UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT
TO
RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of October 2014
Commission File Number: 001-35152
WI-LAN INC.
(Translation of registrant’s name
into English)
303 Terry Fox Drive
Suite 300
Ottawa, Ontario K2K 3J1
Canada
(Address of principal executive office)
Indicate by check mark whether the registrant files or will
file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ¨ Form 40-F þ
Indicate by check mark if the registrant is submitting the Form
6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨
Indicate by check mark if the registrant is submitting the Form
6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨
EXHIBIT LIST
Exhibit |
|
Description |
|
|
|
99.1 |
|
Management’s Discussion and Analysis
of Financial Condition and Results of Operations for the Three and Nine Months ended September 30, 2014 and 2013 |
99.2 |
|
Condensed Consolidated Financial Statements
for the Three Months ended September 30, 2014 |
99.3 |
|
Certification of the Chief Executive Officer - Form 52-109F2 Certification of Interim Filings Full Certificate |
99.4 |
|
Certification of the Chief Financial Officer - Form 52-109F2 Certification of Interim Filings Full Certificate |
99.5 |
|
Press Release dated October 29, 2014 |
|
|
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
WI-LAN INC. |
|
|
|
Date: October 31, 2014 |
By: |
/s/ Prashant R. Watchmaker |
|
|
Name: Prashant R. Watchmaker |
|
|
Title: Vice-President, Corporate Legal & Corporate Secretary |
Exhibit 99.1
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations
For
the Three and Nine Months ended September 30, 2014 and 2013
October 28,
2014
|
MD&A |
|
Introduction
This Management’s Discussion and Analysis of Financial
Condition and Results of Operations (this “MD&A”) is dated October 28, 2014. It should be read in conjunction with
the unaudited condensed consolidated financial statements and notes thereto for Wi-LAN Inc. for the three and nine months ended
September 30, 2014 (the “Financial Statements”). References in this MD&A to “WiLAN”, “our Company”,
“we”, “us” and “our” refer to Wi-LAN Inc. and its consolidated subsidiaries during the periods
presented unless the context requires otherwise. The Financial Statements have been prepared in accordance with generally accepted
accounting principles in the United States of America (“U.S. GAAP” or “GAAP”) for interim financial information.
These Financial Statements do not include all of the information and notes required by U.S. GAAP for complete financial statements.
Accordingly, this MD&A should be read in conjunction with our audited financial statements and notes for the year ended December
31, 2013 and the related management’s discussion and analysis of financial condition and results of operations for our year
ended December 31, 2013 dated February 3, 2014 (the “Annual MD&A”), each as filed with the Canadian securities
regulators on SEDAR and furnished to the United States Securities and Exchange Commission (the “SEC”) on Form 40-F
on EDGAR.
Unless otherwise indicated, all financial information in this
MD&A is reported in thousands of United States dollars (“U.S. dollars”), with the exception of share and earnings
per share data which is reported in number of shares and U.S. dollars respectively. The tables and charts included in this document
form an integral part of this MD&A.
We prepared this MD&A with reference to National Instrument
51-102 - Continuous Disclosure Obligations of the Canadian Securities Administrators. Under the U.S./Canada Multijurisdictional
Disclosure System, we are permitted to prepare this MD&A in accordance with Canadian disclosure requirements which may differ
from U.S. disclosure requirements. This MD&A provides information for the three and nine months ended September 30, 2014 and
up to and including October 28, 2014. Additional information filed by us with the Canadian Securities Administrators, including
quarterly reports, annual reports and our annual information form for the year ended December 31, 2013, is available on-line at
www.sedar.com and also on our website at www.WiLAN.com. Our Form 40-F can be found on the SEC’s EDGAR website
at www.sec.gov.
Our management is responsible for establishing appropriate information
systems, procedures and controls to ensure that all financial information disclosed externally, including this MD&A, and used
internally by us, is complete and reliable. These procedures include the review and approval of our financial statements and associated
information, including this MD&A, first by our management’s Disclosure Committee, then by our Board of Directors’
Audit Committee (the “Audit Committee”) and, finally, by our Board of Directors as a whole (the “Board”).
Cautionary Note Regarding
Forward-Looking Statements
This MD&A contains forward-looking statements and forward-looking
information within the meaning of the United States Private Securities Litigation Reform Act of 1995 and other applicable United
States and Canadian securities laws, including such statements relating to:
|
· |
assumptions and expectations described in our critical accounting policies and estimates; |
|
· |
our expectation regarding the adoption and impact of certain accounting pronouncements; |
|
· |
our expectation regarding the growth rates of licensees’ businesses and the expected revenues to be collected from such licensees; |
|
· |
our expectations with respect to revenues to be recorded as a consequence of license agreements with fixed periodic payment structures; |
|
· |
our expectations with respect to the timing and amounts of any license agreements that may be entered into with respect to any of our litigation matters; |
|
· |
our expectations with respect to our ability to sign new licenses and to sign renewal agreements with existing licensees; |
|
· |
our estimates regarding our effective tax rate; |
2014 Third Quarter Financial Results | | 1 |
|
MD&A |
|
|
· |
our expectations with respect to the sufficiency of our financial resources; and |
|
· |
our expectations regarding continued expansion of our patent portfolio through the acquisition of patents from third parties and from the development of new inventions or our entry into licensing relationships with third parties. |
The words “expect”, “anticipate”, “estimate”,
“may”, “will”, “should”, “would”, “intend”, “believe”,
“plan”, “continue”, “anticipate”, “project” or the negative of these words or other
variations on these words, comparable terms and similar expressions are intended to identify forward-looking statements and forward-looking
information. Forward-looking statements and forward-looking information are based on estimates and assumptions made by us in light
of our experience and our perception of historical trends, current conditions and expected future developments, as well as other
factors that we believe are appropriate in the circumstances.
We provide forward-looking statements and forward-looking information
to assist external stakeholders in understanding our management’s expectations and plans relating to the future as of the
date of this MD&A and such statements and information may not be appropriate for any other purposes. The forward-looking statements
and forward-looking information in this MD&A are made as of the date of this MD&A only. We have no intention and undertake
no obligation to update or revise any forward-looking statements or forward-looking information, whether as a result of new information,
future events or otherwise, except as required by law.
Risks and Uncertainties
Many factors could cause our actual results, performance or
achievements to differ materially from those expressed or implied by the forward-looking statements and forward-looking information
including those which are discussed in greater detail under the heading “Risk Factors” in our February 3, 2014 Annual
Information Form for the year ended December 31, 2013 (the “AIF”).
EXPLORATION OF POTENTIAL STRATEGIC ALTERNATIVES
On October 30, 2013 we announced that the Board had initiated
a process to explore and evaluate potential strategic alternatives for the Company, which could have included a sale or other transaction.
