1. MAVRIX FUND MANAGEMENT INC.THIRD QUARTER RESULTSSeptember 30, 2007Fund Management Inc.

2. Message from the ChairmanDear Fellow Shareholders, Mavrix is a fund management company. The firm provides investment advice and products to investment advisors and financial planners across Canada. What makes your company unique is its reputation for honesty, integrity and efficiency among those who choose to be its clients, and firms doing business with Mavrix - these include the largest financial institutions in Canada.Markets ran into some headwinds during the third quarter of the year. For example, although the S&P/TSX Composite Index total return ended up at a plus 0.8% for the three month period ended September 30, 2007, the one month loss for the stock market index in August was a surprising 1.3%, with a similarly surprising rebound in September 2007. The volatile market environment, fueled by fears of a deteriorating housing market in the United States and a global liquidity crunch, took its toll on investor sentiment. Mutual Fund Industry Assets Under Management (AUM) declined marginally from $706 billion to $701 billion during the quarter, and in August the industry suffered its first month of net redemptions since 2004.According to the Investment Funds Institute of Canada, data showed that Global Equity and Global Balanced fund categories continue to enjoy higher net sales and asset growth. It is our expectation that the strong Canadian dollar will dampen the returns experienced by these funds, and encourage investors to once again invest domestically over the next couple of years.Mavrix AUM since December 31, 2006 has grown 4.9%, compared to the mutual fund industry which grew from $660 billion at the beginning of the year to $701 billion at September 30, 2007, or by 6.2%.During the third quarter, Mavrix AUM declined from $735.6 million at June 30, 2007 to $719.8 million at September 30, 2007, or by 2.1%. Company revenues are correlated with AUM, and declined from $3.3 million for the 2nd quarter of 2007 to $3.1 million for the three months ended September 30, a decline of 5.4%. A significant portion of our AUM is skewed towards more volatile equity markets, especially smaller capitalization equities invested in our more popular mutual funds as well as specialty funds. As a result, our revenues are more sensitive to short-term market corrections than larger financial management companies with more diversified portfolios of assets under management. However, year-to-date revenues are $9.7 million, or 11% above the first nine months of last year, when revenues were $8.7 million. Earnings before interest, taxes, depreciation and amortization (EBITDA) was $(38,965) for the third quarter of 2007, versus $10,884 in the second quarter, and $433,866 in the third quarter of 2006. Net loss was $(892,738) or 11 cents per fully diluted share. For the nine months ended September 30, 2007, EBITDA was $123,904 and net loss was $(2,064,589).Although mutual fund sales experienced by Mavrix have been disappointing in 2007, with sales growth in some of our smaller funds more than offset by redemption activity in our income oriented funds, we continue to invest in our marketing infrastructure. These additional expenses, discussed in prior quarterly reports, have hurt profitability this year but it is expected that these changes will help catapult Mavrix to the next level in terms of revenues in years to come. Some of our products have indeed benefited from these initiatives. For instance we've launched several successful Specialty Funds this year, and more recently the initial closing for our second flow-through fund in 2007 raised a record $33.8 million, and subsequent to the end of the third quarter reached its maximum issue size of $50 million. M A V R I X F U N D M A N A G E M E N T I N C . Third Quarter Results 2007 1 3. Message from the Chairman (continued)Total net Mutual Fund AUM as at September 30, 2007 was $508.8 million, a drop of 8% compared to three months earlier. As at June 30, 2007 mutual fund assets were $552.3 million. As discussed previously, Mavrix Mutual Fund and Specialty Fund assets are particularly sensitive to significant moves in equity markets.Specialty Fund AUM at the end of September 30, 2007 totalled $210.9 million, which is improved from June 30th when these assets totalled $183.3 million; an increase of 15%. Although specialty fund assets were also impacted negatively during the quarter, this was more than offset by the additional funds raised.Thank you for investing with us. Malvin C. Spooner President, CEO & Chairman of the BoardOctober 24, 2007 2 M A V R I X F U N D M A N A G E M E N T I N C . Third Quarter Results 2007 4. Management Discussion and Analysis (MD&A) Summary of Financial Highlights The Nine Months Ended September 30, 2007 Nine months endedNine months ended Year ended Sep. 30, 2007Sep. 30, 2006 Dec. 31, 2006 $$ $ INCOME STATEMENT DATA Revenue Management fees9,067,363 7,607,049 10,448,349 Fund accounting fees-425,005531,025 Redemption fees491,892 655,896823,688 Investment income 96,74713,248 33,158 Total revenues 9,656,002 8,701,198 11,836,220Expenses Selling, general, administrative & other 7,851,489 5,965,2978,277,280 Fund accounting and systems1,603,737 1,593,0402,054,124 Expenses recovered from funds (2,631,509) (2,370,444)(3,200,829) Trailer fees 2,708,381 2,336,7023,185,491 Amortization 1,777,245 1,623,9122,201,109 Interest on long-term debt 453,578 338,160451,765 Other income(42,330)(13,478) (50,110) Total expenses 11,720,5919,473,189 12,918,830Net loss(2,064,589) (771,991) (1,082,610)Basic and diluted loss per share(0.24) (0.10)(0.13)EBITDA*123,9041,176,6031,520,154 EBITDA* per share 0.01 0.15 0.18 Dividends per share** ---Total assets, end of period13,864,38413,412,16913,680,023 Corporate debt, end of period 8,270,246 4,589,508 4,622,590 Shareholders' equity, end of period 3,289,105 7,595,002 7,391,023 Shares outstanding, end of period 8,540,553 8,674,228 8,714,228ASSET MANAGEMENT DATA Mavrix Mutual Funds508,842,218 506,118,640493,163,106 Specialty Funds210,932,195 145,937,092193,223,889 Total assets under management (AUM)719,774,413 652,055,732686,386,995 * References to EBITDA are to earnings before interest, income taxes, depreciation and amortization. EBITDA is not a standardized earnings measure under GAAP. Management believes that in addition to net earnings, EBITDA is a useful supplemental measure as it provides investors with an indication of cash available for distribution, income taxes, working capital needs and capital expenditures. Investors should be cautioned, however, that EBITDA should not be construed as an alternative measure of liquidity and cash flows. The Company's method of calculating EBITDA may differ from other issuers and, accordingly, EBITDA may not be comparable to similarly titled measures used by other issuers. ** There have been no dividends declared in the history of the Company.M A V R I X F U N D M A N A G E M E N T I N C . Third Quarter Results 2007 3 5. Summary of Financial Highlights The Three Months Ended September 30, 2007 Three months ended Three months ended Year ended Sep. 30, 2007 Sep. 30, 2006 Dec. 31, 2006 $$$ INCOME STATEMENT DATA