2012 and by 12% to $9.3 million in the nine month period ended september 30, 2012, and net earnings...

2012 Third Quarter Report

Discover Solium

Management’s Discussion and Analysis

Condensed Consolidated Interim Financial Statements

Notes to Condensed Consolidated Interim Financial Statements

Corporate Information

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Contents

2012 Third Quarter Report

Contents

Management’s Discussion and AnalysisFor the quarter ended September 30, 2012

This Management’s Discussion and Analysis (“MD&A”) of Solium Capital Inc. (“Solium” or the “Company”) for the quarter ended September

30, 2012 is dated November 5, 2012. This MD&A should be read in conjunction with the unaudited Condensed Consolidated Interim Financial

Statements for the three and nine month periods ended September 30, 2012, the Company’s audited Consolidated Financial Statements and

the accompanying notes for the year ended December 31, 2011, and the MD&A included in the Company’s 2011 Annual Report.

Additional information relating to the Company is available on SEDAR at www.sedar.com under Solium Capital Inc.

All dollar amounts discussed in the MD&A are in Canadian dollars unless otherwise specified.

Special note regarding forward-looking statements

Certain statements included or incorporated by reference in this MD&A constitute forward-looking statements or forward-looking information

under applicable securities legislation. Forward-looking statements or information typically contain statements with words such as “anticipate”,

“believe”, “expect”, “plan”, “intend”, “estimate”, “propose”, or similar words suggesting future outcomes or statements regarding an outlook.

Forward-looking statements or information in this MD&A include but are not limited to expectations regarding future revenues, earnings, capital

expenditures, and operating and other costs; business strategy and objectives; market trends; acquisition and disposition plans; the sufficiency

of cash and working capital for future operations; the timing and the completion of various development projects; the migration of trade flows

into the Canadian brokerage business; and the acquisition of intellectual property from business combinations.

Such forward-looking statements or information are based on a number of assumptions which may prove to be incorrect. In addition to other

assumptions identified in this MD&A, assumptions have been made regarding, among other things, the Company’s transition to new products

and releases; the number of customer transactions; the length of the sales cycles; the competitive environment; the ability to maintain or

accurately forecast revenue from the Company’s products or services; the ability of the Company to identify, hire, train, motivate and

retain qualified personnel; currency fluctuations; the ability of the Company to develop, introduce and implement new products as well as

enhancements or improvements for existing products that respond, in a timely fashion, to customer/product requirements and rapid

technological change; risks associated with operations; the impact of any changes in the laws and regulations in the jurisdictions in which the

Company operates; the effect of new accounting pronouncements or guidance; and the ability of the Company to make all required payments

pursuant to its agreements with Computershare Inc.

Although the Company believes that the expectations reflected in such forward-looking statements or information are reasonable, undue

reliance should not be placed on forward looking statements or information because the Company can give no assurance that such

expectations will prove to be correct. The forward-looking statements and information are based on Solium’s current expectations, estimates

and projections, and are subject to a number of significant risks and uncertainties that could cause actual results to differ materially from those

anticipated. Such risks and uncertainties include, among others, general business and economic conditions; the overall performance of stock

market(s); actions of competitors and partners; the regulatory environment; the corporate governance environment and regulatory reporting

requirements for Solium’s clients; product capability and acceptance; the Company’s ability to generate sufficient cash flow from operations

to meet its current and future obligations; and the Company’s ability to access external sources of financing if required. A more detailed

assessment of the risks that could cause actual results to materially differ from current expectations is contained in the Risk Assessment

section of this MD&A. The foregoing is not exhaustive and other risks are detailed from time to time in other continuous disclosure filings of the

Company. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward looking statements

or information prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected.

These forward looking statements and future-oriented financial information contained herein are made as of the date of this MD&A. The

Company uses future-oriented financial information for budgeting and planning purposes and the information may not be appropriate for

other purposes.

3Management’s Discussion and Analysis

Overview of the company

Solium is a software-as-a-service company and is a leading global provider of web-based stock plan administration technology and services.

Solium’s software helps companies automate and manage their stock option and purchase plans by providing unrivalled comprehensive

regulatory and financial reporting capabilities

Solium’s technology provides functionality that streamlines a client’s workflow relating to the issuance of incentives, the exercise of incentives,

reporting of incentives and day-to-day maintenance of the incentives database. The technology provides constant online access to reports for

securities regulators, internal management and financial disclosure purposes.

Solium’s solutions empower plan participants by providing them with online access to review their stock incentive portfolios from any internet-

connected computer, anywhere in the world. Plan participants have direct access to the financial markets through Solium’s brokerage

partners.

Revenue is primarily earned on a recurring basis; derived from corporate clients, their associated employee plan participants, and Solium’s

brokerage partners. From corporate clients, Solium receives recurring access, subscription or maintenance fees. From associated employee

plan participants, revenue is continuously generated in the form of transaction and money movement fees. From brokerage partners, revenue

is continuously generated through fees that are based on the share transactions executed by the brokerage partners for Solium’s participants.

In addition, the Company receives one-time (non-recurring) revenue for the implementation of plans onto the system for new clients, ad hoc

customization and consulting.

Overall performance

Revenue increased by 15% to $12.3 million for the third quarter of 2012 and by 5% to $36.9 million for the nine month period ended

September 30, 2012. Earnings from operations increased by 52% to $1.5 million for the third quarter of 2012 and by 21% to $6.1 million for

the nine month period ended September 30, 2012.

Excluding the impact of the Computershare matter discussed below, Adjusted EBITDA increased by 16% to $2.5 million in the third quarter of

2012 and by 12% to $9.3 million in the nine month period ended September 30, 2012, and net earnings increased to $0.4 million in the third

quarter of 2012 (2011: loss $1.0 million) and by 57% to $2.9 million in the nine month period ended September 30, 2012.

The key factors affecting the results of the three and nine month periods ended September 30, 2012 are:

• Computershare – On April 3, 2012, the Company received notice from Computershare of its decision to retain a stock option and

restricted stock administration business that it acquired on December 31, 2011 as part of a larger transaction. As a consequence of

this decision, effective April 3, 2012, the U.S. $17.3 million amount due to Computershare as at December 31, 2011 was extinguished

and ceased to be an obligation of Solium. The impact of this on the Company’s income statement for the nine month period ended

September 30, 2012 was a gain of $15.6 million partially offset by a charge to intangible assets and goodwill of $7.8 million.

• Foreign exchange – On January 1, 2012, the Company designated the U.S. denominated liability to Computershare as a hedge against

the Company’s net investment in its U.S. operations. As a result of the hedge accounting, unrealized foreign exchange loss on the liability

to Computershare which was reported in net earnings in the three and nine month periods of 2011 was not applicable in the three and

nine month periods ended September 30, 2012. The unrealized foreign exchange loss on Due to Computershare has been reported in

other comprehensive income in the three and nine month periods ended September 30, 2012.