On May 14, 2014 we announced that the Board had concluded its
review of strategic alternatives for the Company. Following a comprehensive process, the Board determined that it is in the best
interests of the Company and our shareholders to execute an updated business plan focused on business diversification, licensing
partnerships, improved profitability and increasing the return of cash generated from operations to shareholders.
Non-GAAP Disclosure
We use the term “adjusted earnings” to reference
earnings from continuing operations before stock-based compensation expense, depreciation & amortization expense, interest
expense, unrealized foreign exchange gains or losses, restructuring charges, incentive buy-out, success fee, transaction costs,
investment income, debenture financing costs, provision for income taxes, and certain other non-cash, infrequent charges. We report
adjusted earnings in the belief that it may be useful for certain investors and readers of the financial statements as a measure
of our performance. Adjusted earnings is not a measure of financial performance under U.S.
GAAP. IT DOES NOT HAVE ANY STANDARDIZED MEANING PRESCRIBED BY U.S. GAAP AND IS THEREFORE UNLIKELY TO BE COMPARABLE TO SIMILARLY
TITLED MEASURES USED BY OTHER COMPANIES. Adjusted earnings should not be interpreted as
an alternative to net earnings and cash flows from operations as determined in accordance with U.S. GAAP or as a measure of liquidity.
2014 Third Quarter Financial Results | | 2 |
|
MD&A |
|
selected financial
information
Tables are expressed in thousands of U.S. dollars, except
share and per share amounts
|
|
Three months ended |
|
|
Three months ended |
|
|
Nine months ended |
|
|
Nine months ended |
|
|
|
September
30, 2014 |
|
|
September
30, 2013 |
|
|
September
30, 2014 |
|
|
September
30, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalties |
|
$ |
24,576 |
|
|
|
100 |
% |
|
$ |
20,724 |
|
|
|
100 |
% |
|
$ |
76,209 |
|
|
|
100 |
% |
|
$ |
59,034 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
17,639 |
|
|
|
72 |
% |
|
|
25,671 |
|
|
|
124 |
% |
|
|
46,741 |
|
|
|
61 |
% |
|
|
71,116 |
|
|
|
120 |
% |
Research and development |
|
|
576 |
|
|
|
2 |
% |
|
|
697 |
|
|
|
3 |
% |
|
|
1,844 |
|
|
|
2 |
% |
|
|
2,196 |
|
|
|
4 |
% |
Marketing, general and administration |
|
|
2,692 |
|
|
|
11 |
% |
|
|
3,146 |
|
|
|
15 |
% |
|
|
8,434 |
|
|
|
11 |
% |
|
|
9,519 |
|
|
|
16 |
% |
Foreign exchange loss (gain) |
|
|
1,077 |
|
|
|
4 |
% |
|
|
(825 |
) |
|
|
(4 |
)% |
|
|
1,354 |
|
|
|
2 |
% |
|
|
1,474 |
|
|
|
2 |
% |
Total operating expenses |
|
|
21,984 |
|
|
|
89 |
% |
|
|
28,689 |
|
|
|
138 |
% |
|
|
58,373 |
|
|
|
77 |
% |
|
|
84,305 |
|
|
|
143 |
% |
Earnings (loss) from operations |
|
|
2,592 |
|
|
|
11 |
% |
|
|
(7,965 |
) |
|
|
(38 |
)% |
|
|
17,836 |
|
|
|
23 |
% |
|
|
(25,271 |
) |
|
|
(43 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income |
|
|
124 |
|
|
|
1 |
% |
|
|
170 |
|
|
|
1 |
% |
|
|
402 |
|
|
|
1 |
% |
|
|
553 |
|
|
|
1 |
% |
Earnings (loss) before income taxes |
|
|
2,716 |
|
|
|
11 |
% |
|
|
(7,795 |
) |
|
|
(38 |
)% |
|
|
18,238 |
|
|
|
24 |
% |
|
|
(24,718 |
) |
|
|
(42 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for (recovery of) income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
928 |
|
|
|
4 |
% |
|
|
1,293 |
|
|
|
6 |
% |
|
|
3,708 |
|
|
|
5 |
% |
|
|
3,887 |
|
|
|
7 |
% |
Deferred |
|
|
2,163 |
|
|
|
9 |
% |
|
|
(2,629 |
) |
|
|
(13 |
)% |
|
|
5,337 |
|
|
|
7 |
% |
|
|
(8,080 |
) |
|
|
(14 |
)% |
|
|
|
3,091 |
|
|
|
13 |
% |
|
|
(1,336 |
) |
|
|
(6 |
)% |
|
|
9,045 |
|
|
|
12 |
% |
|
|
(4,193 |
) |
|
|
(7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
$ |
(375 |
) |
|
|
(2 |
)% |
|
$ |
(6,459 |
) |
|
|
(31 |
)% |
|
$ |
9,193 |
|
|
|
12 |
% |
|
$ |
(20,525 |
) |
|
|
(35 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.00 |
) |
|
|
|
|
|
$ |
(0.05 |
) |
|
|
|
|
|
$ |
0.08 |
|
|
|
|
|
|
$ |
(0.17 |
) |
|
|
|
|
Diluted |
|
|
(0.00 |
) |
|
|
|
|
|
|
(0.05 |
) |
|
|
|
|
|
|
0.08 |
|
|
|
|
|
|
|
(0.17 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
120,211,493 |
|
|
|
|
|
|
|
120,701,944 |
|
|
|
|
|
|
|
120,065,487 |
|
|
|
|
|
|
|
121,154,330 |
|
|
|
|
|
Diluted |
|
|
120,211,493 |
|
|
|
|
|
|
|
120,701,944 |
|
|
|
|
|
|
|
120,352,084 |
|
|
|
|
|
|
|
121,154,330 |
|
|
|
|
|
|
|
As at September 30, 2014 |
|
|
As at December 31, 2013 |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
124,711 |
|
|
$ |
130,394 |
|
Short-term investments |
|
|
1,384 |
|
|
|
1,457 |
|
Total assets |
|
|
325,028 |
|
|
|
337,200 |
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
- |
|
|
|
- |
|
Dividends declared per common share |
|
|
0.13 |
|
|
|
0.16 |
|
2014 Third Quarter Financial Results | | 3 |
|
MD&A |
|
Results of operations
overview
Revenues for the three and nine months ended September 30, 2014
were $24,576 and $76,209, respectively, representing an increase of $3,852 or 19% and $17,175 or 29%, respectively, over the same
periods last year. The increase in revenues is primarily attributable to the timing of fixed-payment amounts as a result of the
significant license agreements signed during the twelve months ended December 31, 2013 and the nine months ended September 30,
2014 for which certain agreements contained higher fixed-payments and/or one-time payments at the beginning of the license agreement.