Revenue Management fees 2,948,645 2,493,51910,448,349 Fund accounting fees -120,621 531,025 Redemption fees 149,568 132,235 823,688 Investment income37,557 3,88233,158 Total revenues3,135,770 2,750,25711,836,220Expenses Selling, general, administrative & other2,616,625 1,877,888 8,277,280 Fund accounting and systems 540,485 499,730 2,054,124 Expenses recovered from funds(869,817) (823,037) (3,200,829) Trailer fees887,442 761,810 3,185,491 Amortization630,331 560,265 2,201,109 Interest on long-term debt223,275 113,604 451,765 Other (income) loss 167 (2,650)(50,110) Total expenses4,028,508 2,987,61012,918,830Net loss (892,738)(237,353) (1,082,610)Basic and diluted loss per share (0.11)(0.03) (0.13)EBITDA*(38,965) 433,8661,520,154 EBITDA* per share (0.00) 0.05 0.18 Dividends per share**- -- * References to EBITDA are to earnings before interest, income taxes, depreciation and amortization. EBITDA is not a standardized earnings measure under GAAP. Management believes that in addition to net earnings, EBITDA is a useful supplemental measure as it provides investors with an indication of cash available for distribution, income taxes, working capital needs and capital expenditures. Investors should be cautioned, however, that EBITDA should not be construed as an alternative measure of liquidity and cash flows. The Company's method of calculating EBITDA may differ from other issuers and, accordingly, EBITDA may not be comparable to similarly titled measures used by other issuers. ** There have been no dividends declared in the history of the Company. 4M A V R I X F U N D M A N A G E M E N T I N C . Third Quarter Results 2007 6. Selected Quarterly Information Years Ended December 31, ($millions except per share amounts) Q4 Q1Q2Q3 Q4Q1 Q2 Q3 2005 2006 20062006 20062007 2007 2007 AUM593.9669.4 635.1652.1686.4720.0 735.6719.8 Revenue 2.53.0 2.9 2.83.13.2 3.3 3.1 EBITDA0.20.60.10.40.30.2 0.0 (0.0) Net Income (Loss)(1.0) 0.02(0.6)(0.2)(0.3)(0.5) (0.7)(0.9) Net Income (Loss) Per Share (0.13) 0.00 (0.07)(0.03) (0.04) (0.06)(0.08) (0.11)Overview of Mavrix Fund Management Inc.'s Business The MD&A that follows should be read in conjunction with the unaudited financial statements for the nine and three months ended September 30, 2007 including the notes attached thereto.Mavrix Fund Management Inc. (Mavrix or the Company) is an independent asset management company offering a wide range of asset management services, consisting primarily of:1. The sponsorship and management of the Mavrix Mutual Funds. 2. Portfolio management services to funds outside of the Mavrix Mutual Funds (Specialty Funds which include MavrixExplore Fund FT Limited Partnerships, Mavrix Explore Quebec FT Limited Partnership and Mavrix Quebec FT LimitedPartnership).As at December 31, 2006, we discontinued the provision of administrative and consulting services to Third Party Funds. The decision was made to focus resources on the two remaining business activities, as they provide a better return.The key factor affecting the results of the Company is the level of Assets under Management (AUM) as Mavrix earns revenue as a percentage of AUM. The key factors affecting AUM are retained market appreciation and net asset inflows. Retained market appreciation is primarily the result of the investment performance of the underlying funds, which is largely driven by capital market returns. The following review and discussion has been prepared by management as of October 24, 2007.At September 30, 2007, total AUM was $719.8 million, as shown in the table below, represented by $508.8 million in Mavrix Mutual Funds and $210.9 million in Specialty Funds. During the quarter, AUM decreased from $735.6 million as at June 30, 2007 to $719.8 million at September 30, 2007 or (2)%.Mavrix Fund Management Inc.'s Assets Under Management (AUM) Sep. 30, 2007 Jun. 30, 2007Dec. 31, 2006Sep. 30, 2006 $ $% Change $% Change $ % Change Mavrix Mutual Funds 508,842,218 552,346,134(8)% 493,163,1063% 506,118,6401% Specialty Funds 210,932,195 183,289,58415%193,223,8899% 145,937,092 45% Total Assets UnderManagement (AUM)719,774,413 735,635,718 (2)% 686,386,9955%652,055,73210%M A V R I X F U N D M A N A G E M E N T I N C . Third Quarter Results 20075 7. Overview of Mavrix Fund Management Inc.'s Revenues and Expenses RevenuesMavrix's revenues are earned from the management services we provide as fund manager of the Mavrix Mutual Funds and Specialty Funds, and are reported as management fees. The key determinant of our management fee revenue is AUM, which is affected by both market returns and net sales of these funds. We charge a lower management fee on Class F units because our distribution and servicing costs are reduced.Our management fees range between 0.25% and 2.75% on the net asset value of AUM, depending on the fund and class of units.Mavrix also earns revenues from redemption fees. Investors in our funds pay redemption fees when funds are purchased on a deferred sales charge basis and the investment is redeemed within the applicable redemption period, either seven or three years, depending on which deferred sales charge option was selected (regular or low-load). Redemption fees are calculated as a percentage of the initial value of the funds sold, and have rates that start as high as 6.0% and decline to nil over the redemption period.We have earned investment income from investments in marketable securities. We invest in marketable securities to generate interest income and capital gains.Our third largest source of income in 2006 was generated from administrative services. These fees were earned on Assets under Administration (AUA), and varied by client according to the level of services provided. As at December 31, 2006, our AUA was nil, as we decided to discontinue administrative services as a business activity in 2007.ExpensesOur expenses are comprised primarily of selling, general, administration and other expenses (S,G,A&O), fund accounting and systems expenses, and trailer fees. Some of these expenses are offset by expenses recovered from funds.S,G,A&O expenses include costs related to portfolio management, sales, marketing, and general corporate overhead. The Mavrix Mutual Funds are responsible for payment of their operating expenses incurred by Mavrix including legal, audit, record keeping and unitholder communication costs, for example. Mavrix reports gross expenses on this line in the financial statements.The second category of expenses we incur on behalf of the funds is fund accounting and systems expenses. Fund accounting and systems costs are a significant expense for asset management companies and require consistent investment to maintain operating efficiency. Parts of these expenses are fixed in nature with a portion being a function of AUM and the number of unitholders of Mavrix funds.The recovery of the expenses paid by the funds is shown as "Expenses Recovered from Funds". To maintain competitive Management Expense Ratios for the Mavrix Mutual Funds, the amount of expenses recovered from some of the funds has been capped. Therefore, as the Mavrix Mutual Funds grow in size, a larger recovery will occur until such time as all recoverable expenses are borne by the funds.Trailer fees are