• CapMX Acquisition – The acquisition of CapMX on May 15, 2012 resulted in an increase in revenue and earnings for the three and nine

month periods ended September 30, 2012.

4 Solium 2012 Third Quarter Report Management’s Discussion and Analysis

• Strategic initiatives – The Company incurred significant strategically driven expenses during the first nine months of 2012 in establishing

its new operations in the UK, launching a brokerage business in Canada to internalize Canadian trade flows from its core business, and

pursuing other potential business opportunities. The Company has made positive progress on the development of new clients in the UK

and expects to begin realizing incremental revenue in Q4 2012 as new clients go live on the Shareworks platform. The Company initiated

migration of Canadian trade flow into its new Canadian brokerage business in the third quarter of 2012. Revenue benefits for the third

quarter were minimal but are expected to accelerate over the coming quarters. Subsequent to the end of the quarter, in early October

2012, the Company opened an office in Sydney, Australia. The Company’s initial business in Australia is with a global financial institution,

which is expected to go live on Solium’s Shareworks platform in Q1 2013.

• SRED ITC’s – – Based on the history of successful SRED claims made in previous years, the Company accrued $300,000 as a reduction

to operating expenses in the third quarter of 2012 (2011: $Nil), and $1.6 million in the nine months ended September 30, 2012 (2011:

$Nil) relating to SRED claims.

Results during the three and nine month periods ended September 30, 2012 were as follows:

• Revenue grew by 15% to $12,346,833 in the third quarter of 2012 and by 5% to $36,915,681 in the nine month period ended

September 30, 2012.

• Operating expenses increased by 11% to $10,808,195 in the third quarter of 2012 and increased by 2% to $30,782,919 in the nine

month period ended September 30, 2012.

• Adjusted EBITDA increased by 16% to $2,480,452 in the third quarter of 2012 and by 12% to $9,308,514 in the nine month period ended

September 30, 2012.

• Excluding the impact of the Computershare matter, net earnings increased to $430,516 in the third quarter of 2012 (2011: loss $962,334)

and by 57% to $2,895,015 in the nine month period ended September 30, 2012.

• Excluding the impact of the Computershare matter, net earnings per share increased to $0.010 in the third quarter of 2012 (2011: loss

$0.023) and by 57% to $0.069 in the nine month period ended September 30, 2012.

Results by geographic segment during the third quarter of 2012 were as follows:

• Canadian revenue grew by 14% to $6,027,880 in third quarter of 2012 and by 7% to $18,585,243 in the nine month period ended

September 30, 2012.

• U.S. revenue grew by 16% to $6,318,953 in the third quarter of 2012 and by 3% to $ 18,330,438 in the nine month period ended

September 30, 2012.

• Adjusted EBITDA in Canada decreased by 16% to $1,106,097 in the third quarter of 2012 and by 7% to $4,878,217 in the nine month

period ended September 30, 2012.

• Adjusted EBITDA in the U.S. increased by 64% to $1,374,355 in the third quarter of 2012 and by 44% to $4,430,297 in the nine month

period ended September 30, 2012.

• Excluding the impact of the Computershare matter, net earnings in Canada increased to $236,390 in the third quarter of 2012 (2011: loss

$518,130) and decreased by 3% to $2,474,093 in the nine month period ended September 30, 2012.

• Excluding the impact of the Computershare matter, net earnings in the U.S. increased to $194,126 in the third quarter of 2012 (2011: loss

$444,204) and to $420,922 in the nine month period ended September 30, 2012 (2011: loss $697,539).


Results from operations

Revenue

Revenue was $12,346,833 in the third quarter of 2012 (2011: $10,726,136), and $36,915,681 in the nine month period ended September 30,

2012 (2011: $35,183,270). This represents an increase of $1,620,697 over the results from the third quarter of 2011 and $1,732,411 over the

results from the nine month period ended September 30, 2011.

Revenue from Canadian operations was $6,027,880 in the third quarter of 2012 (2011: $5,268,644) and $18,585,243 in the nine month period

ended September 30, 2012 (2011: $17,371,023), while revenue from U.S. operations was $6,318,953 in the third quarter of 2012 (2011:

$5,457,492) and $18,330,438 in the nine month period ended September 30, 2012 (2011: $17,812,247).

Increased revenue in 2012 was due in part to the addition of the CapMX business acquired from SVB Analytics, Inc. on May 15, 2012.

Expenses

Total expenses, including income tax expense, in the third quarter of 2012 were $11,916,317 (2011: $11,688,470) and $26,187,380 in the nine

month period ended September 30, 2012 (2011: $33,339,492). Operating expenses were $10,808,195 in the third quarter of 2012 (2011:

$9,710,550) and $30,782,919 in the nine month period ended September 30, 2012 (2011: $30,134,215).

Based on the history of successful SRED claims made in previous years, the Company has accrued $300,000 as a reduction to operating

expenses in the third quarter of 2012 (2011: $Nil), and $1,570,000 in the nine months ended September 30, 2012 (2011: $Nil) relating to SRED

claims. The Company expects to recognize an additional $300,000 of SRED credit in the fourth quarter of 2012 for 2012 SRED expenditures.

Significant staff and infrastructure costs associated with the purchase and transition of the Computershare business in the U.S. during the first

nine months of 2011 did not re-occur in the first nine months of 2012 as a result of the successful integration of the Computershare business

during 2011.

The Company incurred significant strategically driven expenses during the first nine months of 2012 in establishing its new operations in the UK

and launching its Canadian brokerage business to internalize trade flow, which were not applicable in the same period of 2011.

Foreign exchange gain or loss

A foreign exchange loss of $324,822 was recorded during the third quarter of 2012 (2011: $1,270,507) and a loss of $201,555 for the

nine month period ended September 30, 2012 (2011: $814,007). The foreign exchange loss during the third quarter of 2012 reflects the

strengthening of the Canadian dollar against the U.S. dollar during the period. Further, as a result of the hedge accounting, the unrealized

foreign exchange loss on the liability to Computershare was reported in other comprehensive income in the three and nine month periods

ended September 30, 2012.

Income taxes

$692,475 of income tax expense was recorded in the third quarter of 2012 (2011: $371,025) and $2,535,130 for the nine month period ended

September 30, 2012 (2011: $1,352,142). The Company’s U.S. operation became taxable during 2012, which accounts for the majority of the

increase in income tax expense from 2011 to 2012.

Other comprehensive income

A foreign currency translation loss of $847,170 resulting from the translation of the Computershare liability and the Company’s assets and

liabilities in its U.S. subsidiaries was included in other comprehensive income for the third quarter of 2012 (2011: gain $3,102,996) and

$354,070 for the nine month period ended September 30, 2012 (2011: gain $2,062,099).


Financial condition, liquidity and capital resources

Cash and working capital

Cash on hand as at September 30, 2012 was $19,732,062 (December 31, 2011: $16,934,218). Working capital as at September 30, 2012

was $16,241,389 (December 31, 2011: $9,645,362).

