Advantex Marketing International Inc. (TSX:ADX) today reported its operating results for the three and six months ended December 31, 2005, along with an update on its restructuring initiatives.

Sales and Fees for the three-month period were $18,028,000. There was a $154,000 year-over-year revenue improvement in the Company's Canadian Credit Card Loyalty and Online Shopping Mall programs. Net Loss from Continuing Operations for the quarter ending December 31, 2005 was $604,000 compared to $449,000 for the same period in the previous year. The loss included $205,000 of additional costs associated with the restructuring initiative that commenced in November 2005. On a comparative basis, after removing the restructuring costs, net results for the quarter were flat year over year.

"The abovementioned restructuring initiative will result in annualized cost savings of $1.5 - $1.8 million compared with fiscal 2005. The benefits from these cost savings measures will begin to be reflected in the next and subsequent reporting periods," said G. Randall Munger, Chairman and Chief Executive Officer of Advantex.

"During the quarter, Advantex developed and implemented its plan to begin aggressively growing its Canadian Credit Card Loyalty programs," said Mr. Munger. "Improvements introduced are being positively received by both current and prospective merchant partners. Several new signature merchants in Toronto including Thuet, Lobby, Sassafraz and Chiado Restaurant, recently joined or rejoined the program. Cioppino's Mediterranean Grill, one of Vancouver's finest and most popular dining establishments, and The Lord Elgin Hotel in Ottawa are also among our newest participants."

For the six months ended December 31, 2005, Sales and Fees were $35,926,000. The year-over-year revenue improvement from the Company's core programs was $568,000. Net Loss from Continuing Operations for the six months ending December 31, 2005 was $1,562,000 versus $1,468,000 in the previous year.

Fiscal 2005 reflects certain non-recurring fees and events. Excluding the impact of these factors, which amounted to $160,000 for the quarter and $303,000 year to date, and the restructuring costs incurred in the current year, the Company's results for Q2 2006 improved by $210,000 year-over-year, while results for the six-month period improved by $414,000.

Non-recurring fees and events include one-time fees generated in fiscal 2005 and the discontinuation of the US Credit Card Loyalty initiative.

Outlook

The Company is focused on expanding the programs and markets in which it holds leadership positions, specifically, the Canadian Credit Card Loyalty programs, and the Online Shopping Mall programs in the United States. A restructuring of the business has been and is continuing to be implemented to achieve cost savings, increased revenue and improved profitability.

The Company is enhancing its product offering with the objective of substantially increasing the number of merchant participants. Product enhancements include the introduction of improved marketing packages and larger cash advances. The Company is also expanding its sales coverage into additional geographic areas and ethnic markets.

Advantex's Online Shopping Malls are expected to show continued growth in terms of volume and profitability, the result of enhanced marketing support being provided by Advantex and its airline Channel Partners, and the addition of new malls.

On January 20, 2006, Advantex announced the expansion of its long-term relationship with The New York Times with the launch of TimesPoints Online Shops (http://timespointsonlineshops.com), an online shopping mall for The New York Times New Online Member Rewards Program. New York Times subscribers earn TimesPoints when making online purchases through the online shopping mall, redeemable towards the purchase of NYT subscriptions or retail gift cards.

Advantex's Internet technology and electronic marketing expertise has raised the Company's profile among airline and other industry sectors looking to capitalize on the ubiquity of Internet access and the growing number of consumers shopping online. Financial institutions and daily newspapers are only two of the verticals Advantex is targeting for growth. Online shopping is on the rise, confirmed by numerous independent studies.

On January 26th, 2006, the Company announced the appointment of Notre- Dame Capital Inc. as its exclusive agent to raise additional working capital to fund Advantex's expansion plans over the coming 24 months.

About Advantex Marketing International Inc.

Advantex Marketing International Inc. is a leading marketing services company, specializing in integrated marketing solutions for its Merchant and Channel Partner clients. Advantex offers a range of products and services including coalition loyalty rewards programs, online shopping malls, direct marketing, online and email promotion; and data capture and award processing systems. Advantex loyalty partners include CIBC, United Airlines, Delta Air Lines, The New York Times, and other major North American corporations, as well as a growing list of restaurants, online retailers, golf courses, small inns and resorts. Advantex is a public company, traded on the Toronto Stock Exchange under the symbol "ADX". For additional information on Advantex, please visit www.advantex.com.

This press release may include statements about expected future events and/or financial results that are forward-looking in nature and subject to risks and uncertainties. Advantex cautions that actual performance will be affected by a number of factors, many of which are beyond its control. Future events and results may vary substantially from what Advantex currently foresees. Discussion of the various factors that may affect future results is contained in Advantex's recent filings with Canadian securities regulatory authorities.