paid to dealers in respect of services provided by dealers to clients who hold Mavrix Mutual Funds. These expenses are a direct function of AUM with no fixed cost element. Trailer fees vary by fund, and by sales charge option.Other expenses that we incur include amortization and interest on long-term debt. Amortization reflects both the amortization of deferred sales commissions and property and equipment. The portion of amortization expense for DSC commissions is highly correlated with growth in AUM. Mavrix has historically financed its capital requirements for DSC commissions with either debt or equity financing.Other ItemsReferences to EBITDA are to earnings before interest, income taxes, depreciation and amortization. EBITDA is not a standardized earnings measure under GAAP. Management believes that in addition to net earnings, EBITDA is a useful supplemental measure as it provides investors with an indication of cash available for distribution, income taxes, working capital needs and capital expenditures. Investors should be cautioned, however, that EBITDA should not be construed as an alternative measure of liquidity and cash flows. The Company's method of calculating EBITDA may differ from other issuers and, accordingly, EBITDA may not be comparable to similarly titled measures used by other issuers. 6 M A V R I X F U N D M A N A G E M E N T I N C . Third Quarter Results 2007 8. Nine Months Ended September 30, 2007 Compared with Nine Months Ended September 30, 2006 Market ReviewThe S&P/TSX Composite Index return for the first nine months of 2007 was 11.07%. The Dow Jones Industrial Average for the same period, adjusted to Canadian dollars, had a return of (3.75) %, and the S&P 500 Index return was (7.10) %.According to the Investment Fund Institute of Canada (IFIC), total industry assets were $660 billion at December 31, 2006. On October 15, 2007, IFIC released its September statistics. Net assets of the mutual fund industry at September 30, 2007 were 701.4 billion, up 6% from December 31, 2006.Operating ReviewOur total AUM at September 30, 2007 was $719.8 million, up 5% from $686.4 million at December 31, 2006, and up 10% from $652.1 million at September 30, 2006. The increases are attributable to market appreciation and fund sales.At September 30, 2007, our AUM was comprised of $508.8 million of Mavrix Mutual Funds and $210.9 million of Specialty Funds, compared to $506.1 million and $145.9 million respectively at September 30, 2006.The $508.8 million for Mavrix Mutual Funds represents the total for our 20 core funds. Mavrix Mutual Funds had net sales of $19.3 million on gross sales of $211.7 million for the first nine months of 2007. This compares to $49.5 million in net sales on $207.4 million of gross sales for Mavrix Mutual Funds for the same period in 2006.Third Quarter DevelopmentsOn July 27, 2007, Mavrix announced the filing of the preliminary prospectus of the Mavrix Quebec 2007 - II FT Limited Partnership (the LP). On August 30, 2007, Mavrix announced the final closing of the LP. Total units sold were 2.3 million for gross proceeds of $23 million.On August 22, 2007, Mavrix withdrew its Mavrix TSX Venture Fund offering. Market conditions were largely responsible for this decision. On September 27, 2007, Mavrix revised and reintroduced the Mavrix TSX Venture Fund with the filing of the preliminary prospectus of the Mavrix TSX Venture Graduation Fund (the Fund). The prospectus seeks to qualify the distribution of warranted units each consisting of one trust unit of the Fund (a Fund Unit) and one half of one Fund Unit purchase warrant (a Warrant) at a price of $10.00 per warranted unit. Each Warrant entitles the holder to purchase one Fund Unit at a price of $10.25 on June 15, 2009. The maximum size of the offering is $50 million. As part of its investment process, the Manager will focus on issuers that have been included in the TSX Venture 50TM.On September 27, 2007, Mavrix announced the initial closing of the Mavrix Explore 2007 - II FT Limited Partnership. Gross Proceeds raised were $33.8 million. The final closing occured on October 16, 2007, with gross proceeds reaching the maximum size of the offering of $50 million.RevenuesFor the nine months ended September 30, 2007, revenue totalled $9.7 million compared to $8.7 million for 2006. The year over year increase in revenues for the first nine months was the result of the increase in AUM. Details are provided in the table below.Management fees for the first nine months of 2007 increased by $1.5 million, or 19%, from the same period in 2006. This was due to the increase in the Mavrix Mutual Funds and specialty funds AUM of 10% from the prior year.In the fourth quarter of 2006 Mavrix ended the administrative service contracts with the two remaining third party funds. The departure from administrative services was undertaken to focus resources on our two remaining business activities. M A V R I X F U N D M A N A G E M E N T I N C . Third Quarter Results 2007 7 9. Revenues (continued)Redemption fees for the nine months ended September 30, 2007 were $492 thousand compared to $656 thousand in the first nine months of 2006. Redemption fees are driven by the level of gross redemptions, as well as by the time period that clients hold the funds prior to redemption. The longer a client holds the funds, the lower the redemption fee charge.Revenue ($000s) Nine months ended Nine months ended% September 30, 2007 September 30, 2006 Change Management Fees$ 9,067$ 7,607 19% Fund Accounting Fees- 425 (100%) Redemption Fees492656(25%) Investment Income 97 13630% Total Revenue$ 9,656$ 8,701 11% ExpensesS,G,A&O expenses before any expense recovery increased by $1.9 million compared to the first nine months of 2006.Factors that have contributed to the increase in S,G,A&O expenses in the first nine months of 2007 are an increase in the number of employees and increases in business development and compliance costs.Fund accounting and systems expenses for the first nine months of 2007 remained flat at $1.6 million compared with the same period last year.Expenses recovered from funds increased $261 thousand, or 11%, year over year for the nine months ended September 30, 2007. The increase in expenses recovered resulted from the increase in AUM from the prior year. As the Mavrix Mutual Funds continue to grow in size, the amount of recoverable expenses absorbed by the company will decline.Trailer fees rose to $2.7 million in the nine months ended September 30, 2007 compared to $2.3 million for the same nine- month period in 2006. This represented an increase of 16% and is the result of growth in AUM of Mavrix Mutual Funds. The increase is also attributable to the rollover of non-trailer fee specialty funds into the mutual funds of the corporation, which pay trailer fees.Expenses ($000s)Nine months ended Nine months ended% September 30, 2007 September 30, 2006 Change S,G,A&O$ 7,851$ 5,965 32% Fund Accounting and Systems1,6041,5931% Expenses Recovered from Funds(2,631)(2,370) 11% Trailer Fees 2,7082,337 16%$ 9,532$ 7,525 27%EBITDA was $124 thousand for the nine months ended September 30, 2007, compared to $1.2 million for the nine months in 2006.The following reconciles EBITDA to the net loss for the nine-month period presented.