Cash flows

During the nine months ended September 30, 2012, the Company had a net cash inflow of $2,797,844 (2011: $2,099,497). Cash generated

from operations was $7,499,357 during the nine month period ended September 30, 2012 (2011: $4,929,055).

Cash inflow from financing activities was $16,042 for the nine month period ended September 30, 2012 (2011: outflow $2,746,611).

Cash outflow from investing activities was $3,938,928 in the nine month period ended September 30, 2012 (2011: outflow $1,309,539).

Liquidity

The Company believes it will generate enough cash and working capital from operations to fund ongoing operations and growth strategies.

Contractual obligations

(a) The $1,000,000 payable to Computershare in each of 2013, 2014 and 2015 relates to contingency payments which will become

payable if revenue generated by Solium from the clients acquired from Computershare during the 12 most recently completed

calendar months preceding the third anniversary of the closing of the acquisition reach a certain threshold. These contingency

payments are unaffected by the extinguishment in April 2012 of the US $17.3 million amount due to Computershare.

Capital expenditures

Capital expenditures of $277,485 in 2012 (2011: $1,579,612) were comprised of computer hardware, computer software, office furniture, and

leasehold improvements.

It is expected that ongoing capital expenditures will be financed from funds generated by operating activities.

Capital resources

The Company has a demand operating credit facility of $1,600,000 available through a Canadian bank. To date, no amounts have been drawn

on this credit facility. Current economic conditions have not caused a change in the company’s objectives, policies or procedures for managing

capital.

Cash available from operations has been greatly enhanced by the extinguishment in April 2012 of the US $17.3 million amount due to

Computershare.

Undiscounted Payments Due by Fiscal Period

Total ($) 2012 ($) 2013 ($) 2014 ($) 2015 ($) 2016 ($)

Operating leases 3,825,735 205,254 964,689 974,597 947,073 734,122

Due to Computershare (USD) (a) 3,000,000 - 1,000,000 1,000,000 1,000,000 -


The following is a reconciliation of Adjusted EBITDA to net earnings:

2. Comparability of quarterly Adjusted EBITDA and net earnings is affected by factors such as SRED income tax credits, hedge

accounting of the amount due to Computershare, intangibles and goodwill charges, and gain on extinguishment of the amount due to

Computershare.

Summary of quarterly results

The following table summarizes the quarterly results for the eight most recently completed quarters.

2012 2011 2010

Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4

Adjusted EBITDA 2,480,452 2,683,364 4,144,698 2,569,057 2,146,281 2,214,296 3,962,176 1,614,844

Foreign exchange gain

(loss) (324,822) 137,087 (13,820) 431,669) (1,270,507) 82,415) 374,085) 58,220)

Finance costs (90,825) (90,714) (319,523) (340,059) (336,388) (342,956) (359,784) (233,738)

Amortization (941,814) (1,023,660) (1,210,278) (1,226,971) (1,130,695) (1,081,965) (1,061,038) (707,193)

Gain on extinguishment

of amount due to

Computershare -

15,630,180

-

-

-

-

-

-

Intangibles and

goodwill charge - (7,796,894) - - - - - -

Income tax (692,475) (1,210,800) (631,855) (576,787) (371,025) (325,102) (656,015) (547,827)

Net earnings 430,516 8,328,563 1,969,222) 856,909) (962,334) 546,688) 2,259,424) 184,306)

Notes:

1. Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) is a non-IFRS financial measure which does

not have any standardized meaning prescribed by IFRS and is therefore unlikely to be comparable to similar measures presented by other

issuers. Adjusted EBITDA provides useful information to users as it reflects the net earnings prior to the effect of non-operating expenses

such as finance costs, income tax, amortization, foreign exchange gain or loss, gain on extinguishment of amount due to Computershare,

and intangibles and goodwill charges. Management uses Adjusted EBITDA in measuring the financial performance of the Company.

Management monitors Adjusted EBITDA against budget and past results on a regular basis. The measure is a component in determining

the annual bonus pool for staff and management.

2012 2011 2010

Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4

Revenues 12,346,833 11,916,176 12,652,672 10,820,707 10,726,136 11,400,255 13,056,879 9,663,590

Expenses before income taxes 2 11,223,842 2,376,813 10,051,595 9,387,011 11,317,445 10,528,465 10,141,440 8,931,453

Adjusted EBITDA 1, 22,480,452 2,683,364 4,144,698 2,569,057 2,146,281 2,214,296 3,962,176 1,614,844

Earnings from operations2 1,538,638 1,659,704 2,934,420 1,342,086 1,015,586 1,132,331 2,901,138 907,215

Earnings (loss) before income taxes 2 1,122,991 9,539,363 2,601,077 1,433,696 (591,309) 871,790 2,915,439 732,137

Net earnings (loss) 2 430,516 8,328,563 1,969,222 856,909 (962,334) 546,688 2,259,424 184,306

Per share – basic 2

– diluted 2

$0.010$0.010

$0.199$0.198

$0.047$0.047

$0.021$0.020

($0.023)($0.023)

$0.013$0.013

$0.054$0.054

$0.003$0.003


3. Factors contributing to quarterly results

Participant activity

The transaction administration fees collected from participants are affected by several factors, some of which are seasonal. These factors

include: (i) grant vesting dates; (ii) grant termination dates; (iii) the pattern of the Canadian population of making retirement contributions in the

first quarter of every year; (iv) the stock trading prices for a corporate client relative to an employee participant’s associated option exercise

price; and (v) employee participant perceptions of future stock trading prices. Historically, the first three factors contribute to higher transaction

based fees in the first quarter of a given year. However, the actual magnitude of transaction based fees for a specific quarter or year is difficult

to predict, primarily due to the last two factors.

Critical accounting estimates

The preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions

that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the consolidated financial statements and

reported amounts of revenues and expenses during the reporting period. Estimates and judgments are continuously evaluated and are

based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the

circumstances. Actual outcomes can differ from these estimates.

The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the amounts recognized in the

consolidated financial statements are:

Useful lives of property and equipment

The Company estimates the useful lives of property and equipment based on the period over which the assets are expected to be available

for use. The estimated useful lives of property and equipment are reviewed periodically and are updated if expectations differ from previous

estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the relevant assets. In

addition, the estimation of the useful lives of property and equipment are based on internal technical evaluation and experience with similar

assets. It is possible, however, that future results of operations could be materially affected by changes in the estimates brought about by

changes in factors mentioned above. The amounts and timing of recorded expenses for any period would be affected by changes in these

factors and circumstances. A reduction in the estimated useful lives of the property and equipment would increase the recorded expenses and

decrease the non-current assets.

Fair value of financial instruments

The estimated fair value of financial assets and liabilities, by their very nature, are subject to measurement uncertainty.

Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its

fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales

transactions in an arm’s length transaction of similar assets or observable market prices less incremental costs for disposing of the asset. The

value in use calculation is based on a discounted cash flow model. The cash flows are derived from financial forecasts and do not include

restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset’s performance of

the cash generating unit being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model

as well as the expected future cash inflows and the growth rate used for extrapolation purposes.

Taxes

Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant

factors. The Company reviews the adequacy of these provisions at the end of the reporting period. However, it is possible that at some future

date an additional liability could result from audits by taxing authorities. Where the final outcome of these tax-related matters is different from

the amounts that were initially recorded, such differences will affect the tax provisions in the period in which such determination is made.


Share-based payment transaction

The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the

date at which they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation

model, which is dependent on the terms and conditions of the grant. This estimate also requires determining and making assumptions about

the most appropriate inputs to the valuation model including the expected life, volatility and dividend yield of the share option.

Future adoption of recently issued accounting pronouncements

In June 2012, the International Accounting Standards Board (“IASB”) issued Consolidated Financial Statements, Joint Arrangements and

Disclosure of Interests in Other Entities: Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12). The amendments clarify the

transition guidance in IFRS 10 and provide additional transition relief for all three standards by limiting the requirement to provide adjusted

comparative information to only the preceding comparative period. The amendments are effective for annual periods beginning on or after

January 1, 2013. The Company will apply these amendments along with the adoption of IFRS 10, 11 and 12 on January 1, 2013.

On December 16, 2011 the International Accounting Standards Board (“IASB”) and Financial Accounting Standards Board (“FASB”) issued

common disclosure requirements that are intended to help investors and other users to better assess the effect or potential effect of offsetting

arrangements on a company’s financial position. The new requirements are set out in ‘Disclosures-Offsetting Financial Assets and Financial

Liabilities (Amendments to IFRS 7)’. The IFRS 7 amendments are effective for annual reporting periods beginning on or after January 1, 2013.

The Company is currently evaluating the impact of this standard on its consolidated financial statements.

IFRS 9, ‘Financial Instruments’ was issued in November 2009 as the first step in a project to replace IAS 39 ‘Financial Instruments: Recognition

and Measurement’. IFRS 9 requires all recognized financial assets that are within the scope of IAS 39 ‘Financial Instruments: Recognition and

Measurement’ to be subsequently measured at amortized cost or fair value. The most significant effect of IFRS 9 regarding the classification

and measurement of financial liabilities relates to the accounting for changes in the fair value of a financial liability (designated as at fair value

through profit or loss) attributable to changes in the credit risk of that liability and the elimination of the cost exemption for derivative liabilities to

be settled by delivery of unquoted equity instruments. IFRS 9 is applied prospectively with transitional arrangements depending on the date of

application. The Standard is not applicable until annual periods beginning on or after January 1, 2015, but is available for early adoption. The

Company is currently evaluating the impact of this standard on its consolidated financial statements.

In September 2011, the IASB issued an amendment to IAS 1 that changes the presentation of items in the consolidated statement of

comprehensive income. This amendment requires the components of other comprehensive income (“OCI”) to be presented in two separate

groups, based on whether or not the components may be recycled to the consolidated statement of earnings in the future. Companies will

continue to have a choice of whether to present components of OCI before or after tax. Those that present components of OCI before tax will

be required to disclose the amount of tax related to the two groups separately. This amendment is effective for annual periods beginning on or

after July 1, 2012, is applied retrospectively, with early adoption permitted. The Company is currently evaluating the impact of this amendment

to IAS 1 on its consolidated financial statements.

In May 2011, the IASB published IFRS 13, a comprehensive standard on how to measure and disclose fair values. IFRS 13 applies to IFRSs

that require or permit fair value measurement, but does not address when to measure fair value or require additional use of fair value. The new

standard requires disclosures similar to those in IFRS 7 ‘Financial Instruments: Disclosures’, but applies to all assets and liabilities measured at

fair value, whereas IFRS 7 applied only to financial assets and liabilities measured at fair value. IFRS 13 is effective for annual periods beginning

on or after January 1, 2013, is applied prospectively as of the beginning of the annual period in which it is adopted, with early adoption

permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements.


Financial instruments

Exposure to counterparty credit risk, interest rate risk and foreign currency risk arises in the normal course of the Company’s business. The

Company currently does not enter into derivative financial instruments to reduce exposure to fluctuations in any of the risks impacting the

Company’s operations.

The Company has credit risk as a result of its trade accounts receivable. The Company mitigates this risk by dealing with financially sound

companies and, accordingly, does not anticipate any significant credit losses.

The Company has foreign exchange risk because it is exposed to foreign currency fluctuations due to its operations in the United States.

The Company currently has no interest rate risk as the Company has no long-term debt outstanding.

Disclosure controls and procedures

The Company has a Corporate Disclosure Policy in place to ensure that communications with the public about the Company are timely, factual

and accurate; disseminated in accordance with all applicable legal and regulatory requirements; and that all material information in respect of the

Company is communicated to the Chief Executive Officer and the Executive Vice President (EVP), Finance, and where appropriate, the Board of

Directors and/or committees thereof. The Company’s Chief Executive Officer and EVP, Finance have concluded that the Company’s disclosure

controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in its annual

filings, interim filings or other reports or submitted under securities legislation is recorded, processed, summarized and reported within the time

periods specified in the securities legislation and include controls and procedures designed to ensure that information required to be disclosed

in the annual filings, interim filings or other reports filed or submitted under securities legislation is accumulated and communicated to the

Company’s management, including its certifying officers, as appropriate to allow timely decisions regarding required disclosure.

It should be noted that while the Chief Executive Officer and EVP, Finance believe that the disclosure controls and procedures will provide a

reasonable level of assurance and that they are effective, they do not expect that the disclosure controls and procedures will prevent all errors

and fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute assurance that the objectives

of the control system are met.

Internal control over financial reporting

The Chief Executive Officer and EVP, Finance of Solium are responsible for designing internal controls over financial reporting or causing them to

be designed under their supervision in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of

financial statements for external purposes in accordance with IFRS.

Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis. Also,

projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risk that the

controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may

deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2011, based on the

criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on that assessment, management concluded that, as of December 31, 2011, the Company’s internal control over financial reporting was

effective based on the criteria established in the Internal Control – Integrated Framework. Also, management determined that there were no

material weaknesses in Solium’s internal control over financial reporting as of December 31, 2011.

No changes were made in the Company’s internal control over financial reporting during the nine month period ended September 30, 2012, that

have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.


Subsequent event

On October 8, 2012, the Company announced that it will acquire all of the outstanding shares of OptionEase Inc., the leading provider of

applications for fair-market-value accounting and compliance in the United States. The transaction is expected to close in November 2012.

The completion of the transaction is subject to customary closing conditions.

Outstanding share data

TThe Company is authorized to issue an unlimited number of common shares and an unlimited number of preferred shares. As at the date of

this MD&A, there were 41,797,319 common shares outstanding.