Operating expenses for the three and nine months ended September
30, 2014 were $21,984 or 89% of revenues and $58,373 or 77% of revenues, respectively, representing a decrease of $6,705 or 23%
and $25,932 or 31%, respectively, as compared to the three and nine months ended September 30, 2013. The decrease in operating
expenses is primarily attributable to lower litigation expenses partially offset by an increase in amortization expense.
Litigation expense, which is included in cost of revenue, accounted
for approximately $3,072 or 14% and $6,437 or 11% of total operating expenses for the three and nine months ended September 30,
2014, respectively, as compared to $14,234 or 50% and $40,377 or 48% of total operating expenses for the three and nine months
ended September 30, 2013, respectively. Our preference is to negotiate licenses without the use of litigation; however
that is not always possible. Litigation expenses are expected to vary from period to period due to the variability of litigation
activities and any contingent payments that may be required from licenses signed in any particular quarter. Litigation activities,
and therefore litigation expenses, are difficult to predict as there are many factors that can influence any particular litigation.
As a result of new litigation commenced during the three months ended June 30, 2014, we do expect litigation expenses to increase
modestly in the absence of any success fee payments.
We recorded a net loss for the three months ended September
30, 2014 of $375 or nil per basic and diluted share and net earnings for the nine months ended September 30, 2014 of $9,193 or
$0.08 per basic and diluted share, respectively, as compared to a net loss for the three and nine months ended September 30, 2013
of $6,459 or $0.05 per basic and diluted share and $20,525 or $0.17 per basic and diluted share, respectively.
We consider adjusted earnings, a non-GAAP measure, to be a good
indicator of performance for the business as it more accurately captures financial performance in a given period related to the
operations of the business.
The table below reconciles the net earnings/loss to the adjusted
earnings/loss.
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, 2014 |
|
|
September 30, 2013 |
|
|
September 30, 2014 |
|
|
September 30, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) under GAAP |
|
$ |
(375 |
) |
|
$ |
(6,459 |
) |
|
$ |
9,193 |
|
|
$ |
(20,525 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized foreign exchange loss (gain) |
|
|
903 |
|
|
|
(1,187 |
) |
|
|
410 |
|
|
|
924 |
|
Depreciation and amortization |
|
|
9,046 |
|
|
|
7,662 |
|
|
|
26,187 |
|
|
|
20,881 |
|
Stock based compensation |
|
|
502 |
|
|
|
979 |
|
|
|
1,719 |
|
|
|
3,118 |
|
Disposal of assets (gain) loss |
|
|
(5 |
) |
|
|
78 |
|
|
|
1 |
|
|
|
71 |
|
Income tax expense (recovery) |
|
|
3,091 |
|
|
|
(1,336 |
) |
|
|
9,045 |
|
|
|
(4,193 |
) |
Adjusted earnings (loss) |
|
$ |
13,162 |
|
|
$ |
(263 |
) |
|
$ |
46,555 |
|
|
$ |
276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings (loss) per basic share |
|
$ |
0.11 |
|
|
$ |
(0.00 |
) |
|
$ |
0.39 |
|
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
120,211,493 |
|
|
|
120,701,944 |
|
|
|
120,065,487 |
|
|
|
121,154,330 |
|
The adjusted earnings for the three and nine months ended September
30, 2014 were $13,162 and $46,555, respectively, as compared to an adjusted loss of $263 and adjusted earnings of $276 for the
three and nine months ended September 30, 2013, respectively. The increase in adjusted earnings as compared to last year is
primarily attributable to the increase in revenue and a decrease in litigation expenses.
2014 Third Quarter Financial Results | | 4 |
|
MD&A |
|
Results of Operations for the three and nine months ended
September 30, 2014 as compared to the three and nine months ended September 30, 2013
Revenues
Revenues for the three and nine months ended September 30, 2014
were $24,576 and $76,209, respectively, representing an increase of $3,852 or 19% and $17,175 or 29%, respectively, over the three
and nine months ended September 30, 2013.
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, 2014 |
|
|
September 30, 2013 |
|
|
September 30, 2014 |
|
|
September 30, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
24,576 |
|
|
$ |
20,724 |
|
|
$ |
76,209 |
|
|
$ |
59,034 |
|
Increase from comparative period |
|
|
19 |
% |
|
|
|
|
|
|
29 |
% |
|
|
|
|
Revenues can vary significantly from quarter to quarter depending
upon the type of royalty arrangement with licensees, the timing of royalty reporting by licensees, the cyclical nature of licensees’
markets and fluctuations in foreign currency and other factors. Revenues can fluctuate based on individual licensees’ growth
and success rates in their respective markets, and other market factors on their respective businesses and other factors outside
of our control. See “Risk Factors” contained in our AIF for more detailed information.
Revenue is comprised as follows:
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, 2014 |
|
|
September 30, 2013 |
|
|
September 30, 2014 |
|
|
September 30, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patent royalties |
|
|
88 |
% |
|
|
100 |
% |
|
|
96 |
% |
|
|
100 |
% |
Partnering programs royalties |
|
|
12 |
% |
|
|
0 |
% |
|
|
4 |
% |
|
|
0 |
% |
Brokerage |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
|
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
Partnering programs royalties are derived from licensing patent
portfolios which our operating subsidiaries own or control but for which there are royalty sharing arrangements with the previous
patent owners and, most often, contingent legal fee arrangements with law firms.
For the three and nine months ended September 30, 2014 and 2013,
there were no revenues from brokerage. We may sell patents from our portfolio when we believe the revenue from an outright sale
of patents is greater than what can be derived from licensing the patents.
Two licensees individually accounted for 13% and 11% and, two
licensees individually accounted for 15% and 12% of revenues from royalties for the three and nine months ended September 30, 2014,
respectively, as compared to three licensees which individually accounted for 30%, 15% and 10% and, four licensees which individually
accounted for 18%, 16%, 10% and 10% of revenue from royalties for the three and nine months ended September 30, 2013, respectively.
For the three and nine months ended September 30, 2014, the top ten licensees accounted for 71% and 72% of revenues from royalties,
respectively, as compared to 86% and 80% for the same periods last year.
Cost of revenue
Cost of revenue is comprised of patent licensing expenses which
includes royalty obligations, cost of patents sold through brokerage activities (if any), employee related costs and other costs
incurred in conducting license negotiations, contingent partner payments and legal fees, litigation expense and amortization of
patents expense related to acquired patents. We also consider the expenses related to the management of our patent portfolio as
cost of revenue. The management of our patent portfolio involves filing patent applications, prosecuting applications to obtain
issued patents, documenting infringement, assessing validity of issued patents, conducting due diligence on patents and applications
to be acquired, and other general administrative tasks. Many of these costs are directly related to the size and breadth of our
patent portfolio and, therefore, as we add or reduce patents, these costs would be expected to increase or decrease accordingly.