($000s) Nine months ended Nine months ended% September 30, 2007 September 30, 2006 Change EBITDA $ 124$ 1,177(89%) Amortization (1,777)(1,624)9% Interest on Long-term Debt(454)(338)34% Other Income42 13214% Net Loss $ (2,065)$(772) 167%8 M A V R I X F U N D M A N A G E M E N T I N C . Third Quarter Results 2007 10. Expenses (continued)Amortization increased from $1.6 million in the first nine months of 2006 to $1.8 million in the same period in 2007, or a 9% increase from year to year. The increase in the expense is the result of the increase in deferred sales commission (DSC) from a cost of $11.6 million at September 30, 2006 to $13.1 million at September 30, 2007. The largest element of amortization represents amortization of DSC. Other factors affecting amortization expense are the amortization of deferred transaction costs for the 8% convertible debenture and the issue of the 10% subordinated debenture in June 2007.Mavrix reported a net loss for the nine months ended September 30, 2007 of $(2.1) million or $(0.24) per share, compared to a net loss for the nine months ended September 30, 2006 of $(772) thousand or $(0.10) per share. Quarter Ended September 30, 2007 Compared with Quarter Ended September 30, 2006 Market ReviewThe S&P/TSX Composite Index return for the third quarter of 2007 was 0.81%. The Dow Jones Industrial Average return for the same period, adjusted to Canadian dollars, was (3.43)%, and the S&P 500 Index return was (5.58)%.According to IFIC, total industry assets were $706.8 billion at June 30, 2007 and $701.4 billion at September 30, 2007, for a decrease of $5.4 billion, or 0.76%, during the third quarter of 2007.Operating ReviewOur total AUM at September 30, 2007 was $719.8 million, down 2% from $735.6 million at June 30, 2007. At September 30, 2007, our AUM was comprised of $508.8 million of Mavrix Mutual Funds and $210.9 million of Specialty Funds, compared to $552.3 million and $183.3 million respectively at June 30, 2007.Our Mavrix Mutual Funds decreased by 8% over the quarter while Specialty Funds increased 15%. This variance is largely due to the launch of the Mavrix Explore 2007 - II FT Limited Partnership for gross proceeds of $33.8 million, and the launch of the Mavrix Quebec 2007 - II FT Limited Partnership for gross proceeds of $23 million.Mavrix Mutual Funds had net redemptions of $23.7 million on gross sales of $23.3 million for the third quarter of 2007. This compares to $20.3 million in net sales on $67.1 million of gross sales for Mavrix Mutual Funds for the same period in 2006. Third quarter 2007 saw higher redemptions largely due to increased market volatility.RevenuesAs a result of the 10% year over year increase in AUM, total third quarter revenue increased from $2.8 million in 2006 to $3.1 million in 2007. Details are provided in the table below.Management fees are positively impacted by increases in AUM. Management fees for the third quarter of 2007 increased $455 thousand, or 18%, from the same period in 2006, to $2.9 million.Revenue ($000s) Three months ended Three months ended %September 30, 2007 September 30, 2006Change Management Fees$ 2,948$ 2,49318% Fund Accounting Fees -121(100%) Redemption Fees150132 13% Investment Income384 867% Total Revenue$ 3,136$ 2,750 14%M A V R I X F U N D M A N A G E M E N T I N C . Third Quarter Results 2007 9 11. ExpensesS,G,A&O expenses before any expense recovery for the third quarter of 2007 totalled $2.6 million compared to $1.9 million for the same period in 2006. This represents an increase of $739 thousand compared to the third quarter of 2006.An overall increase in compensation costs was the main reason for the change in S,G,A&O expenses. Compensation costs increased by $495 thousand, due to the expansion of our workforce from 48 employees at September 30, 2006 to 54 employees at September 30, 2007.Other factors that have contributed to the increase in S,G,A&O expenses in the third quarter of 2007 are increases in compliance and business development costs.During the three months ended September 30, 2007, fund accounting and systems expenses increased to $540 thousand from $500 thousand for the same three-month period of 2006.Expenses recovered from funds totalled $870 thousand in the third quarter of 2007, compared to $823 thousand in the same period in 2006. As Mavrix AUM increases, so do expense recoveries, and the portion of expenses absorbed by Mavrix declines.Trailer fees increased to $887 thousand in the three months ended September 30, 2007 compared to $762 thousand for the same three-month period in 2006, due to the rollover of non-trailer fee specialty funds into our mutual funds, which pay trailer fees.Expenses ($000s)Three months endedThree months ended %September 30, 2007September 30, 2006Change S,G,A&O $ 2,618 $ 1,878 39% Fund Accounting and Systems540500 8% Expenses Recovered from Funds(870)(823) 6% Trailer Fees 887 76216% $ 3,175 $ 2,317 37%EBITDA was $(39) thousand for the three months ended September 30, 2007, compared to $434 thousand for the three months in 2006.The following reconciles EBITDA to the net loss for the three months presented.($000s) Three months ended Three months endedSeptember 30, 2007 September 30, 2006 EBITDA$(39) $434 Amortization(630) (560) Interest(223)(114) Other Income(0) 3 Net Loss$ (892) $(237)Total amortization for the three months ended September 30, 2007 was $630 thousand compared to $560 thousand for the same three-month period in 2006. This is due to the growth in assets in the Mavrix Mutual Funds resulting in a larger deferred sale charge amortization. Other factors affecting amortization expense are the amortization of deferred transaction costs for the 8% convertible debenture and the issue of the 10% subordinated debenture in June 2007.On a three-month basis, interest expense increased from $114 thousand for the three months ended September 30, 2006, to $223 thousand for the same three months in 2007. The increase is attributable to the issue of the new subordinated debenture in June 2007.Mavrix reported a net loss for the three months ended September 30, 2007 of $(892) thousand or $(0.11) per share, compared to a net loss for the three months ended September 30, 2006 of $(237) thousand or $(0.03) per share. 