Employees, directors, officers and consultants have been granted options to purchase common shares under a stock option plan. As at the

date of this MD&A, there were options outstanding to purchase 3,741,294 common shares.

Employees have been granted rights to receive common shares under a share award incentive plan. As at the date of this MD&A, there were

438,335 restricted share units outstanding.

Risk assessment

Management defines risk as the evaluation of probability that an event might happen in the future that could negatively affect the financial

condition and/or results of operations of the Company. The risks that could affect the Company have been described in the MD&A of the

Company’s Annual Report for the year ended December 31, 2011. The risks identified therein do not constitute an exhaustive list of all possible

risks as there may be additional risks of which management is currently unaware of. As it is difficult to predict whether any risk will happen or

its related consequences, the actual effect of any risk on the business could be materially different from anticipated.


Condensed Consolidated Interim Financial StatementsConsolidated statement of financial position

As at

(Unaudited, expressed in Canadian dollars)

Notes

September 30, 2012

$

December 31, 2011

$

Assets Current assets

Cash 19,732,062 16,934,218

Trade and other receivable 7,413,055 7,453,143

Prepaid and deferred expenses 1,043,729 846,951

28,188,846 25,234,312

Non-current assets

Note receivable - 117,645

Property and equipment 2,201,464 2,615,741

Intangible assets 5 16,727,841 24,599,346

Goodwill 5 12,262,098 10,112,382

Deferred tax asset 38,732 31,066

31,230,135 37,476,180

Total Assets 59,418,981 62,710,492

Liabilities Current liabilities

Trade payables and other accruals 5,069,432 4,753,837

Current portion of due to Computershare 4 - 4,947,027

Current portion of deferred revenue 6,812,102 5,823,806

Current portion of deferred tenant inducements 65,923 64,280

11,947,457 15,588,950

Non-current liabilities

Due to Computershare 4 2,344,333 12,993,378

Deferred revenue 768,827 940,802

Deferred tenant inducements 630,252 516,039

Deferred tax liability 17,476 -

3,760,888 14,450,219

Shareholders’ equityShare capital 28,083,304 28,034,844

Contributed surplus 3,067,454 2,363,435

Retained earnings 12,497,576 1,856,672

Accumulated other comprehensive income 62,302 416,372

43,710,636 32,671,323

Total Liabilities and Shareholders’ Equity 59,418,981 62,710,492

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

13Condensed Consolidated Interim Financial Statements

Consolidated statement of comprehensive income (loss)



Three Months Ended Nine Months Ended

Notes

September 30, 2012

$

September 30, 2011

$

September 30, 2012

$

September 30, 2011

$

Operations

Revenue 12,346,833 10,726,136 36,915,681 35,183,270

Operating expenses 10,808,195 9,710,550 30,782,919 30,134,215

Earnings from operations 1,538,638 1,015,586 6,132,762 5,049,055

Finance costs 90,825 336,388 501,062 1,039,128

Foreign exchange loss 324,822 1,270,507 201,555 814,007

Gain on extinguishment of amount due to Computershare - - (15,630,180) -

Intangible assets and goodwill charge - - 7,796,894 -

Earnings (loss) before income taxes 1,122,991 (591,309) 13,263,431 3,195,920

Current income taxes 623,960 363,531 2,528,341 1,340,461

Deferred taxes 68,515 7,494 6,789 11,681

692,475 371,025 2,535,130 1,352,142

Net earnings (loss) 430,516 (962,334) 10,728,301 1,843,778

Other comprehensive income

Foreign currency translation (losses) gains for foreign

operations(847,170) 3,102,996 (354,070) 2,062,099

Total comprehensive income (loss) for the period (416,654) 2,140,662 10,374,231 3,905,877

Net earnings (loss) per share

Basic 7 $0.010 ($0.023) $0.257 $0.044

Diluted 7 $0.010 ($0.023) $0.256 $0.044

14 Solium 2012 Third Quarter Report Condensed Consolidated Interim Financial Statements

Consolidated statement of changes in equity

For the nine months ended September 30, 2012 and 2011


Share Capital$

Contributed surplus

$

(Deficit)Retained Earnings

$

Accumulated other

comprehensive income (loss)

$

TotalEquity

$

As at January 1, 2012 28,034,844 2,363,435 1,856,672 416,372 32,671,323

Net earnings - - 10,728,301 - 10,728,301

Foreign currency translation differences for foreign

operations net of tax - - - (354,070) (354,070)

Stock-based compensation expense - 795,409 - - 795,409

Share unit releases 35,337 (64,061) - - (28,724)

Stock options exercised 74,699 (27,329) - - 47,370

Cancellation of shares purchased in issuer bid (58,902) - (87,397) - (146,299)

Transaction costs (2,674) - - - (2,674)

As at September 30, 2012 28,083,304 3,067,454 12,497,576 62,302 43,710,636

As at January 1, 2011 27,466,406 2,044,155 (809,326) (495,147) 28,206,088

Net earnings - - 1,843,778 - 1,843,778


operations net of tax - - -2,062,099 2,062,099

Stock-based compensation - 518,606 - - 518,606


Stock options exercised 438,158 (181,908) - - 256,250

Transaction costs (7,547) - - - (7,547)

As at September 30, 2011 27,947,538 2,291,499 1,034,452 1,566,952 32,840,441

Net earnings - - 856,909 - 856,909


operations net of tax - - - (1,150,580) (1,150,580)

Stock-based compensation - 264,625 - - 264,625


Stock options exercised - - - - -

Cancellation of shares purchased in issuer bid (34,805) - (34,689) - (69,494)

Transactions costs (1,289) - - - (1,289)

As at December 31, 2011 28,034,844 2,363,435 1,856,672 416,372 32,671,323


15Condensed Consolidated Interim Financial Statements

Consolidated statement of cash flows



Nine Months Ended

Notes

September 30, 2012

$

September 30 2011

$

Cash flows related to the following activities:

Operating activities

Net earnings 10,728,301 1,843,778

Adjustments for items not involving cash:

Finance costs 501,062 1,039,128

Deferred taxes 6,789 11,681

Depreciation of property and equipment 674,773 576,780

Amortization of intangible assets 2,500,979 2,697,018

Share-based compensation expense 795,409 518,606

Amortization of tenant inducement (39,349) (35,845)

Gain on extinguishment of amount due to Computershare 4 (15,630,180) -

Intangible assets and goodwill charge 5 7,796,894 -

7,334,678 6,651,146

Changes in non-cash working capital 2,043,448 8,824

Tenant inducement received 161,107 258,090

Cash taxes paid (2,039,876) (1,989,005)

Cash flow from operations 7,499,357 4,929,055

Financing activities

Repayments of note receivable 117,645 158,617

Payment to Computershare 4 - (3,153,931)

Issuance of common shares, net of issue costs 47,370 248,703

Purchase of common shares in issuer bid (148,973) -

Cash flow from (used in) financing activities 16,042 (2,746,611)