We are continuously looking at ways to reduce costs including reducing our patent count if revenues will not be impacted.
2014 Third Quarter Financial Results | | 5 |
|
MD&A |
|
Litigation and amortization expenses are not necessarily variable
with revenues. We also include, as a licensing expense, any costs related to sourcing new patent portfolios or developing new strategic
partnerships.
The table below provides the details of cost of revenue:
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, 2013 |
|
|
September 30, 2013 |
|
|
September 30, 2013 |
|
|
September 30, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits |
|
$ |
1,750 |
|
|
$ |
1,569 |
|
|
$ |
6,021 |
|
|
$ |
4,359 |
|
Litigation |
|
|
3,072 |
|
|
|
14,234 |
|
|
|
6,437 |
|
|
|
40,377 |
|
Patent maintenance, prosecution, and evaluation |
|
|
1,692 |
|
|
|
1,458 |
|
|
|
5,095 |
|
|
|
4,143 |
|
Contingent partner payments and legal fees |
|
|
1,615 |
|
|
|
- |
|
|
|
1,615 |
|
|
|
- |
|
Amortization of patents |
|
|
8,903 |
|
|
|
7,464 |
|
|
|
25,626 |
|
|
|
20,293 |
|
Stock-based compensation |
|
|
262 |
|
|
|
341 |
|
|
|
715 |
|
|
|
762 |
|
Other |
|
|
345 |
|
|
|
605 |
|
|
|
1,232 |
|
|
|
1,182 |
|
|
|
$ |
17,639 |
|
|
$ |
25,671 |
|
|
$ |
46,741 |
|
|
$ |
71,116 |
|
Percent of revenue |
|
|
72 |
% |
|
|
124 |
% |
|
|
61 |
% |
|
|
120 |
% |
Decrease from comparative period |
|
|
(31 |
)% |
|
|
|
|
|
|
(34 |
)% |
|
|
|
|
Cost of revenue for the three and nine months ended September
30, 2014 was $17,639 or 72% and $46,741 or 61% of revenues, respectively, as compared to $25,671 or 124% and $71,116 or 120% of
revenues for the same periods last year. The decrease in expenses is primarily attributable to a decrease in litigation expense
partially offset by an increase in amortization expense, patent maintenance, prosecution and evaluation expenses, compensation
and benefits and contingent partner payments and contingent legal fees. In general, patent licensing expenses are proportional
to the breadth and depth of our licensing and brokerage programs and should be expected to increase as we add programs to our business
operations. As a result of the expansion of the number of our licensing programs and an increase in partnering agreements with
contingent partner payment arrangements with the previous patent owners and contingent legal fee arrangements with law firms, licensing
expenses are expected to increase in fiscal 2014.
Patent management expenses were reclassified as cost of revenue
for the three and nine months ended September 30, 2014 and the comparative periods adjusted accordingly.
Litigation is a normal part of our business which may extend
over multiple years and is principally a discretionary cost not directly related to or necessarily proportional to the revenues
we generate. Our external litigation expenses consist of all expenses related to conduct of our litigation activities and include
the costs of external legal counsel and third party costs including those of expert witnesses and other service providers required
during the course of litigations.
Pursuant to our engagement with McKool Smith (“McKools”)
in respect of certain litigations that concluded in 2011, in consideration for a discount on fees in connection with such litigations,
we have agreed to pay McKools a success fee based on achieving certain minimum financial measures attributable to such litigations.
Upon achieving these financial measures, McKools will be entitled to receive a percentage of the proceeds actually received pursuant
to the license agreements relating to these litigations up to a maximum of $27,986. We have collected and expect to collect proceeds
from these license agreements over the next four years. Should we collect these amounts as contemplated in the agreements, McKools
will be entitled to the entire success fee. We accrued the full amount of the success fee obligation in fiscal 2011. As at September
30, 2014, the current and long-term portion of the success fee obligation is $3,425 and $4,703, respectively. During the nine months
ended September 30, 2014, we paid McKools $3,278 (nine months ended September 30, 2013 - $3,161) based on proceeds collected as
of June 30, 2014.
For the three and nine months ended September 30, 2014, litigation
expenses amounted to $3,072 and $6,437, respectively, as compared to $14,234 and $40,377 for the same periods last year. The decrease
in litigation for the three and nine months ended September 30, 2014 is attributable to a decrease in the level of litigation activities
in comparison to the same period last year. Litigation expenses are expected to vary from period to period due to the variability
of litigation activities and any contingent payments that may be required from licenses signed in any particular quarter.
2014 Third Quarter Financial Results | | 6 |
|
MD&A |
|
In the course of our normal operations, we are subject to claims,
lawsuits and contingencies. Accruals are made in instances where it is probable that liabilities may be incurred and where such
liabilities can be reasonably estimated. Although it is possible that liabilities may be incurred in instances for which no accruals
have been made, we have no reason to believe that the ultimate outcome of these matters would have a significant impact on our
consolidated financial position.
On December 16, 2013, we engaged the services of McKools to
represent us in certain patent infringement litigation. Pursuant to this engagement, in consideration for a discounted fixed fee
arrangement, we have agreed to pay McKools a success fee which is based on a percentage of proceeds received (as defined in the
respective agreements) pursuant to future license agreements resulting from these patent infringement litigations. As at September
30, 2014, the success fees are not yet determinable because the total proceeds have not yet been determined and therefore no amounts
have been accrued.
Our partnering programs related to specific patent portfolios
owned or controlled by our operating subsidiaries have contingent partner payment arrangements with the previous patent owners
and most often contingent legal fee arrangements with law firms. As these licensing programs generate revenues we will expect to
incur contingent partner payments and contingent legal fees. The contingent partner payments and contingent legal fees are expected
to fluctuate from period to period based on the amount of revenues recognized each period, the terms and conditions of the particular
contingent legal fee arrangements, the type of contingent partner payment arrangements with the previous patent owners and the
mix of specific patent portfolios generating revenues each period.
Research and development expense (“R&D”)
Our R&D efforts are specifically focused on generating patents
in advanced wireless technologies. The costs associated with these efforts, principally staff costs (including stock-based compensation)
and certain external consultants, are classified as R&D.