10 M A V R I X F U N D M A N A G E M E N T I N C . Third Quarter Results 2007 12. Liquidity and Capital Resources Cash flow used by operating activities (before the net change in non-cash balances related to operations) was $(19) thousand for the nine months ended September 30, 2007, compared to cash flow provided by operating activities in the same period in 2006 of $1.1 million. The net change in non-cash operating working capital for the nine months ended September 30, 2007 was $323 thousand compared $(323) thousand in the nine months ended September 30, 2006.Cash flow used by operating activities (before the net change in non-cash balances related to operations) was $(167) thousand for the quarter ended September 30, 2007, compared to cash provided of $403 thousand in the same period in 2006. The net change in non-cash operating working capital for the quarter ended September 30, 2007 was $(135) thousand compared to $(103) thousand in the prior year.Current assets net of current liabilities at September 30, 2007 remained flat at $3.5 million compared to December 31, 2006. Consolidated cash and marketable securities amounted to $3.5 million as at December 31, 2006, and increased to $3.8 million as at September 30, 2007.In the second quarter of 2007, we spent $2.7 million to prepay our 8% convertible debenture and during the same time period we received $5.8 million from a new 10% subordinated debenture. We invested the net proceeds in marketable securities and maintained these investments in the third quarter of 2007.In the second quarter of 2007, we extended $1.2 million in loans to employees to purchase units in the MFMI Employee Partnership. This has been deducted against capital stock.In the second quarter of 2007, we spent $717 thousand to repurchase our common stock for cancellation under our Normal Course Issuer Bid (NCIB), and we received $75 thousand from the exercise of options. We had no similar transactions in the third quarter of 2007.Our consolidated cash and marketable securities at September 30, 2007 will be used to finance the payment of DSC commissions to advisors, to facilitate the development of new products, and to acquire additional assets if and when appropriate. Management believes that the availability of capital to fund trailer fees and deferred sales charge commissions is important to the future financial results of operations and that available capital will be sufficient to execute on the present business plan for the period to December 31, 2007. Risks and Uncertainties and Forward-Looking Statements A significant portion of Mavrix Mutual Funds AUM is attributable to a small number of the Mavrix Mutual Funds. If investors modified their portfolios by transferring their investments out of these funds where there is also a decline in sales, this would result in a materially adverse effect on the Company's results of operations and prospects. This may result if the Mavrix Mutual Funds were unable to achieve returns that are competitive with or superior to those achieved by other comparable investment products offered by its competitors or if its products otherwise fall out of favour with investors.The Company attributes its growth in AUM substantially to the Company's efforts to engage in sales and marketing initiatives targeted directly at third-party distribution channels and, in particular, investment advisors and financial planners who recognize the merits of the Company's differentiated products and the value of access to the Company's portfolio managers, rather than to the investing public generally.AUM growth relies largely on net asset inflows, which is affected materially by access to the third-party distribution channels. These channels are very competitive and access may be adversely affected by acquisitions of dealers by the Company's competitors who may limit or eliminate the Company's access to such distribution channels. The Company's focus is on the development of differentiated products that complement mainstream equity and fixed income products.Competitive pressures may impact the fees that the Company may charge for its services, as well as the expenses properly payable by the Mavrix Mutual Funds that are waived or "absorbed" by the Company. There can be no assurance that prevailing management fee rates will continue to be available in the future or that the Company will be able to reduce the portion of fund expenses absorbed by the Company. M A V R I X F U N D M A N A G E M E N T I N C . Third Quarter Results 2007 11 13. Risks and Uncertainties and Forward-Looking Statements (continued) The following section titled "Outlook" contains forward-looking statements, as may other portions of this document. These statements are based on the judgment of management on a basis deemed reasonable given the current circumstances. These judgments are subject to risks and uncertainties beyond the control of management such as general economic conditions, the state of capital markets, political events, regulatory changes and competitive developments. Investors should carefully consider these risks and uncertainties when evaluating the Company. Outlook At Mavrix, we expect that the asset management industry will continue to grow through 2007. We also plan to grow our business with solid performance in our existing products, by expanding our business with existing and new advisors, particularly focusing on gaining depth in the province of Quebec with the expansion of our presence there, and by gaining new mandates for Specialty Funds. Our belief has remained unchanged from the prior year - we believe that successful smaller fund companies are well suited to deliver products to more sophisticated advisors and that the mutual fund market will continue rewarding this approach. We believe that we will become stronger in our two remaining business activities in 2007 now that we have exited the activity of providing administrative services to third parties. We will be able to more effectively focus our existing resources on the growth and performance of the Mavrix Mutual Funds and Specialty Funds. Critical Accounting Estimates The following is a summary of Mavrix's critical accounting estimates. Mavrix's accounting policies are in accordance with GAAP and are described in the notes to the audited consolidated financial statements for the year-ended December 31, 2006. The accounting policies described below required estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses recorded in the financial statements. Because of their nature, estimates require judgment based on available information. Actual results or amounts could differ from estimates and the difference could have a material impact on the financial statements.Deferred CostsSelling commissions paid on mutual fund securities sold on a deferred load basis (DSC) are recorded at cost and are amortized on a straight-line basis.DSC assets relating to the sales of mutual fund securities sold on a deferred low load basis are amortized over 3 years. DSC assets relating to the sales of mutual fund securities sold on a deferred regular load basis are amortized over 7 years.Deferred exchange costs represent expenses incurred by the Company on the issue of equity instruments in a Fund managed by the company. These costs are amortized on a straight-line basis over 3 years.The unamortized DSC and deferred exchange costs would be written down to fair value if carrying value exceeded expected future undiscounted cash flow.Customer ListsThe customer list is recorded at cost and is amortized on a straight-line basis over a period of 7 years. Customer list is reviewed for impairment if events or changes in circumstances indicate that the carrying value may not be recoverable.Management ContractsManagement contracts are recorded at cost less accumulated amortization prior to 2003. Management contracts are no longer amortized as they were determined to have an indefinite life; however, they are subject to impairment tests on an annual basis or more frequently if events and circumstances indicate a potential impairment. 