Magnotta Winery Corporation
TSX : MGN

Magnotta Winery Corporation

September 14, 2007 09:23 ET

Magnotta Winery Corporation Announces July 31, 2007 Results

VAUGHAN, ONTARIO--(Marketwire - Sept. 14, 2007) - Magnotta Winery Corporation (TSX:MGN), is pleased to announce the release of its financial results for the second quarter ended July 31, 2007.

Net sales for the quarter ended July 31, 2007 increased 4.1% to $5,692,474 from $5,469,553 for the corresponding period of the prior year and for the six month period increased 3.9% to $11,641,520 from $11,207,580 for the corresponding period of the prior year. Net earnings increased 0.9% to $755,574 from $748,870 for the three month period and increased 1.6% to $1,598,869 from $1,573,710 for the six month period ended July 31, 2007. The growth in net sales were from greater volumes due to an expanded customer base, and more focused marketing campaigns. This steady and gradual increase in sales is consistent with management expectations.

Overall gross profit margin for the quarter ended July 31, 2007 decreased to 51.0% from 51.7% for the corresponding period of the prior year, and for the six month period ended July 31, 2007, decreased to 50.4% from 51.4%. This reduction in the overall gross profit margin is due to increased cost pressures for raw materials as well as higher Ontario grape prices.

Selling, administration and other expenses were $1,061,477 for the three months ended July 31, 2007 compared to $974,991 for the corresponding period of the prior year. For the six month period ended July 31, 2007, selling, administration and other expenses were $2,073,913 compared to $1,974,216 for the corresponding period of the prior year. Selling, administration and other expenses increased to 18.6% of net sales from 17.8% for the quarter and increased for the six month period to 17.8% from 17.6% for the corresponding period of the prior year.

Amortization for the three months ended July 31, 2007 was $316,873 compared to $311,411 and for the six month period ended July 31, 2007 was $633,746 compared to $622,822 for the corresponding period of the prior year.

Interest expense for the three months ended July 31, 2007 decreased to $238,278 from $264,602 and for the six month period ended July 31, 2007 was $471,200 compared to $497,121 for the corresponding period of the prior year.

Earnings before interest, income taxes and amortization decreased marginally to $1,843,725 from $1,854,883 for the three months ended July 31, 2007 and for the six month period ended July 31, 2007 was $3,798,815 compared to $3,783,653 for the corresponding period of the prior year.

Additional details and information are found in the Interim Unaudited Consolidated Financial Statements, the Management Discussion and Analysis for July 31, 2007 as well as on www.sedar.com.

The common shares of Magnotta trade on the TSX under the symbol "MGN".

Readers are cautioned that some of the statements contained in this release may be forward-looking statements, such as expectations, estimates and statements that describe the Company's future plans, objectives or goals, including words to the effect that the Company or management expects a stated condition to exist or occur. Generally, these forward-looking statements can be identified by the use of terminology such as "outlook", "anticipate", "believe", "estimate", "expect", "intend", "should", and similar expressions. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties. Actual results in each case could differ from those currently anticipated in such statements by reason of factors such as, but not limited to, changes in general economic and market conditions. Magnotta disclaims any intention or obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or results, or otherwise.



MAGNOTTA WINERY CORPORATION
Interim Consolidated Financial Statements - Unaudited

Six months ended July 31, 2007



MAGNOTTA WINERY CORPORATION
Notice To Reader of the Interim Consolidated Financial Statements

Six months ended July 31, 2007

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The consolidated financial statements of Magnotta Winery Corporation and
the accompanying interim consolidated balance sheet as at July 31, 2007 and
the interim consolidated statement of earnings and retained earnings and
cash flows for the six month period then ended are the responsibility of
the Company's management. These consolidated financial statements have not
been audited or reviewed on behalf of the shareholders by the independent
external auditors of the Company, KPMG LLP.

The interim consolidated financial statements have been prepared by
management and include the selection of appropriate accounting principles,
judgments and estimates necessary to prepare these financial statements
in accordance with Canadian generally accepted accounting principles.



MAGNOTTA WINERY CORPORATION
Consolidated Interim Balance Sheets

As at July 31, 2007, with comparative figures for
January 31, 2007 and July 31, 2006

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July 31 January 31 July 31
2007 2007 2006
(unaudited) (unaudited)
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Assets

Current assets:
Accounts receivable $ 1,543,575 $ 396,397 $ 1,553,410
Inventories 22,943,980 22,760,567 20,622,299
Prepaid expenses and deposits 585,377 280,142 627,167
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25,072,932 23,437,106 22,802,876

Capital assets 21,836,959 21,768,993 22,019,525
Winery licenses 251,516 251,516 251,516
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$ 47,161,407 $ 45,457,615 $ 45,073,917
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Liabilities and Shareholders'
Equity

Current liabilities:
Bank indebtedness $ 5,216,004 $ 5,400,368 $ 4,789,244
Accounts payable and
accrued liabilities 1,207,641 790,565 1,310,288
Income taxes payable 100,672 176,790 67,399
Current portion of
long-term debt 707,335 783,886 1,101,359
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7,231,652 7,151,609 7,268,290

Long-term debt 7,692,740 7,949,860 8,349,783
Future income taxes 1,248,404 966,404 1,327,517

Shareholders' equity:
Share capital 6,961,617 6,961,617 6,961,617
Notes receivable for share
capital (465,000) (465,000) (465,000)
Other paid-in capital 210,000 210,000 210,000
Retained earnings 24,281,994 22,683,125 21,421,710
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30,988,611 29,389,742 28,128,327
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$ 47,161,407 $ 45,457,615 $ 45,073,917
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Segmented information on
identifiable capital assets
by geographic region
Canada $ 19,027,499 $ 18,949,551 $ 19,189,019
Chile 2,809,460 2,819,442 2,830,506
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$ 21,836,959 $ 21,768,993 $ 22,019,525
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On behalf of the Board:

"Gabe Magnotta"
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Gabe Magnotta - Executive Chairman and Director

"Rossana DiZio Magnotta"
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Rossana DiZio Magnotta - CEO/President and Director



MAGNOTTA WINERY CORPORATION
Consolidated Interim Statements of Earnings and Retained Earnings

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For The Three Months For The Six Months
Ended July 31 Ended July 31
2007 2006 2007 2006
(unaudited) (unaudited) (unaudited) (unaudited)
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Net sales $ 5,692,474 $ 5,469,553 $ 11,641,520 $ 11,207,580

Cost of goods sold 2,787,272 2,639,679 5,768,792 5,449,711
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Gross profit 2,905,202 2,829,874 5,872,728 5,757,869

Expenses:
Selling,
administration
and other 1,061,477 974,991 2,073,913 1,974,216
Amortization 316,873 311,411 633,746 622,822
Interest 109,952 108,030 206,713 194,982
Interest -
long-term debt 128,326 156,572 264,487 302,139
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1,616,628 1,551,004 3,178,859 3,094,159
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Earnings before
income taxes 1,288,574 1,278,870 2,693,869 2,663,710

Income taxes:
Current 396,000 393,500 813,000 810,000
Future 137,000 136,500 282,000 280,000
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533,000 530,000 1,095,000 1,090,000
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Net earnings for
the period 755,574 748,870 1,598,869 1,573,710

Retained earnings,
beginning of period 23,526,420 20,672,840 22,683,125 19,848,000
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Retained earnings,
end of period $ 24,281,994 $ 21,421,710 $ 24,281,994 $ 21,421,710
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Earnings per share :
Basic $ 0.05 $ 0.05 $ 0.11 $ 0.11
Diluted $ 0.05 $ 0.05 $ 0.11 $ 0.11
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Weighted average
number of common
shares outstanding 13,932,005 13,932,005 13,932,005 13,784,219
Weighted average
number of diluted
shares outstanding 13,932,005 13,932,005 13,932,005 13,932,005

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Segmented information
on net sales by
geographic region
Canada $ 5,631,604 $ 5,417,995 $ 11,394,264 $ 10,884,889
Chile - - 57,599 143,649
Other 60,870 51,558 189,657 179,042
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$ 5,692,474 $ 5,469,553 $ 11,641,520 $ 11,207,580
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MAGNOTTA WINERY CORPORATION
Consolidated Interim Statements of Cash Flow

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For The Three Months For The Six Months
Ended July 31 Ended July 31
2007 2006 2007 2006
(unaudited) (unaudited) (unaudited) (unaudited)
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Cash flows from
(used in):

Operating activities:
Net earnings $ 755,574 $ 748,870 $ 1,598,869 $ 1,573,710
Items not involving
cash:
Amortization 316,873 311,411 633,746 622,822
Future income taxes 137,000 136,500 282,000 280,000
Unrealized foreign
exchange gain (6,421) (4,338) (15,270) (44,101)
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1,203,026 1,192,443 2,499,345 2,432,431

Changes in non-cash
operating working
capital:
Accounts
receivable (75,850) (403,800) (1,147,178) (1,205,741)
Inventories (84,820) (14,290) (183,413) (116,630)
Prepaid expenses
and deposits (157,623) (177,448) (305,235) 44,794
Accounts payable
and accrued
liabilities 178,160 40,425 417,076 20,474
Income taxes payable (29,225) (122,335) (76,118) (63,355)
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1,033,668 514,995 1,204,477 1,111,973

Financing activities:
Decrease in
long-term debt (161,676) (348,936) (318,401) (663,489)
Increase in share
capital - - - 330,800
Increase (decrease)
in bank indebtedness (455,726) 130,841 (184,364) 32,063
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(617,402) (218,095) (502,765) (300,626)

Investing activities:
Purchases of
capital assets (416,266) (296,900) (701,712) (811,347)
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Cash, end of period - - - -
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Supplemental cash
flow information:
Cash paid for
interest $ 221,965 $ 226,629 $ 441,583 $ 446,854
Cash paid for
income taxes 425,225 515,835 889,118 873,355

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MAGNOTTA WINERY CORPORATION
Notes to Consolidated Interim Financial Statements - Unaudited

Six months ended July 31, 2007

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1 DESCRIPTION OF BUSINESS

The Company develops, grows, produces, imports, markets, distributes and retails wines, beer, spirits and "must" (juice for making wine) through its seven locations in Ontario.

Products are also sold through representatives, an e-commerce site, in other Canadian provinces, and through export markets.

The Company experiences some seasonal variations in sales with sales typically being highest in the third and fourth quarters and lowest in the first quarter of the fiscal year.

2 SIGNIFICANT ACCOUNTING POLICIES

The disclosures contained in the unaudited interim consolidated financial statements do not include all the requirements of generally accepted accounting principles for annual financial statements, and accordingly, the unaudited interim consolidated financial statements should be read in conjunction with the annual consolidated financial statements for the year ended January 31, 2007.

The unaudited interim consolidated financial statements are based upon accounting principles consistent with those used and described in the annual consolidated financial statements for the year ended January 31, 2007.

3 NOTES RECEIVABLE INCLUDED IN SHARE CAPITAL

The five year notes receivable were received from two senior officers who were provided with the financing to exercise their options on 500,000 common shares of Magnotta at a price of $0.93 per share. These notes are secured by the acquired common shares, bear monthly interest at the rate charged to Magnotta on its operating line of credit, and provide for repayment of $116,250 in each of the years 2007, 2008, 2009 and 2010. These have been included as a component of shareholders' equity for presentation purposes.

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