ADVANTEX MARKETING INTERNATIONAL INC.

CONSOLIDATED FINANCIAL STATEMENTS

For the three-month and six-month periods

ended DECEMBER 31, 2005

The accompanying consolidated financial statements have been prepared by management and approved by the Board of Directors of the Company. Management is responsible for the information and representations contained in these consolidated financial statements and other sections of this report.

An auditor has not performed a review of these financial statements.

ADVANTEX MARKETING INTERNATIONAL INC.

CONSOLIDATED BALANCE SHEETS (unaudited - note 1)

AS AT DECEMBER 31, JUNE 30,

(in thousands) 2005 2005

($) ($)

ASSETS

Current:

Cash and cash equivalents 2,021 2,971

Accounts receivable 2,125 1,239

Purchased receivables 2,070 2,363

Prepaid expenses and sundry assets 171 225

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6,387 6,798

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Long term:

Capital and other assets 762 874

Deferred financing charges 241 293

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1,003 1,167

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TOTAL ASSETS 7,390 7,965

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LIABILITIES

Current:

Accounts payable and accrued liabilities 4,490 3,804

Deferred revenue 106 40

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4,596 3,844

Long term:

Convertible debenture payable 3,560 3,460

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TOTAL LIABILITIES 8,156 7,304

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SHAREHOLDERS' EQUITY/(DEFICIENCY)

Capital Stock:

Class A preference shares 4 4

Common shares 21,498 21,463

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21,502 21,467

Contributed surplus 60 60

Equity portion of convertible debenture 880 880

Deficit (23,208) (21,746)

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(766) 661

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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 7,390 7,965

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(see accompanying notes)

ADVANTEX MARKETING INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF NET LOSS (unaudited - note 1)

Three Months Ended Six Months Ended

December 31 December 31

(In thousands except net loss 2005 2004 2005 2004

per common share) ($) ($) ($) ($)

REVENUE

Sales and fees 18,028 18,382 35,926 36,056

Direct costs 16,311 16,384 32,821 32,480

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Gross Contribution 1,717 1,998 3,105 3,576

OPERATING EXPENSES

Selling and marketing 781 1,002 1,597 1,811

General and administrative 1,269 1,175 2,558 2,715

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2,050 2,177 4,155 4,526

LOSS BEFORE AMORTIZATION

AND INTEREST (333) (179) (1,050) (950)

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Amortization 86 100 152 188

Interest 185 170 360 330

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271 270 512 518

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NET LOSS - CONTINUING OPERATIONS (604) (449) (1,562) (1,468)

NET INCOME - DISCONTINUED

OPERATIONS - 17 100 239

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NET LOSS FOR THE PERIOD (604) (432) (1,462) (1,229)

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NET (LOSS) PER COMMON SHARE

- Continuing Operations (0.01) 0.00 (0.02) (0.02)

- Discontinued Operations 0.00 0.00 0.00 0.00

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ADVANTEX MARKETING INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF DEFICIT (unaudited - note 1)

Three Months Ended Six Months Ended

December 31 December 31

2005 2004 2005 2004

(In thousands) ($) ($) ($) ($)

BALANCE AT THE BEGINNING

OF THE PERIOD (22,604) (21,539) (21,746) (20,742)

Net income (loss) (604) (432) (1,462) (1,229)

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BALANCE AT THE END

OF THE PERIOD (23,208) (21,971) (23,208) (21,971)

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(see accompanying notes)

ADVANTEX MARKETING INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited - note 1)

Three Months Ended Six Months Ended

December 31 December 31

2005 2004 2005 2004

(In thousands) ($) ($) ($) ($)

OPERATING ACTIVITIES

Net loss - continuing operations (604) (449) (1,562) (1,468)

Items not affecting cash:

Amortization of capital assets 86 100 152 188

Accretion charges 55 45 100 87

Amortization of deferred

financing charges 26 23 52 40

Issue of common shares 0 0 35 0

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(437) (281) (1,223) (1,153)

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Changes in non-cash working

capital items 206 (65) 213 275

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Cash provided by (used in)

operating activities (231) (346) (1,010) (878)

INVESTING ACTIVITIES

Purchase of capital assets (30) (99) (40) (119)

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NET DECREASE IN CASH AND

CASH EQUIVALENTS

CONTINUING OPERATIONS (261) (445) (1,050) (997)

DISCONTINUED OPERATIONS 0 273 100 155

Cash and cash equivalents at

the beginning of the period 2,282 1,667 2,971 2,337

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CASH AND CASH EQUIVALENTS AT

THE END OF THE PERIOD 2,021 1,495 2,021 1,495

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ADDITIONAL INFORMATION

Interest paid semi-annually on

the Convertible Debenture 0 0 206 200

(see accompanying notes)

ADVANTEX MARKETING INTERNATIONAL INC.