12 M A V R I X F U N D M A N A G E M E N T I N C . Third Quarter Results 2007 14. Changes in Accounting Policies There have been no changes to our existing accounting policies in the third quarter of 2007. There were two changes to our existing accounting policies in the first quarter of 2007 in the areas of accounting changes and financial instruments. Please refer to our first quarter MD&A for a detailed discussion of these policies. Changes in Internal Controls over Financial Reporting Pursuant to Multilateral Instrument 52-109, the Chief Executive Officer and Chief Financial Officer must certify that they are responsible for the design of internal controls over financial reporting (or caused them to be designed under their supervision). Internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Canadian generally accepted accounting principles. During the nine-month period ended September 30, 2007, there was no significant change to the systems of internal controls within our company.M A V R I X F U N D M A N A G E M E N T I N C . Third Quarter Results 2007 13 15. MAVRIX FUND MANAGEMENT INC.Consolidated balance sheets As at September 30, 2007 and December 31, 2006(Unaudited) September 30, 2007December 31, 2006 ASSETS Current AssetsCash $396,133$ 142,484Marketable securities (market value - 2006 - $3,418,130)3,372,0103,369,080Accounts receivable (Note 3)1,325,7771,020,878Prepaid expenses676,784665,741 5,770,704 5,198,183Other Assets Property and equipment 251,111 290,694 Deferred costs 6,368,451 6,701,371 Intangible assets1,474,118 1,489,775 8,093,680 8,481,840$ 13,864,384$ 13,680,023 LIABILITIES Current LiabilitiesAccounts payable and accrued liabilities $ 2,305,033 $ 1,666,410Corporate Debt (Note 4)8,270,2464,622,59010,575,2796,289,000 SHAREHOLDERS' EQUITY Capital Stock (Note 5) 17,945,697 19,764,308Equity Portion of Corporate Debt 235,481235,481Contributed Surplus (Note 5) 912,364451,065Deficit (15,791,087) (13,059,831)Accumulated Other Comprehensive Income (Note 2) (13,350) - 3,289,105 7,391,023$ 13,864,384$ 13,680,023The accompanying notes are an integral part of these consolidated financial statements.Signed on Behalf of the BoardMalvin C. SpoonerRaymond M. Steele DirectorDirector 14 M A V R I X F U N D M A N A G E M E N T I N C . Third Quarter Results 2007 16. MAVRIX FUND MANAGEMENT INC. Consolidated statements of loss and deficit For the nine months ended September 30, 2007 and 2006 (Unaudited)2007 2006 RevenuesManagement fees $9,067,363 $ 7,607,049Fund accounting fees-425,005Redemption fees491,892 655,896Investment income 96,74713,2489,656,0028,701,198 Expenses Selling, general, administration and other7,851,489 5,965,297 Fund accounting and systems 1,603,737 1,593,040 Expenses recovered from funds(2,631,509) (2,370,444) Trailer fees2,708,381 2,336,7029,532,098 7,524,595 Profit before the undernoted items123,904 1,176,603 Amortization (1,777,245) (1,623,912) Interest on long-term debt (453,578) (338,160) Other income Gain on sale of marketable securities 59,10014,619 Loss on disposal of property and equipment (16,770)(1,141)Net loss (2,064,589) (771,991)Deficit - beginning of period(13,059,831) (11,959,099)Loss on prepayment of debt (Note 4) (666,667) -Excess on repurchase of capital stock (Note 5)-(18,122)Deficit - end of period$ (15,791,087) $ (12,749,212)Weighted average number of shares - basic and diluted 8,466,494 8,078,036Basic and diluted loss per share $ (0.24) $(0.10)The accompanying notes are an integral part of these consolidated financial statements. M A V R I X F U N D M A N A G E M E N T I N C . Third Quarter Results 2007 15 17. MAVRIX FUND MANAGEMENT INC.Consolidated statements of loss and deficit For the three months ended September 30, 2007 and 2006(Unaudited)20072006 RevenuesManagement fees $ 2,948,645 $2,493,519Fund accounting fees - 120,621Redemption fees 149,568132,235Investment income37,5573,882 3,135,7702,750,257 Expenses Selling, general, administration and other 2,616,6251,877,888 Fund accounting and systems540,485499,730 Expenses recovered from funds (869,817)(823,037) Trailer fees 887,442761,810 3,174,7352,316,391 Profit (loss) before the undernoted items(38,965) 433,866 Amortization(630,331)(560,265) Interest on long-term debt(223,275)(113,604) Other income Gain on sale of marketable securities - 2,650 Loss on disposal of property and equipment(167)-Net loss(892,738)(237,353)Deficit - beginning of period(14,898,349)(12,475,616)Excess on repurchase of capital stock (Note 5)-(36,243)Deficit - end of period$ (15,791,087)$ (12,749,212)Weighted average number of shares - basic and diluted7,932,7958,350,352Basic and diluted loss per share $(0.11) $ (0.03)The accompanying notes are an integral part of these consolidated financial statements. 16 M A V R I X F U N D M A N A G E M E N T I N C . Third Quarter Results 2007 18. MAVRIX FUND MANAGEMENT INC.Consolidated statements of Comprehensive Lossand Accumulated Other Comprehensive LossFor the nine months ended September 30, 2007(Unaudited)2007Net loss $ (2,064,589)Other comprehensive loss, net of tax(13,350)Comprehensive loss $ (2,077,939)2007Accumulated other comprehensive income, beginning of period, net of tax$-Transitional adjustment (Note 2) 49,050 Reclassification for realized gains (49,050) Total other comprehensive loss, net of tax(13,350)Accumulated other comprehensive loss end of period, net of tax $(13,350) MAVRIX FUND MANAGEMENT INC. Consolidated statements of Comprehensive Loss and Accumulated Other Comprehensive Loss For the three months ended September 30, 2007 (Unaudited)2007Net loss $ (892,738)Other comprehensive loss, net of tax(13,350)Comprehensive loss $ (906,088)2007Accumulated other comprehensive income, beginning of period, net of tax$-Total other comprehensive loss, net of tax(13,350)Accumulated other comprehensive loss end of period, net of tax $(13,350) The accompanying notes are an integral part of these consolidated financial statements.M A V R I X F U N D M A N A G E M E N T I N C . Third Quarter Results 2007 17 19. MAVRIX FUND MANAGEMENT INC. Consolidated statements of cash flowsFor the nine months ended September 30, 2007 and 2006(Unaudited)20072006 Cash from operations Net loss $ (2,064,589) $ (771,991) Items not affecting cash -Amortization1,777,245 1,623,912Gain on sale of marketable securities(59,100)(14,619)Loss on disposal of property and equipment16,770 1,141Accretion expense 35,32235,322Stock-based compensation expense275,425 206,077(18,927) 1,079,842Net change in non-cash working capital -Accounts receivable(304,899) 454,918Prepaid expenses (11,044) (259,041)Accounts payable and accrued liabilities638,623 (518,813) 303,753 756,906Financing Activities Net issuance of convertible debentures(1,534) - Corporate debt repayment (2,666,667)- Corporate debt issuance, net of transaction costs 5,784,986 - Net share capital transactions (734,034) 763,196 2,382,751 763,196Investing Activities Net disposition of marketable securities42,820 (500,000) Employee partnership loans (1,179,000)- Purchase of property and equipment (63,786)(45,314) Additions to deferred costs(1,232,889) (1,425,658) (2,432,855) (1,970,972)Net change in cash during the period 253,649(450,870)Cash - beginning of period 142,484 900,810Cash - end of period $ 396,133 $ 449,940Supplementary InformationCash paid for interest$ 320,547 $ 246,764 The accompanying notes are an integral part of these consolidated financial statements. 