Financial Models Announces Fiscal 2005 Third Quarter Results

Toronto, January 6, 2005 – Financial Models Company Inc. (FMC), a leading provider of technology solutions and services to the investment world, today announced its results of operations for the fiscal 2005 third quarter ended November 30, 2004. All results are in accordance with Canadian generally accepted accounting principles, except EBITDA which is defined below, and are reported in Canadian dollars.

Financial Highlights

Revenue for the third quarter decreased 2.9% to $17.9 million from $18.5 million in the third quarter of the prior year. Third quarter cost of revenue and operating expenses declined 4.8% to $15.1 million from $15.9 million as a result of continued cost control and the benefit of $0.6 million of investment tax credits recorded in the third quarter.

Third quarter EBITDA(1) increased 8.9% to $2.8 million from $2.6 million. Third quarter net earnings increased to $1.0 million, or $0.09 per share, from $0.9 million, or $0.08 per share, in the third quarter of the prior year.

Year-to-date revenue increased 0.9% to $54.0 million from $53.5 million in the comparable period of the prior year. Year-to-date cost of revenue and operating expenses declined 5.0% to $45.8 million from $48.2 million.

Year-to-date EBITDA increased 54.8% to $8.2 million from $5.3 million. Year-to date net earnings increased to $3.3 million, or $0.30 per share, from $1.1 million, or $0.10 per share.

"We are pleased with the increase in EBITDA and net earnings in the first three quarters of the year," said Stamos D. Katotakis, President and Chief Executive Officer of FMC. "We continue to focus on increasing our recurring revenue base from application services and licence maintenance, which now represents approximately 80% of our total revenue. The significant appreciation of the Canadian currency against the United States and British currencies in the third quarter had a negative effect on third quarter revenues of approximately $0.6 million as compared to the revenue levels of the first and second quarter of 2005."

Third quarter cash flow from operations was $1.4 million before changes in non cash operating working capital and $3.8 million after such changes. Cash of $31.8 million, or $2.90 per share, increased from $28.5 million at the end of the second quarter and compares to $28.7 million at the end of the prior year.

Subsequent Events – Corporate Developments

On December 20, 2004, FMC announced that Linedata Services S.A. ("Linedata") had made an offer to purchase all of FMC’s outstanding common shares and Class C shares (the "FMC Shares") for $9.10 in cash and approximately 0.1523 Linedata shares for each FMC Share. At the time of the announcement the value of Linedata’s bid was $12.76 per FMC Share. The Linedata offer is subject to a number of conditions, including the requirement that more than 50% of the FMC Shares on a partially diluted basis are tendered into its bid.

Pursuant to a shareholder’s agreement among Mr. Katotakis and other significant shareholders of FMC, Mr. Katotakis and 1066821 Ontario Inc. ("1066821"), a company he controls, have the right to purchase up to approximately 42.3% of the FMC Shares at $12.20 in cash for each FMC Share. Mr. Katotakis currently owns, directly and indirectly, approximately 40.4% of the FMC Shares. On December 29, 2004, 1066821 announced that it had made an offer to purchase all of the FMC Shares at a price of $12.20 in cash for each FMC Share. The 1066821 offer is subject to a number of conditions. For more details see 1066821’s Offer and Offering Circular dated December 29, 2004.

As announced on December 29, 2004, an Independent Committee of the Board of Directors of FMC will meet to consider the two offers and expects that FMC’s Board of Directors will be in a position to comment on the offers by Monday, January 10, 2005.

Outlook

For the fourth quarter of 2005, we expect that the corporate developments discussed above may impact revenue and expect total revenue to be in the range of $17.0 million to $18.0 million. Fourth quarter cost of revenue and operating expenses are expected in the range of $15.5 million to $16.0 million.

The above range of cost of revenue and operating expenses are exclusive of the one-time expenses related to FMC’s activities in considering the offers to purchase FMC’s Shares by either 1066821 or Linedata. Approximately $0.3 million of such expenses were included in administration expenses in the third quarter and it is expected that approximately $1.5 million of such expenses will be recorded in the fourth quarter.

Further, the acquisition agreement between Linedata and FMC provides that FMC will pay Linedata a fee of $4.25 million if the acquisition agreement is terminated in certain circumstances, provided, however, that this fee will be $3.0 million if Mr. Katotakis, or companies controlled by him, including 1066821, exercises his rights to purchase FMC Shares under the above mentioned shareholder’s agreement. In the event that the 1066821 offer is successful and the Linedata offer is not successful and based on the expected timing of the acquisition in 1066821’s offer to purchase the FMC Shares, it is likely the $3.0 million expense would be recorded in the fourth quarter.

Additionally, the Board of Directors has amended FMC’s stock option plan, subject to regulatory approval, to provide that if, but only if, a takeover bid is made for all of the FMC Shares, the conditions to such bid are either waived or satisfied and the FMC Shares are taken up and paid for pursuant to the bid, then all unvested options immediately become vested. Holders of all options would then have the right to surrender their options to FMC for cancellation and receive a cash payment for each option in an amount at least equal to the excess, if any, of the value of the consideration offered for each FMC Share over the exercise price of each option. In the event that either offer is successful and based on the expected acquisition dates in either Linedata’s or 1066821’s offer to purchase the FMC Shares it is expected that stock compensation expense would be recorded in the fourth quarter in the range of $4.0 million to $5.0 million if all of the approximately 1.0 million options are surrendered.

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