Notes to Financial Statements

For the six months ended December 31, 2005 (unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES

The interim unaudited financial statements for the six months ended

December 31, 2005 have been prepared on a consistent basis with the

Company's annual consolidated financial statements for the year ended

June 30, 2005 and should be read in conjunction with the accounting

policies and other disclosures in those consolidated financial

statements. The enclosed consolidated financial statements do not

include all the disclosures required by generally accepted accounting

principles applicable to annual financial statements.

2. CAPITAL STOCK

Issued Common Shares

Number Amount

Balance as at June 30, 2005 58,493,831 $ 21,462,938

Issue of common shares 500,000 35,000

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Balance as at September 30,

and December 31, 2005 58,993,831 $ 21,497,938

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On July 12, 2005, the Company issued 500,000 common shares to CIBC,

by way of a private placement, in consideration of: i) the signing of

a long-term agreement to continue Advantex's merchant-based loyalty

programs and ii) the agreement to cancel CIBC's rights under a

previous agreement to receive additional Incentive Warrants to

purchase Advantex common shares. The value assigned to the shares

issued was based on the Company's share price at that time.

As at June 30, 2004 and December 31, 2004, the number and amount of

issued Common Shares was 50,493,831 and $20,814,938, respectively.

3. STOCK OPTIONS AND WARRANTS

As at December 31, 2005, there were 4,092,500 stock options

outstanding at exercise prices between $0.07 and $ 0.82, expiring

between February 2006 and October 2010.

During the period, the Company issued 2,000,000 stock options at an

exercise price of $0.07 per common share. These stock options expire

on October 27, 2010 and vest equally over a three-year period. During

the period, 625,000 options were forfeited or expired.

The Company calculated the fair value of the stock options issued

during the period using the Black-Scholes option pricing model and

determined their value to be immaterial. Accordingly, no expense has

been recorded in these financial statements upon the issue of these

options. The assumptions used in the model were a risk free interest

rate of 4.4%, an expected life of five years, an expected volatility

of 10% and no expected dividends on the common shares.

In consideration of a commercial agreement for an online and offline

program, a warrant agreement was entered into by which Air Canada and

CIBC collectively had the opportunity to earn up to 55,000,000

incentive warrants of Advantex exercisable for Advantex common shares

over a five year period. The warrant agreement expired on

December 31, 2005. CIBC and Air Canada earned, and Advantex issued, a

total of 175,974 incentive warrants in respect of this agreement.

There were 15,175,974 warrants outstanding at December 31st, 2005,

each warrant entitling the holder to purchase one common share of the

Company on a 1:1 basis. 15,000,000 of these warrants, granted

pursuant to a warrant agreement amongst Advantex, CIBC and Air Canada

expire on February 6, 2006, with each warrant entitling the holder to

purchase one Advantex common share at $1.08 per share. The balance of

175,974 warrants are incentive warrants, issued as described above,

of which 51,789 expired on January 2, 2006 and the remainder are

exercisable up to January 2, 2007 at $0.32.

4. SUBSEQUENT EVENTS

(i) Stock Options

Subsequent to December 31, 2005, the Company received approval from

shareholders at its Annual General Meeting to amend the Company's

Stock Option Plan from a fixed maximum number of Common Shares

issuable under the stock option plan to a "rolling maximum" number of

Common Shares issuable under the stock option plan, not to exceed 10%

of the aggregate number of Common Shares issued and outstanding

(calculated on a non-diluted basis).

(ii) Share Offering, and Debt Facility

The Company has initiated an offering by way of a private placement,

as well as the issue of a subordinated debt facility as announced on

January 26th, 2006. The private placement will be for gross proceeds

of up to $2.0 million; the debt facility will be up to $5.0 million.

The additional capital will be used to fund new programs.

5. COMPARATIVE FIGURES

Certain of the comparative figures have been reclassified to conform

to the presentation adopted in the current year.

%SEDAR: 00004122E

For further information: please contact: Lisa S. Levstein, Director, Communications and Investor Relations, Tel: (416) 322-6130, ext. 260, E-mail: lisa.levstein@advantex.com; To request a free copy of this organization's annual report, please go to http://www.newswire.ca and click on Tools for Investors.

Source: newswire