18 M A V R I X F U N D M A N A G E M E N T I N C . Third Quarter Results 2007 20. MAVRIX FUND MANAGEMENT INC. Consolidated statements of cash flowsFor the three months ended September 30, 2007 and 2006(Unaudited) 2007 2006 Cash from operations Net loss$ (892,738)$(237,353) Items not affecting cash -Amortization 630,331560,265Gain on sale of marketable securities - (2,650)Loss on disposal of property and equipment 167-Accretion expense 11,774 11,774Stock-based compensation expense83,493 70,509 (166,973) 402,545 Net change in non-cash working capital - Accounts receivable (689,894) (161,109) Prepaid expenses71,453 120,159 Accounts payable and accrued liabilities 483,039 (62,228) (302,375) 299,367Financing Activities Net issuance of convertible debentures (1,534)- Net share capital transactions - 743,197 (1,534) 743,197Investing Activities Net disposition of marketable securities718,839(800,000) Purchase of property and equipment(33,030)(7,500) Additions to deferred costs(318,255) (299,834) 367,554 (1,107,334)Net change in cash during the period63,645(64,770)Cash - beginning of period 332,488 514,710Cash - end of period$ 396,133$ 449,940Supplementary InformationCash paid for interest $ 119,565$ 40,906The accompanying notes are an integral part of these consolidated financial statements.M A V R I X F U N D M A N A G E M E N T I N C . Third Quarter Results 2007 19 21. MAVRIX FUND MANAGEMENT INC.Notes to Interim Unaudited Consolidated Financial Statements For the nine months ended September 30, 2007 and 2006 1. Basis of Presentation The unaudited interim consolidated financial statements of Mavrix Fund Management Inc. ("Mavrix" or the "Company")have been prepared in accordance with Canadian generally accepted accounting principles, except that certaindisclosures required for annual financial statements have not been included. Accordingly, the unaudited interimconsolidated financial statements should be read in conjunction with the Company's most recent annual auditedconsolidated financial statements for the year ended December 31, 2006. The consolidated interim financialstatements follow the same accounting policies and methods of application as the most recent annual consolidatedfinancial statements. During the period the Company added the wholly owned subsidiaries Mavrix Explore 2007 - I FTManagement Limited, Mavrix Explore Quebec 2007 - I Ltd., Mavrix Quebec 2007 - II FT Ltd., and Mavrix Explore 2007- II FT Management Limited. 2. Changes in Accounting Policies (a) Accounting Changes Effective January 1, 2007 the Company adopted revised CICA Handbook section 1506 - Accounting Changes. This section prescribes the criteria for changing accounting policies, together with the accounting treatment and disclosure of changes in accounting policies, changes in accounting estimates and corrections of errors. The revised section is effective for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2007. (b) Financial InstrumentsEffective January 1, 2007 the Company adopted CICA Handbook sections concerning financial instruments:section 3855 - Financial Instruments - Recognition and Measurement; section 3861 - Financial Instruments -Disclosure and Presentation; and section 1530 - Comprehensive Income. Implementation has been on aretroactive basis without the restatement of prior period financial statements. Sections 3855 and 3861 deal with the classification, recognition, measurement, presentation and disclosure offinancial instruments and non-financial derivatives in the financial statements. These standards require that allfinancial instruments be classified as either available-for-sale, held for trading, held to maturity, loans andreceivables or other liabilities. Section 1530 deals with the presentation of comprehensive income and itscomponents, including net income and components of comprehensive income.Adoption of these recommendations had the following impact on the financial statements:Marketable securities have been classified as available-for-sale financial assets. As such, they are measured at fair value and changes in fair value are recognized in other comprehensive income. The transitional adjustment for the recognition of the financial assets at fair value on January 1, 2007 is $49,050 and is recorded in opening accumulated other comprehensive income. In April 2007 the asset that created the transitional adjustment and unrealized gain on available-for-sale securities was disposed of, resulting in both accumulated other comprehensive income and current year other comprehensive income being recognized in current period net income. Corporate debts have been classified as other liabilities and are measured at amortized cost, net of transaction costs, with amortization of interest and costs calculated on the effective interest rate method. Previously the Company used the straight-line method. There is no material impact on these financial statements as a result of this change in accounting policy. Cash is classified as available for sale, accounts receivable are classified as loans and receivables and accounts payable are classified as other liabilities. There is no change to these financial statements as a result of this classification. 20 M A V R I X F U N D M A N A G E M E N T I N C . Third Quarter Results 2007 22. MAVRIX FUND MANAGEMENT INC. Notes to Interim Unaudited Consolidated Financial Statements (continued)3. Accounts Receivable Included in accounts receivable are amounts due from funds managed by the Company, deemed to be related parties,of $ 1,300,919 (2006, $ 975,917). These amounts are in the normal course of business, are non-interest bearing andare due on demand. 4. Corporate Debt September 30, 2007 December 31, 2006$2.0 million - 8% convertible debenturedue January 6, 2009$ - $ 1,967,874$3.05 million - 8% subordinated convertible debenturedue June 30, 2010 2,739,9472,654,716$6.0 million - 10% subordinated debenturedue July 2, 2011 5,530,299- $ 8,270,246 $ 4,622,590$2,000,000 - 8% Convertible Debenture In June 2007, the Company prepaid the $2,000,000 convertible debenture for a cash payment of $2,666,667. Thecash payment was allocated to the carrying values of the debt and equity components resulting in a charge toamortization of $25,431 and a charge to deficit of $666,667. $6,000,000 - 10% Subordinated Debenture In June 2007, the Company obtained debenture financing in the form of a $6,000,000 subordinated debenture bearinginterest at 10% per annum. The debt is repayable upon maturity on July 2, 2011 and is subordinated to all seniorindebtedness. Transaction costs are amortized over the term of the debenture using the effective interest method. The lender also received warrants exercisable into 600,000 shares of the Company until July 2, 2011 at an exerciseprice of $2.20 per share. The estimated fair value of $280,296 for the warrants, which has been included in thedeferred transaction costs, is based on the following assumptions:Risk-free interest rate 4.54%Expected dividend yield0%Expected share price volatility27%Expected warrant life 4 yearsThe components of the subordinated debenture are as follows: September 30, 2007 December 31, 2006Face value of subordinated debenture $ 6,000,000 $ - Less deferred transaction costs(469,701)-Net subordinated debenture $ 5,530,299 $ -M A V R I X F U N D M A N A G E M E N T I N C . Third Quarter Results 2007 21 23. 