Investing activities

Purchases of capital assets, net of changes in non-cash working capital (270,976) (1,309,539)

Acquisition of subsidiary, net of cash acquired 3 (3,667,952) -

Cash flow used in investing activities (3,938,928) (1,309,539)

Effect of foreign exchange on cash held in foreign currency (778,627) 1,226,592

Increase in cash 2,797,844 2,099,497

Cash, beginning of period 16,934,218 12,463,890

Cash, end of period 19,732,062 14,563,387

16 Solium 2012 Third Quarter Report Condensed Consolidated Interim Financial Statements

Notes to the Condensed Consolidated Interim Financial StatementsAs at September 30, 2012 and for the three and nine month periods ended September 30, 2012 and 2011


1. General information Solium Capital Inc. was incorporated in October of 1999 under the laws of the Province of Alberta. Solium Capital Inc. and its

subsidiaries (together the “Company” or “Solium”) are Software-as-a-Service (SaaS) companies specializing in technology and services

for the administration and execution of equity-based incentive and savings programs for corporations and their employees. Solium’s

technology platforms, Shareworks, StockVantage and Transcentive, are leading online solutions that integrate the management of

multiple equity plan types including stock options, share units, share appreciation rights, restricted stock awards, and employee share

purchase plans on one comprehensive platform for a client. The address of the head office is 1500, 800 – 6th Avenue SW, Calgary,

Alberta, T2P 3G3.

2. Basis of preparation Statement of compliance These condensed consolidated interim financial statements present Solium’s financial results of operations and financial position using

accounting policies under International Financial Reporting Standards (“IFRS”) as at and for the three and nine month periods ended

September 30, 2012, including 2011 comparative periods. The condensed consolidated interim financial statements are prepared on a

basis consistent with the Company’s annual audited consolidated financial statements issued under IFRS for the year ended December

31, 2011. These condensed consolidated interim financial statements are prepared in accordance with IAS 34, ‘Interim Financial

Reporting’. The condensed consolidated interim financial statements do not include all information required for full annual financial

statements and should be read in conjunction with the consolidated financial statements of the Company as at December 31, 2011,

December 31, 2010 and January 1, 2010 and for the years ended December 31, 2011 and 2010.

These condensed consolidated interim financial statements have been prepared on a basis consistent with the accounting policies

disclosed in Note 2 of the Company’s condensed consolidated interim financial statements for the three months ended March 31, 2012.

3. Business combinations On May 15, 2012, the Company closed the acquisition (the “Acquisition”) of all the assets related to the operations of the CapMX

business of SVB Analytics, Inc. for total cash consideration of $5.27 million (U.S. $5.25 million). CapMX provides record keeping

services for grant based incentive plans and awards to private companies and venture capital investors in the United States. The

Acquisition positioned the Company to better compete in the equity administration of private companies and expand its services in the

United States. The goodwill recognized on acquisition was primarily attributed to the expected future cash flows to be derived from

synergies which will contribute to operational efficiencies.

The preliminary allocation of the components of total consideration to the net assets acquired was as follows:

$

Cash 1,597,273

Intangible assets:

Customer contracts 2,557,395

Brand and proprietary technology 141,409

Deferred revenue (1,934,896)

Net working capital 180,326

Total identifiable net assets 2,541,507

Goodwill 2,723,718

Total consideration 5,265,225

17Notes to the Condensed Consolidated Interim Financial Statements

In Canadian dollars

September 30,2012

$

December 31, 2011

$

Fair value of obligation, end of period 2,344,333 17,940,405)

Less: current portion of obligation - 4,947,027)

Long-term portion of obligation 2,344,333 12,993,378)

In U.S. dollars

September 30,2012

$

December 31, 2011

$

Fair value of obligation, beginning of period 17,638,081 20,601,450)

Less: payments(a) - (4,358,333)

Add: accretion 492,539 1,394,964)

Less: extinguishment of obligations (15,746,230) -

Fair value of obligation, end of period 2,384,390 17,638,081)

Net working capital included trade receivables with a fair value of $681,136 and a gross contractual value of $690,577. The best

estimate at acquisition date of the contractual cash flows not expected to be collected was $9,441.

These Condensed Consolidated Interim Financial Statements incorporate the results of operations of the acquired CapMX business

from May 15, 2012. For the three and nine months ended September 30, 2012, the Company recorded revenue from the CapMX

business of $1.0 million and $1.5 million respectively. For the three and nine months ended September 30, 2012, the Company

recorded earnings before income taxes from the CapMX business of $0.16 million and $0.18 million respectively. Had the acquisition

occurred on January 1, 2012, for the nine months ended September 30, 2012, the Company estimates that its pro forma consolidated

revenue and earnings before income taxes would have been approximately $38.4 million and $13.1 million, respectively.

(a) Payments made to Computershare in Canadian dollars were $nil (2011: $4,311,517).

4. Due to Computershare

In connection with an acquisition in November 2010, the Company had an obligation to pay Computershare an aggregate of U.S. $22

million over five years. The amount outstanding as at December 31, 2011 was U.S. $17.3 million. On April 3, 2012, the Company

received notice from Computershare of its decision to retain the stock options and restricted stock administration business that it

acquired on December 31, 2011 as part of a larger transaction. As a consequence of Computershare’s decision, pursuant to the Asset

Purchase Agreement dated November 7, 2010 between Solium and Computershare, the U.S. $17.3 million due to Computershare as

at December 31, 2011 was extinguished and ceased to be an obligation of the Company. U.S. $1.25 million of this amount was paid

to Computershare in the first quarter of 2012. Computershare refunded this payment in April 2012.

The extinguishment of the U.S. $17.3 million due to Computershare resulted in a gain of U.S. $15.7 million in the second quarter of

2012, and will result in U.S. $1.5 million of finance costs that would have otherwise been recorded through November 2015 no longer

being recorded.

Also, in connection with the acquisition of the business, the Company has an obligation to pay additional cash consideration

(“Contingent Payments”) of up to U.S. $3 million if the revenue generated by Solium from the clients acquired from Computershare

during the 12 most recently completed calendar months preceding the third anniversary of the closing of the acquisition is greater than

or equal to a certain threshold. If the consideration is payable, three contingent cash payments will be paid to Computershare in the

amount of U.S. $1 million each (the “Contingent Payments”), on January 21, 2014, and at or prior to each of November 7, 2014 and

November 7, 2015.

18 Solium 2012 Third Quarter Report Notes to the Condensed Consolidated Interim Financial Statements

The fair value of the amounts due to Computershare and Contingent Payments was calculated using a discounted cash flow model

using a discount factor of 6.5%. The difference between the face value of the amounts due to Computershare and Contingent

Payments and the fair value (the accretion amount) is recognized as finance costs over the term which payments are due. As at

September 30, 2012, the accretion on the outstanding obligation resulted in $90,825 (U.S. $91,328) being recorded as finance costs

for the three months ended September 30, 2012 (2011: $336,388 or U.S. $343,199) and $501,062 (U.S. $492,540) for the nine

months ended September 30, 2012 (2011: $1,039,128 or U.S. $1,062,515).

