanying financial information reflects all adjustments,
    consisting primarily of normal recurring adjustments, which are, in the
    opinion of management, necessary for a fair presentation of results for
    interim periods. Operating results for the six months ended December 31,
    2007 are not necessarily indicative of the results that may be expected
    for the fiscal year ending June 30, 2008. The accounting policies used in
    the preparation of these interim consolidated financial statements should
    be read in conjunction with the consolidated financial statements and
    notes thereto for fiscal 2007.

    These interim financial statements follow the same accounting policies
    and methods of application as the consolidated financial statements for
    the year ended June 30, 2007, except as described in note 2 below.
    Certain prior period amounts have been re-classified to conform to the
    current period's presentation.


    As required by the Canadian Institute of Chartered Accountants ("CICA"),
    on July 1, the Company adapted CICA Handbook Section 1530, Comprehensive
    Income; Section 3251, Equity; Section 3855, Financial Instruments -
    Recognition and Measurement; Section 3861, Financial Instruments -
    Disclosure and Presentation; and Section 3865, Hedges. The prospective
    adoption of those new standards resulted in changes in the accounting and
    presentation for financial instruments. The principal changes in
    accounting for financial instruments due to the adoption of these
    accounting standards are described in detail in Note 2 to the interim
    consolidated financial statements of the Company for the three months
    ended September 30, 2007.


    As at December 31, 2007 the maximum number of shares issuable under the
    plan was 12,128,858, and there were 9,100,000 employee stock options
    outstanding at exercise prices between $0.045 to $0.15, expiring between
    July 9, 2008 and September 19, 2012.

    During the period 400,000 stock options were forfeited or expired.

    The Company has recorded stock option expense of $16,200 and $32,400 for
    the three and six months ended December 31, 2007, respectively


    During the period Company continued development of new processing systems
    for its CIBC Advantex programs. The costs incurred to date on this
    project approximate $448,240 and are included in property, plant and
    equipment. Certain modules of the system were implemented during the
    current quarter, and the Company commenced amortization on these modules.
    An amount of $26,078 is reflected in amortization expense for the three
    and six months ended December 31, 2007 related to the new processing


    In December, 2007 Advantex Dining Corporation, a 100% subsidiary of the
    Company concluded an agreement with Montcap Financial Corp (Montcap) for
    a $5.0 million credit facility. Interest will be calculated daily on the
    amount outstanding and charged monthly at the per annum rate of
    10 per cent above a certain major Canadian bank's prime rate. First
    charge on all amounts due from participating establishments which are
    funded from this facility will be provided as security. The agreement is
    for three years.

    Under the agreement, the facility is to be used exclusively to acquire
    transaction credits. Transaction credits can only be acquired from those
    establishments that are in industries open to the Company under its
    agreement with CIBC. The Company has immediate access to $1.5 million of
    the facility. The remaining balance of $3.5 million will be available
    once the Company reaches an agreement with CIBC that will allow the
    Company to expand its program to retail establishments.

    The financing costs of this credit facility are approximately $177,330
    and $706,490 was outstanding under this facility at December 31, 2007.


    In December, 2007, the Company issued 2,000 units of non-convertible
    debentures for proceeds of $1,920,000, net of $80,000 of transaction
    costs. Each unit consists of a $1,000 secured non-convertible debentures
    and 1,975 share purchase warrants. The debentures bear interest at 14%
    per annum, payable quarterly, and mature on December 31, 2010. Each share
    purchase warrant allows the holder to acquire one share of the Company at
    $0.06 per share during the three year term of the debenture.

    Under the agreement, the proceeds of the debenture are to be used to
    acquire transaction credits. In addition, the proceeds of the non-
    convertible debentures are to be held in a segregated bank account, set
    up by the company. As security, the debenture holders will have first
    charge to the balances in the segregated bank accounts as well as all
    amounts due from establishments funded by the proceeds of the non-
    convertible debentures.

    The non-convertible debentures include a financial covenant that requires
    the Company to meet a defined level of assets at each quarter end
    commencing the quarter ending on March 31, 2008.

    In accordance with CICA 3855, the fair value of the new non-convertible
    debentures was bifurcated into debt and equity portions and an estimated
    fair value was applied to the debt and equity components. Accordingly,
    $138,645 was allocated to the equity portion of the share warrants.

    The Black-Scholes option pricing model was used to determine the fair
    value of the share warrant feature. The following assumptions were used
    in the Black-Scholes option pricing model:

    Common share price                                  $0.06
    Exercise price of share warrant                     $0.06
    Expected life of the share warrant                3 years
    Expected Volatility                                   89%
    Risk-free interest rate                              3.9%


    Equity portion of convertible debenture                       $2,114,341
    Equity portion of non-convertible debenture (note 6)             138,645


    The closing of the second and final tranche of the non-convertible debt
    offering was completed on January 30, 2008. The Company issued an
    additional 665 units, for gross proceeds of $665,000. Certain Directors
    and officers of the Company participated in second tranche, purchasing
    110 units.

    %SEDAR: 00004122E

For further information:

For further information: Mukesh Sabharwal, Vice-President and Chief
Financial Officer, Tel: (416) 481-5657, ext. 249, E-mail:

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