The table below provides the details of R&D expense:
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, 2014 |
|
|
September 30, 2013 |
|
|
September 30, 2014 |
|
|
September 30, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits |
|
$ |
481 |
|
|
$ |
406 |
|
|
$ |
1,508 |
|
|
$ |
1,260 |
|
Depreciation |
|
|
36 |
|
|
|
169 |
|
|
|
142 |
|
|
|
408 |
|
Stock-based compensation |
|
|
14 |
|
|
|
75 |
|
|
|
23 |
|
|
|
288 |
|
Other |
|
|
45 |
|
|
|
47 |
|
|
|
171 |
|
|
|
240 |
|
|
|
$ |
576 |
|
|
$ |
697 |
|
|
$ |
1,844 |
|
|
$ |
2,196 |
|
Percent of revenue |
|
|
2 |
% |
|
|
3 |
% |
|
|
2 |
% |
|
|
4 |
% |
Decrease from comparative period |
|
|
(17 |
)% |
|
|
|
|
|
|
(16 |
)% |
|
|
|
|
For the three and nine months ended September 30, 2014, R&D
expenses were $576 or 2% and $1,844 or 2% of revenue, respectively, as compared to $697 or 3% of revenue and $2,196 or 4% of revenue
for the three and nine months ended September 30, 2013, respectively. The decrease in spending for the three and nine months ended
September 30, 2014 is primarily attributable to a decrease in stock-based compensation expense and depreciation partially offset
by an increase in compensation and benefits as a result of an increase in R&D staffing from six to seven and accrued variable
compensation costs.
R&D expense is predominately employee related costs and
therefore any changes in spending will be a result of changes to staffing levels.
2014 Third Quarter Financial Results | | 7 |
|
MD&A |
|
Marketing, general and administration expense (“MG&A”)
MG&A expenses represent the cost of corporate services including
facilities, executive management, finance, corporate legal, human resources, office administration, marketing and communications,
information technology and all costs associated with being a public company.
The table below provides the details of MG&A expense:
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, 2014 |
|
|
September 30, 2013 |
|
|
September 30, 2014 |
|
|
September 30, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits |
|
$ |
1,216 |
|
|
$ |
1,261 |
|
|
$ |
3,201 |
|
|
$ |
3,816 |
|
Depreciation |
|
|
129 |
|
|
|
122 |
|
|
|
454 |
|
|
|
364 |
|
Stock-based compensation |
|
|
203 |
|
|
|
469 |
|
|
|
946 |
|
|
|
1,884 |
|
Public company costs |
|
|
532 |
|
|
|
265 |
|
|
|
1,835 |
|
|
|
1,219 |
|
Facilities |
|
|
162 |
|
|
|
140 |
|
|
|
525 |
|
|
|
411 |
|
Other |
|
|
450 |
|
|
|
889 |
|
|
|
1,473 |
|
|
|
1,825 |
|
|
|
$ |
2,692 |
|
|
$ |
3,146 |
|
|
$ |
8,434 |
|
|
$ |
9,519 |
|
Percent of revenue |
|
|
11 |
% |
|
|
15 |
% |
|
|
11 |
% |
|
|
16 |
% |
Decrease from comparative period |
|
|
(14 |
)% |
|
|
|
|
|
|
(11 |
)% |
|
|
|
|
MG&A expenses for the three and nine months ended September
30, 2014, amounted to $2,692 or 11% of revenues and $8,434 or 11% of revenues, respectively, as compared to $3,146 or 15% of revenue
and $9,519 or 16% of revenues for the same periods last year. The decrease in spending for the three and nine months ended September
30, 2014 is primarily attributable to a decrease in compensation and benefits and stock-based compensation as a result of
changes in staffing levels, and recruiting costs partially offset by an increase in accrued costs related to deferred stock units
granted to the non-executive members of our Board during the three months ended March 31, 2014.
MG&A costs will vary from period to period depending on
activities and initiatives undertaken and changes in staffing levels in any given period. Restricted share units and deferred stock
units are variable elements and therefore changes in the stock price could be expected to impact compensation and public company
spending.
Foreign exchange gain/loss
The table below provides the details of the foreign exchange
gain/loss:
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, 2014 |
|
|
September 30, 2013 |
|
|
September 30, 2014 |
|
|
September 30, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized foreign exchange loss |
|
$ |
174 |
|
|
$ |
362 |
|
|
$ |
944 |
|
|
$ |
550 |
|
Unrealized foreign exchange loss (gain) |
|
|
903 |
|
|
|
(1,187 |
) |
|
|
410 |
|
|
|
924 |
|
|
|
$ |
1,077 |
|
|
$ |
(825 |
) |
|
$ |
1,354 |
|
|
$ |
1,474 |
|
Percent of revenue |
|
|
4 |
% |
|
|
(4 |
)% |
|
|
1 |
% |
|
|
1 |
% |
Decrease from comparative period |
|
|
(231 |
)% |
|
|
|
|
|
|
(8 |
)% |
|
|
|
|
Our realized foreign exchange loss is attributable to unhedged
transactions denominated in currencies other than our functional currency, U.S. dollars. The realized foreign exchange loss is
a result of the change in exchange rates in effect when foreign denominated transactions are initially recorded and the corresponding
settlement.
The unrealized foreign exchange loss recognized in the three
and nine months ended September 30, 2014 resulted from the translation of monetary accounts, primarily cash and cash equivalents,
short-term investments, dividends, and accounts payable, denominated in Canadian dollars to U.S. dollars and foreign exchange contracts
we held at September 30, 2014. The change for the three months ended September 30, 2014 compared to the same period last year
is attributable to the decrease in the value of the Canadian dollar relative to the U.S. dollar, and the level of monetary accounts
denominated in Canadian dollars. The change for the nine months ended September 30, 2014 compared to the same period last year
is attributable to an increase in the value of the Canadian dollar relative to the U.S. dollar, and the level of monetary accounts
denominated in Canadian dollars.
2014 Third Quarter Financial Results | | 8 |
|
MD&A |
|
From time to time we utilize forward contracts to enhance our
ability to manage foreign currency exchange rate risk and exposure to currency rate fluctuations related primarily to future cash
outflows of Canadian dollars. The foreign exchange forward contracts require us to sell U.S. dollars for Canadian dollars at prescribed
rates.
As at September 30, 2014, we held foreign exchange forward contracts
totaling approximately $20,500 which mature at various dates through to June 2015. During the nine months ended September 30, 2014,
we recorded an unrealized foreign exchange loss of approximately $606 related to the foreign exchange forward contracts held as
at September 30, 2014.
We cannot accurately predict foreign exchange movements and
as such, cannot accurately predict future gains and losses related to holding assets and liabilities denominated in currencies
other than U.S. dollars.
Investment income
Our recorded investment income for the three and nine months
ended September 30, 2014 was $124 and $402, respectively as compared to $170 and $553 for the three and nine months ended September
30, 2013, respectively. Investment income includes interest earned on deposits and short-term investments. The decrease in investment
income for the three and nine months ended September 30, 2014 is attributable to a decreased cash position.