5. Intangible assets and goodwill

Intangible assets and goodwill have been allocated to the following cash-generating units for purposes of reviewing their

carrying values:

Intangible Assets Goodwill

September 30, 2012

December 31, 2011

September 30, 2012

December 31, 2011

Balance, beginning of period 24,599,346 27,782,529 10,112,382 9,895,136

Amortization during period (2,500,979) (3,693,063) - -

Addition arising from business combination (Note 4) 2,698,804 - 2,723,718 -

Reduction to carrying value (7,595,392) - (201,502) -

Effect of foreign currency exchange differences (473,938) 509,880 (372,500) 227,246

Balance, end of period 16,727,841 24,599,346 12,262,098 10,112,382

As a result of Computershare’s decision to retain the stock options and restricted stock administration business that it acquired on

December 31, 2011, the Company reviewed the carrying value of its U.S. assets and recorded a charge to intangible assets of $7,595,392

and to goodwill of $201,502 in the second quarter of 2012.

The charge was determined using a discounted cash flow model. Significant key assumptions included estimated cash flows covering a

five-year period, a discount rate of 15.4% and terminal growth rate in line with historical inflation at 2%. This charge does not affect the

Company’s operations, its liquidity, taxes, or its bank credit agreements.

If the future were to adversely differ from management’s best estimate of key assumptions and associated cash flows were to be materially

adversely affected, the Company could potentially experience future material impairment charges in respect of its intangible assets and

goodwill.

Intangible Assets Goodwill

September 30, 2012

December 31, 2011

September 30, 2012

December 31, 2011

Canada 613,730 673,798 249,030 249,030

United States 16,114,111 23,925,548 12,013,068 9,863,352

16,727,841 24,599,346 12,262,098 10,112,382


As at September 30, 2012, 568,689 stock options were vested at a weighted average exercise price of $1.56.

As at September 30, 2012, 439,535 restricted share unit awards (“RSUs”) were outstanding. During the nine months ended

September 30, 2012, 48,939 RSUs vested. 28,797 common shares were issued in connection with this vesting, and 20,142 common

shares were cancelled in lieu of the income tax withholdings remitted in cash by the Company to tax authorities on behalf of the

employees.

Number of shares

Weighted average

exercise price$

Outstanding, January 1, 2011 2,738,653 1.87

Granted 1,176,966 1.73

Exercised (205,000) 1.25

Forfeited (240,400) 1.64

Outstanding, December 31, 2011 3,470,219 1.88

Granted 1,277,800 1.84

Exercised (36,475) 1.30

Forfeited (237,300) 1.71

Expired (708,750) 2.70

Outstanding, September 30, 2012 3,765,494 1.73

6. Stock-based payments

Stock option activity with respect to the Company’s stock option plan for the nine months ended September 30, 2012 is shown below:


Three Months Ended Nine Months Ended

September 30,2012

September 30,2011

September 30,2012

September 30,2011

Weighted average shares outstanding – basic 41,783,433 41,702,807 41,804,370 41,635,876

Effect of dilutive stock options and share units 266,510 287,542 171,929 310,355

Weighted average shares outstanding – diluted 42,049,943 41,990,349 41,976,299 41,946,231

7. Earnings per share Basic and diluted earnings per share

The calculation of basic earnings per share for the three months ended September 30, 2012 was based on net earnings of $430,516

(2011: loss $962,334) and a weighted average number of common shares outstanding of 41,783,433 (2011: 41,702,807). The

calculation for the nine months ended September 30, 2012 was based on net earnings of $10,728,301 (2011: $1,843,778) and a

weighted average number of common shares outstanding of 41,804,370 (2011: 41,635,876).

In the nine months ended September 30, 2012, there were 3,674,175 (2011: 1,288,015) stock options and restricted share unit awards

excluded from the diluted weighted average shares outstanding calculation due to what would otherwise have been an anti-dilutive

effect as a result of the exercise right being higher than the market price of the stock in the period.

8. Financial instruments and risk management Fair value of financial instruments

Cash is classified as held-for-trading. Its fair value is equal to its carrying value and is classified as a Level 1 valuation.

The three levels of the fair value hierarchy are described as follows:

• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in the active market for identical assets or

liabilities.

• Level 2 fair value measurements are those derived from inputs other than quoted prices that are observable for the asset or

liability, either directly (i.e. as prices) or indirectly (derived from prices).

• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are

not based on observable market data (unobservable inputs).

Risk management

The Company’s activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (currency fluctuations, interest

rates and commodity prices). The Company’s overall risk management program focuses on the unpredictability of financial markets

and seeks to minimise potential adverse effects on the Company’s financial performance.

Credit risk

Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Company.

The Company has credit risk as a result of its accounts receivable. The Company mitigates this risk by dealing with financially sound

companies and, accordingly, does not anticipate any significant credit losses.

Total trade receivable (net of allowances) held by the Company at September 30, 2012 amounted to $5,506,477. Allowances are

provided against trade receivable based on estimated unrecoverable amounts. In determining the recoverability of a trade receivable,

the Company considers the client’s financial position, service history and payment history.


Carrying amount

Contractual undiscounted

payments0 to 6

months6 to 12

monthsAfter 12 months

As at September 30, 2012

Trade payables and other accruals 5,069,431 5,069,431 5,069,431 - -

Due to Computershare (a) (b) 2,344,333 2,949,601 - - 2,949,601

7,413,764 8,019,032 5,069,431 - 2,949,601

have been converted to Canadian dollars in the above table at a rate of 1 U.S. dollar equal to 0.9832 Canadian dollars as at

September 30, 2012.

(b) The contractual undiscounted payments due to Computershare relates to contingency payments payable if revenue generated

by Solium from the clients acquired from Computershare during the 12 calendar months preceding the third anniversary of the

closing of the acquisition is greater than or equal to a certain threshold.

Management believes that future cash flows from operations and availability under existing banking arrangements will be adequate to

support these financial liabilities.

Trade receivable consists of a large number of customers, spread across diverse industries. The Company does not have significant

credit risk exposure to any single counterparty. Of the trade receivable balance at September 30, 2012, one customer represented

greater than 5% of the balance.

Foreign currency risk

The Company’s main operations are in Canada and the United States. The Company’s functional currency is Canadian dollars

(CAD) and the reporting currency is CAD. Foreign exchange risk arises because the amount receivable on revenue or payable on

expenditures that are denominated in U.S. dollars (USD) may vary when converted to CAD due to changes in exchange rates arising

from timing differences between when the revenue or expense occurs and when actual payment is received or made (“transaction

exposures”) and because the USD denominated monetary net assets of the Company’s U.S. subsidiaries may vary on consolidation

and revaluation into CAD (“translation exposure”).