5. Capital Stock (a) Issued and Outstanding The following transactions occurred with respect to common shares during 2007 and 2006: Shares Amount Balance - December 31, 2005 7,910,270 $ 18,827,933Stock options and warrants exercised 755,000 807,500Shares issued under RSU plan - (Note 5(b)(ii))48,958 128,875 Balance - December 31, 2006 8,714,228 19,764,308Stock options and warrants exercised 325,000 487,500Shares issued under RSU plan (Note 5(b)(ii))92,025 199,478Shares repurchased under NCIB (590,700) (1,221,534)Contributed surplus from excess of average cost over repurchase price-(105,055)Employee partnership loans -(1,179,000) Balance - September 30, 2007 8,540,553$ 17,945,697(b) Stock-Based Compensation PlansB (i)Employee Stock Option PlanThe number of common shares issuable under the plan is as follows:Nine months endedYear endedSeptember 30, 2007December 31, 2006WeightedWeighted Average Average Number Exercise Price Number Exercise Price($)($) Outstanding - beginning of period 387,5001.84410,000 1.63 Granted59,0001.66195,000 1.59 Exercised (75,000) 1.50 (150,000)1.00 Forfeited (20,000) 2.60(67,500)1.75 Outstanding - end of period 351,5001.84387,500 1.84 The fair values of the options granted in the first nine months of 2007 were estimated to be $0.54 per option.The following assumptions were used to calculate the fair values of the options issued.Nine months endedYear endedSeptember 30, 2007December 31, 2006 Risk-free interest rate 4.09% to 4.65%3.99% to 4.34% Expected dividend yield 0%0% Expected share price volatility 26% to 27% 20% to 26% Expected life of option 4 years 4 yearsDuring the nine months ended September 30, 2007, 75,000 stock options were exercised (year ended December 31, 2006, 150,000) by employees of the Company for cash proceeds of $112,500 (2006, $150,000). Additionally, in the first nine months of 2007, a total of 59,000 stock options were granted (year ended December 31, 2006, 195,000), 30,000 with an exercise price of $1.60 and 29,000 with an exercise price of $1.73 (2006, $1.50 to $1.85). Management has estimated the fair value of the options issued in the nine months ended September 30, 2007 using the Black-Scholes option-pricing model to be $31,798 (year ended December 31, 2006, $77,071). This amount is expensed over the vesting period. Compensation expense for options for the nine months ended September 30, 2007 is $27,645 (year ended December 31, 2006, $24,770) with an offsetting credit to contributed surplus. 20,000 options were forfeited in the nine months ended September 30, 2007 (year ended December 31, 2006, 67,500) with $9,858 fair value (year ended December 31, 2006, $20,941). 22 M A V R I X F U N D M A N A G E M E N T I N C . Third Quarter Results 2007 24. MAVRIX FUND MANAGEMENT INC. Notes to Interim Unaudited Consolidated Financial Statements (continued) 5. Capital Stock (continued)(ii) Restricted Stock Unit Plan (RSU)The number of common shares issuable under the RSU plan are as follows:Nine months ended Year endedSeptember 30, 2007 December 31, 2006 Outstanding - beginning of period 224,053156,079 Granted 153,750120,000 Vested(92,025) (48,958) Cancelled- (3,068) Outstanding - end of period 285,778224,053 The fair value of the RSUs granted in the nine months ended September 30, 2007 was $339,150 (year ended December 31, 2006, $198,375). Compensation expense related to RSUs for the nine months ended September 30, 2007 was $247,781 (year ended December 31, 2006, $247,947). The unamortized value of RSUs granted to-date is $273,632 (year ended December 31, 2006, $182,058).(c) WarrantsThe Company has granted warrants to purchase common shares. The numbers of common shares issuable under these warrants are as follows: Nine months endedYear ended September 30, 2007 December 31, 2006WeightedWeighted Average Average Number Exercise PriceNumberExercise Price($)($) Outstanding - beginning of period 400,000 2.25 1,200,000 1.54 Issued600,000 2.20-- Exercised(250,000)1.50(605,000)1.09 Expired(150,000)3.50(195,000)1.50 Outstanding - end of period 600,000 2.20 400,000 2.25 During the nine months ended September 30, 2007, 250,000 warrants were exercised (year ended December 31, 2006, 605,000) for cash proceeds of $375,000 (2006, $657,500). Additionally, 600,000 warrants were issued during the nine months ended September 30, 2007 (year ended December 31, 2006, Nil). In the first nine months of 2007, 150,000 warrants expired (year ended December 31, 2006, 195,000).(d) Contributed SurplusThe following table summarizes the changes in contributed surplus during the period.Nine months endedYear endedSeptember 30, 2007 December 31, 2006 Balance - beginning of period $ 451,065$293,404 Options vested34,744 33,689 Options forfeited (7,099) (8,919) Amortized value of RSUs granted247,781247,947 Shares issued under RSU plan(199,478)(133,178) Excess of average cost over repurchaseof capital stock under NCIB105,055 18,122 Warrants issued as a financing fee (Note 4) 280,296 - Balance - end of period $ 912,364$ 451,065M A V R I X F U N D M A N A G E M E N T I N C . Third Quarter Results 2007 23 25. 5. Capital Stock (continued) (e) Employee Partnership LoansIn June 2007, the Company adopted a partnership loan plan for certain employees pursuant to which it extended offers to all employees to borrow in aggregate $1,179,000 to purchase common shares indirectly through MFMI Employee Partnership.Individual employees were given until June 27, 2007 to accept the terms of their partnership loans. As at September 30, 2007, an aggregate of $1,179,000 of offered loans were accepted by employees. The Company did not issue shares from treasury, as the shares were purchased by the partnership through the public markets.The Company will retain the loans on the balance sheet until they are repaid. The loans are due on June 15, 2017. The loans will be immediately repayable upon termination of employment of the participant with the Company. The loans are non-interest bearing and are secured by the units of the partnership, with a market value at September 30, 2007 of $930,000. 24 M A V R I X F U N D M A N A G E M E N T I N C . Third Quarter Results 2007 26. MAVRIX FUND MANAGEMENT INC. Fund Management Inc.36 Lombard Street, Suite 400, Toronto, Ontario M5C 2X3 Telephone: 416-362-3077 Fax: 416-365-4080 Toll Free: 1-888-964-3533 Website: www.mavrixfunds.com Email: clientservices@mavrixfunds.com Vancouver Office:701 West Georgia Street, Suite 1500 Vancouver, BC V7Y 1C6 Tel: (604) 684-8930 Fax: (604) 801-5911Calgary Office: Regus Bankers Hall 888 3rd Street West, 10th Floor Calgary, AB T2P 5C5 Tel: (403) 444-6906 Fax: (403) 668-6001 Winnipeg Office: 179 McDermot Avenue, Unit 101 Winnipeg, MB R3B 0S1 Tel: (204) 947-9649 Fax: (204) 956-5705 Montreal Office:1155 University Street, Suite 905Montreal, QC H3B 3A7 Tel: (514) 227-0666 Fax: (514) 875-8188Halifax Office:1809 Barrington Street, Suite 708Halifax, NS B3J 3K8 Tel: (902) 423-9987 Fax: (902) 423-6115