Provision for (recovery of) income taxes
The table below provides the details of income tax expense/recovery:
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, 2014 |
|
|
September 30, 2013 |
|
|
September 30, 2014 |
|
|
September 30, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current income tax expense |
|
$ |
928 |
|
|
$ |
1,293 |
|
|
$ |
3,708 |
|
|
$ |
3,887 |
|
Deferred income tax expense (recovery) |
|
|
2,163 |
|
|
|
(2,629 |
) |
|
|
5,337 |
|
|
|
(8,080 |
) |
|
|
$ |
3,091 |
|
|
$ |
(1,336 |
) |
|
$ |
9,045 |
|
|
$ |
(4,193 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current income tax expense % of revenue |
|
|
3.8 |
% |
|
|
6.2 |
% |
|
|
4.9 |
% |
|
|
6.6 |
% |
Income tax expense for the three and nine months ended September
30, 2014 was $3.091 and $9,045, respectively, as compared to an income tax recovery of $1,336 and $4,193 for the same periods last
year. The provision for income tax is recognized based on our management’s best estimate of the weighted average annual income
tax rate expected for the full financial year. The estimated average annual rate used for the three and nine months ended September
30, 2014 and 2013 was approximately 26.5%.
The increase in the deferred income tax expense is primarily
attributable to the utilization of certain previously recognized Canadian loss carryforwards and an increase in the valuation allowance
for our Canadian and U.S. subsidiaries. There is a valuation allowance of $14,590 as at September 30, 2014 (December 31, 2013 -
$10,983) against deferred tax assets for our Canadian and U.S. subsidiaries. We establish a valuation allowance for any portion
of our deferred tax assets for which management believes it is more likely than not that we will be unable to utilize the assets
to offset future taxes. We will continue to evaluate our deferred income tax position quarterly and record any adjustment necessary
in that period.
We expect to continue to utilize certain previously recognized
Canadian loss carryforwards. Until such time as our licensing programs in certain of our Canadian and U.S, subsidiaries generate
sufficient taxable income we expect to continue to maintain a full valuation allowance against deferred tax assets for these Canadian
and U.S. subsidiaries. As a result, we expect our provision for deferred income tax expense to be disproportionately higher when
compared to our estimated average annual rate.
We claim R&D expenditures and related investment tax credits
based on our interpretation of the applicable legislation in the Income Tax Act (Canada). These claims are subject to review
by the Canada Revenue Agency. For the three and nine months ended September 30, 2014, we recorded non-refundable investment tax
credits earned of nil.
2014 Third Quarter Financial Results | | 9 |
|
MD&A |
|
The current income tax expense for the three and nine months
ended September 30, 2014 and 2013, consisted primarily of foreign taxes withheld on royalty revenues received from licensees in
foreign tax jurisdictions for which there is no treaty relief. Withholding tax expense for the three and nine months ended September
30, 2014 was 3.8% of revenue and 4.9% of revenue, respectively, as compared to 6.2% and 6.6% of revenue for the same periods last
year. The decrease in withholding tax expense as a percentage of revenue is attributable to an increase in revenue from jurisdictions
for which there is tax treaty relief.
selected consolidated
quarterly Results
(Unaudited)
Thousands of U.S. dollars except per share amounts |
|
Three
months ended
September 30, 2014 |
|
|
Three
months ended
June 30, 2014 |
|
|
Three
months ended
March 31, 2014 |
|
|
Three
months ended
December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
24,576 |
|
|
$ |
25,655 |
|
|
$ |
25,978 |
|
|
$ |
29,175 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings |
|
$ |
13,162 |
|
|
$ |
16,623 |
|
|
$ |
16,769 |
|
|
$ |
17,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.11 |
|
|
$ |
0.14 |
|
|
$ |
0.14 |
|
|
$ |
0.14 |
|
Diluted |
|
$ |
0.11 |
|
|
$ |
0.14 |
|
|
$ |
0.14 |
|
|
$ |
0.14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
$ |
(375 |
) |
|
$ |
5,599 |
|
|
$ |
3,969 |
|
|
$ |
2,432 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.00 |
) |
|
$ |
0.05 |
|
|
$ |
0.03 |
|
|
$ |
0.02 |
|
Diluted |
|
$ |
(0.00 |
) |
|
$ |
0.05 |
|
|
$ |
0.03 |
|
|
$ |
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
120,211,493 |
|
|
|
120,065,465 |
|
|
|
119,916,260 |
|
|
|
119,972,775 |
|
Diluted |
|
|
120,211,493 |
|
|
|
120,335,029 |
|
|
|
120,260,260 |
|
|
|
120,350,286 |
|
Thousands of U.S. dollars except per share amounts |
|
Three
months ended
September 30, 2013 |
|
|
Three
months ended
June 30, 2013 |
|
|
Three
months ended
March 31, 2013 |
|
|
Three
months ended
December 31, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
20,724 |
|
|
$ |
19,941 |
|
|
$ |
18,369 |
|
|
$ |
21,183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings (loss) |
|
$ |
(263 |
) |
|
$ |
(762 |
) |
|
$ |
1,301 |
|
|
$ |
7,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
- |
|
|
$ |
(0.01 |
) |
|
$ |
0.01 |
|
|
$ |
0.06 |
|
Diluted |
|
$ |
- |
|
|
$ |
(0.01 |
) |
|
$ |
0.01 |
|
|
$ |
0.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(6,459 |
) |
|
$ |
(7,632 |
) |
|
$ |
(6,434 |
) |
|
$ |
(2,119 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.05 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.05 |
) |
|
$ |
(0.02 |
) |
Diluted |
|
$ |
(0.05 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.05 |
) |
|
$ |
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
120,701,944 |
|
|
|
121,225,490 |
|
|
|
121,545,062 |
|
|
|
121,429,318 |
|
Diluted |
|
|
120,701,944 |
|
|
|
121,225,490 |
|
|
|
122,166,911 |
|
|
|
122,417,211 |
|
2014 Third Quarter Financial Results | | 10 |
|
MD&A |
|
Historically, our operating results have fluctuated on a quarterly
basis and we expect that quarterly results will continue to fluctuate in the future. The operating results for interim periods
should not be relied upon as an indication of the results to be expected or achieved in any future period or any fiscal year as
a whole. The factors affecting our revenue and results, many of which are outside of our control, include the factors set out under
the heading “Risks and Uncertainties” above which are discussed in greater detail under the heading “Risk Factors”
in our AIF which we urge readers to review carefully and also include the following:
|
· |
competitive conditions in our industry, including strategic initiatives by us, our licensees or competitors, new products or services or the implementation and take-up of new standards, product or service announcements and changes in pricing policy by us or our licensees; |
|
· |
market acceptance of our patented technologies; |
|
· |
our ability to sign license agreements; |
|
· |
decisions relating to our patents issued pursuant to litigation or administrative proceedings; |
|
· |
the discretionary nature of purchase and budget cycles of our licensees’ customers and changes in their budgets for, and timing of, purchases; |
|
· |
strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy; |
|
· |
general weakening of the economy resulting in a decrease in the overall demand for products and services that infringe our patented technologies or otherwise affecting the capital investment levels of our current and prospective licensees; |
|
· |
timing of product development and new product initiatives; and |
|
· |
the length and variability of the licensing cycles for our patented technologies. |
Because our quarterly revenue is dependent upon a relatively
small number of transactions, even minor variations in the rate and timing of payment of royalties could cause us to plan or budget
inaccurately and those variations could adversely affect our operating results. Delays or reductions in the amounts of royalty
payments would adversely affect our business, results of operations and financial condition. Further, the composition of our quarterly
revenue could vary which could result in us incurring contingent litigation and inventor royalty expense and therefore fluctuations
in our quarterly operating results.