Based on the balance of net monetary assets carried in the statement of financial position of the Canadian operations as at September

30, 2012, an increase of 1% in the exchange rate of USD to CAD would, everything else being equal, have had a positive effect

on earnings before taxes for the nine months ended and retained earnings as at September 30, 2012 of approximately $100,000

(December 31, 2011: negative effect of $130,000).

On January 1, 2012, the Company designated the U.S. dollar denominated due to Computershare liability as a hedge against the

Company’s net investment in its U.S. operations. This designation has the effect of mitigating volatility on net earnings by offsetting

foreign exchange gains and losses on the liability with foreign exchange gains and losses on its net investment in U.S. operations that

are presented in other comprehensive income. Based on the balance of net assets of the U.S. operations and the balance of due to

Computershare liability carried in the statement of financial position as at September 30, 2012, an increase of 1% in the exchange rate

of USD to CAD would, everything else being equal, have had a positive effect on other comprehensive income for the nine months

ended and accumulated other comprehensive income as at September 30, 2012 of approximately $260,000 (December 31, 2011:

positive effect of $377,000).

Liquidity risk

Liquidity risk is the risk that the Company will not have sufficient funds to meet its obligations as they come due. The Company’s

objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet its liquidity requirements at any

point in time. The Company achieves this by maintaining sufficient cash and cash equivalents balances and through the availability

of funding from committed credit facilities. As at September 30, 2012, the Company had cash of $19,732,062 on hand and a

$1,600,000 credit facility available to be drawn against.

The table below summarizes the maturity profile of the Company’s financial liabilities at September 30, 2012 based on contractual

undiscounted payments.

(a) Contractual undiscounted payments due to Computershare of U.S. $3,000,000 and the carrying amount of U.S. $2,384,390


Three months ended Nine months ended

September 30, 2012

$

September 30, 2011

$

September 30, 2012

$

September 30, 2011

$

Revenue

Canada 6,027,880 5,268,644 18,585,243 17,371,023United States 6,318,953 5,457,492 18,330,438 17,812,247

12,346,833 10,726,136 36,915,681 35,183,270

Earnings from operations

Canadaa 936,405 1,134,120 4,323,350 4,743,723United States 602,233 (118,534) 1,809,412 305,332

1,538,638 1,015,586 6,132,762 5,049,055

Net earningsCanadaa 236,390 (518,130) 18,104,273 2,541,317United States 194,126 (444,204) (7,375,972) (697,539)

430,516 (962,334) 10,728,301 1,843,778

Depreciation of property & equipment and amortization of

intangible assets

Canada 169,691 174,907 554,867 507,208United States 772,122 955,788 2,620,885 2,766,590

941,813 1,130,695 3,175,752 3,273,798

Finance costs

Canada 4,178 15,473 23,049 47,798United States 86,647 320,915 478,013 991,330

90,825 336,388 501,062 1,039,128

Income tax expense

Canada 371,015 366,271 1,624,653 1,340,600United States 321,460 4,754 910,477 11,542

692,475 371,025 2,535,130 1,352,142

Capital expenditures

Canada 27,768 338,089 194,095 1,177,620United States 19,472 40,201 83,390 401,992

47,240 378,290 277,485 1,579,612

9. Segmented information The Company’s operations fall into one dominant industry segment, the administration of equity-based incentive and savings programs

for corporations and their employees. Primary operations are located in Canada and the United States.

Where applicable, inter-segment transactions are reflected at the exchange value, which is the amount agreed to by the parties.

The following is a breakdown of financial information by geographic segment:

(a) Currently included in the Canadian reportable segment for the three and nine months ended September 30, 2012 are expenditures relating to the

establishment of operations in the UK.


Segmented information (continued)

10. Subsequent event On October 8, 2012, the Company announced that it will acquire all of the outstanding shares of OptionEase Inc., the leading provider

of applications for fair-market-value accounting and compliance in the United States. The transaction is expected to close in November

2012. The completion of the transaction is subject to customary closing conditions.

As at

September 30, 2012

$

December 31,2011

$

Total Assets

Canada 32,683,379 29,809,804United States 26,735,602 32,900,688

59,418,981 62,710,492

Property & equipment and intangible assets, excluding goodwill

Canada 2,333,280 2,685,443United States 16,596,025 24,529,644

18,929,305 27,215,087

GoodwillCanada 249,030 249,030United States 12,013,068 9,863,352

12,262,098 10,112,382


Corporate information

Executive team

Mike Broadfoot / CEO and Managing Director

Brian Craig / Managing Director

Jeff English / Managing Director

Marcos Lopez / Managing Director

Rudi Bester / Executive Vice President, Global Sales

June Davenport / Executive Director, Corporate Services

Jeannie Kezama / Executive Vice President, Human Resources

Lynn Leong / Executive Vice President, Finance & Administration

Scott Scobie / Executive Vice President, Service Operations

Board of directors

Mike Broadfoot / Director

Brian Craig / Executive Chairman

Michael Deleray / Director

Jeff English / Director

Marcos Lopez / Director

Colleen Moorehead / Lead Director

Tom Muir / Director

Investor information

Transfer agent / Computershare Trust Company of Canada

Lead counsel / Norton Rose Canada LLP

Auditor / Deloitte & Touche LLP

Stock listing and symbol / TSX, Symbol: SUM

Investor contact

Mike Broadfoot / CEO and Managing Director

Solium

403.472.5446

[email protected]

Aaron Kabucis, CFA

TMX | Equicom

416.815.0700 x 230

[email protected]

Headquarters

Calgary, Alberta

1500, 800 6 Avenue SW

Calgary, AB T2P 3G3

Phone: 403.515.3910

Fax: 403.515.3919

Regional offices

Toronto, Ontario

Suite 905, 150 Ferrand Drive

Toronto, ON M3C 3E5

Montreal, Quebec

Suite 620, 999 de Maisonneuve Boulevard Ouest

Montreal, QC H3A 3L4

San Franscico, California

1 Post Street, Suite 900

San Francisco, CA 94104

Shelton, Connecticut

2 Enterprise Drive

Shelton, CT 06484

Tempe, Arizona

60 East Rio Salado Parkway, Suite 510

Tempe, AZ 85281

London, UK

212, 31 Southampton Row

London, UK WC1B 5HJ

Sydney, Australia

L13, 167 Macquarie Street

Sydney, NSW 2000

27Corporate information

Contact

Headquarters: 403.515.3910

UK office: + 44 (0) 203 585 1209

[email protected]

solium.com

© Solium Capital 2012. All rights reserved. Solium Capital, Solium Transcentive,

StockVantage, and the Solium logo are trademarks or registered trademarks of

Solium Capital in the U.S. and/or Canada.

2012 and by 12% to $9.3 million in the nine month period ended september 30, 2012, and net earnings...

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