Capital and Liquidity
Cash and cash equivalents and short-term investments amounted
to $126,095 at September 30, 2014, representing a decrease of $5,756 from the $131,851 held at December 31, 2013. The decrease
is primarily attributable to the payment of dividends totaling $13,359 and payments related to patent acquisitions totaling $36,327
partially offset by $44,590 of cash generated in operations.
At September 30, 2014 we had working capital of $94,355, long-term
success fee obligation of $4,703 and patent finance obligation of $30,635 relating to deferred payment terms on patents we acquired
in fiscal 2011, 2013 and 2014.
During the nine months ended September 30, 2014, patent acquisitions
have totaled approximately $28,100 of which $26,500 were acquired under deferred payment terms. As at September 30, 2014, the current
and long-term portions of the patent finance obligation are $20,042 and $30,635, respectively. We expect the repayment of the long-term
portion of the patent finance obligation to be completed within the next two to four years.
We have a revolving credit facility available in the amount
of CDN$8,000 or the equivalent in U.S. dollars for general corporate purposes and a further CDN$2,000 for foreign exchange facility.
Canadian dollar or U.S. dollar amounts advanced under this credit facility are payable on demand and bear interest at the bank's
Canadian prime rate plus 1.0% per annum or U.S. base rate plus 1.0% per annum. Borrowings under this facility are collateralized
by a general security agreement over our cash and cash equivalents, receivables and present and future personal property. As at
and during the three and nine months ended September 30, 2014, we had no borrowings under this facility.
2014 Third Quarter Financial Results | | 11 |
|
MD&A |
|
Effective May 27, 2014, we received regulatory approval to make
a normal course issuer bid (the “NCIB”) pursuant to which we are permitted to purchase up to 11,676,510 common shares
for cancellation. The NCIB commenced on May 29, 2014 and will be completed on May 28, 2015. During the nine months ended September
30, 2014, we repurchased 135,000 common shares under the NCIB for a total of $423.
We plan to use our cash resources to fund our operations and
any litigation that might be required, and to purchase additional high quality patent portfolios and patent licensing businesses
that are identified and fit our value proposition and strategic objectives.
Our ability to generate cash from operations going forward is
based on collecting royalties under our signed licenses and additional licensing of our patent portfolio to companies around the
world. It is difficult to predict the timing and nature of future licenses.
We plan to finance our cash requirements for operating expenses,
litigation costs and technology acquisitions by a combination of cash generated from licensing our patent portfolio and, if desirable
based on market conditions, by selling common shares and debt securities to the public.
Outstanding Common
Share Data
We are authorized to issue an unlimited number of common shares,
6,350.9 special preferred, redeemable, retractable, non-voting shares and an unlimited number of preferred shares, issuable in
series. As at September 30, 2014, there were 120,204,181 common shares and no special or preferred shares issued and outstanding.
We also maintain a Share Option Plan, an Employee Share Purchase Plan and a Deferred Stock Unit Plan. Under all these plans, we
can issue a maximum of 10% of our issued and outstanding common shares from time to time which was, as at September 30, 2014, 12,020,418
common shares combined. As at September 30, 2014, we had 9,417,702 options outstanding and 241,135 DSUs outstanding.
Critical Accounting
Policies, Including Initial Adoption of Policies, and Critical Estimates
Our management is required to make judgments, assumptions and
estimates in applying our accounting policies and practices which have a significant impact on our financial results. Our significant
accounting policies are described in Note 2 of our audited financial statements and notes for the year ended December 31, 2013.
A discussion of our critical accounting policies, and the estimates related to them, are included in our Annual MD&A. Except
as outlined below, there has been no material changes in our existing critical accounting policies from the disclosures included
in our audited financial statements and notes for the year ended December 31, 2013 and our Annual MD&A. Refer to Note 2, “Basis
of Presentation,” in the Notes to Unaudited Condensed Consolidated Financial Statements updates related to new accounting
pronouncements.
Patents and other intangibles
We have determined that there were no indications of possible
impairment during the three and nine months ended September 30, 2014.
Goodwill
We have determined that there were no indications of possible
impairment during the three and nine months ended September 30, 2014.
2014 Third Quarter Financial Results | | 12 |
|
MD&A |
|
Disclosure Controls
and Procedures
In conformance with National Instrument 52-109 – Certification
of Disclosure in Issuers’ Annual and Interim Filings of the Canadian Securities Administrators, we have filed certificates
signed by our Chief Executive Officer and Chief Financial Officer that, among other things, deal with the matter of disclosure
controls and procedures.
Our management has evaluated the effectiveness of our disclosure
controls and procedures as of September 30, 2014, and based on our evaluation has concluded that these are effective.
The evaluation took into consideration our corporate disclosure
policy and the functioning of our executive officers, Board and Board Committees. In addition, our evaluation covered our processes,
systems and capabilities relating to regulatory filings, public disclosures and the identification and communication of material
information.
Critical accounting estimates are defined as estimates that
are very important to the portrayal of our financial position and operating results and require management to make judgments based
on underlying assumptions about future events and their effects.
These underlying assumptions are based on historical experience
and other factors that we believe to be reasonable under the circumstances and are subject to change as events occur, as additional
information is obtained and as the environment in which we operate changes.
MANAGEMENT’S
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under
the supervision of, our Chief Executive Officer and our Chief Financial Officer to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Because
of its inherent limitations, however, internal control over financial reporting may not prevent or detect misstatements on a timely
basis.
Our management evaluated, under the supervision of the Chief
Executive Officer and Chief Financial Officer, the effectiveness of our internal control over financial reporting as at September
30, 2014. We based our evaluation on criteria established in “Internal Control over Financial Reporting – Guidance
for Smaller Public Companies” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”)
and, based on that evaluation, we have concluded that, as of September 30, 2014, our internal control over financial reporting
is effective.
CHANGES IN INTERNAL
CONTROLS
There have been no changes in our “internal control over
financial reporting” that occurred during the nine months ended September 30, 2014 which have materially affected or are
reasonably likely to materially affect the internal control over financial reporting.
2014 Third Quarter Financial Results | | 13 |
Wi-LAN Inc.
303 Terry Fox Drive, Suite 300
Ottawa, ON Canada
K2K 3J1
Tel: 1.613.688.4900
Fax: 1.613.688.4894
www.wilan.com
Exhibit 99.2
Wi-LAN Inc.
2014 Third Quarter
Unaudited Condensed Consolidated
Financial Results
Interim Report
2014 Third Quarter Financial Results | |
|
Financial
statements
|
|
|
Wi-LAN Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(in thousands of United States dollars, except share and per
share amounts)
| |
Three months ended | | |
Three months ended | | |
Nine months ended | | |
Nine months ended | |
| |
September 30, 2014 | | |
September 30, 2013 | | |
September 30, 2014 | | |
September 30, 2013 | |
| |
| | |
| | |
| | |
| |
Revenue | |
| | | |
| | | |
| | | |
| | |
Royalties | |
$ | 24,576 | | |
$ | 20,724 | | |
$ | 76,209 | | |
$ | 59,034 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| | |
Cost of revenue | |
| 17,639 | | |
| 25,671 | | |
| 46,741 | | |
| 71,116 | |
Research and development | |
| 576 | | |
| 697 | | |
| 1,844 | | |
| 2,196 | |
Marketing, general and administration | |
| 2,692 | | |
| 3,146 | | |
| 8,434 | | |
| 9,519 | |
Foreign exchange loss (gain) | |
| 1,077 | | |
| (825 | ) | |
| 1,354 | | |
| 1,474 | |
Total operating expenses | |
| 21,984 | | |
| 28,689 | | |
| 58,373 | | |
| 84,305 | |
Earnings (loss) from operations | |
| 2,592 | | |
| (7,965 | ) | |
| 17,836 | | |
| (25,271 | ) |
Investment income | |
| 124 | | |
| 170 | | |
| 402 | | |
| 553 | |
Earnings (loss) before income taxes | |
| 2,716 | | |
| (7,795 | ) | |
| 18,238 | | |
| (24,718 | ) |
| |
| | | |
| | | |
| | | |
| | |
Provision for (recovery of) income tax expense | |
| | | |
| | | |
| | | |
| | |
Current | |
| 928 | | |
| 1,293 | | |
| 3,708 | | |
| 3,887 | |
Deferred | |
| 2,163 | | |
| (2,629 | ) | |
| 5,337 | | |
| (8,080 | ) |
| |
| 3,091 | | |
| (1,336 | ) | |
| 9,045 | | |
| (4,193 | ) |
Net and comprehensive income (loss) | |
$ | (375 | ) | |
$ | (6,459 | ) | |
$ | 9,193 | | |
$ | (20,525 | ) |
| |
| | | |
| | | |
| | | |
| | |
Earnings (loss) per share (Note 4) | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | (0.00 | ) | |
$ | (0.05 | ) | |
$ | 0.08 | | |
$ | (0.17 | ) |
Diluted | |
$ | (0.00 | ) | |
$ | (0.05 | ) | |
$ | 0.08 | | |
$ | (0.17 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average number of common shares | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 120,211,493 | | |
| 120,701,944 | | |
| 120,065,487 | | |
| 121,154,330 | |
Diluted | |
| 120,211,493 | | |
| 120,701,944 | | |
| 120,352,084 | | |
| 121,154,330 | |
See accompanying notes to condensed consolidated financial statements
2014 Third Quarter Financial Results | |
|
Financial
statements
|
|
|
Wi-LAN Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands of United States dollars)
| |
September 30, 2014 | | |
December 31, 2013 | |
As at | |
| | | |
| | |
Current assets | |
| | | |
| | |
Cash and cash equivalents | |
$ | 124,711 | | |
$ | 130,394 | |
Short-term investments | |
| 1,384 | | |
| 1,457 | |
Accounts receivable | |
| 6,342 | | |
| 11,999 | |
Prepaid expenses and deposits | |
| 1,476 | | |
| 592 | |
| |
| 133,913 | | |
| 144,442 | |
| |
| | | |
| | |
Loan receivable | |
| 1,214 | | |
| 1,075 | |
Furniture and equipment, net | |
| 1,968 | | |
| 2,159 | |
Patents and other intangibles, net | |
| 153,771 | | |
| 150,025 | |
Deferred tax asset | |
| 21,539 | | |
| 26,876 | |
Goodwill | |
| 12,623 | | |
| 12,623 | |
| |
$ | 325,028 | | |
$ | 337,200 | |
| |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Accounts payable and accrued liabilities | |
$ | 19,515 | | |
$ | 25,011 | |
Current portion of patent finance obligation | |
| 20,042 | | |
| 19,480 | |
| |
| 39,558 | | |
| 44,491 | |
| |
| | | |
| | |
Patent finance obligation | |
| 30,635 | | |
| 32,552 | |
Success fee obligation | |
| 4,703 | | |
| 7,048 | |
| |
| 74,895 | | |
| 84,091 | |
| |
| | | |
| | |
Commitments and contingencies (Note 7) | |
| | | |
| | |
| |
| | | |
| | |
Shareholders' equity | |
| | | |
| | |
Capital stock (Note 4) | |
| 426,062 | | |
| 425,238 | |
Additional paid-in capital | |
| 15,892 | | |
| 14,635 | |
Accumulated other comprehensive income | |
| 16,225 | | |
| 16,225 | |
Deficit | |
| (208,046 | ) | |
| (202,989 | ) |
| |
| 250,133 | | |
| 253,109 | |
| |
$ | 325,028 | | |
$ | 337,200 | |
See accompanying notes to condensed consolidated financial statements
2014 Third Quarter Financial Results | |
|
Financial
statements
|
|
|
Wi-LAN Inc.
Condensed Consolidated Statements of Cash Flow
(Unaudited)
(in thousands of United States dollars)
| |
Three months ended | | |
Three months ended | | |
Nine months ended | | |
Nine months ended | |
| |
September 30, 2014 | | |
September 30, 2013 | | |
September 30, 2014 | | |
September 30, 2013 | |
Cash generated from (used in) | |
| | | |
| | | |
| | | |
| | |
Operations | |
| | | |
| | | |
| | | |
| | |
Net earnings (loss) | |
$ | (375 | ) | |
$ | (6,459 | ) | |
$ | 9,193 | | |
$ | (20,525 | ) |
Non-cash items | |
| | | |
| | | |
| | | |
| | |
Stock-based compensation | |
| 502 | | |
| 979 | | |
| 1,719 | | |
| 3,118 | |
Depreciation and amortization | |
| 9,046 | | |
| 7,662 | | |
| 26,187 | | |
| 20,881 | |
Foreign exchange loss (gain) | |
| 651 | | |
| 351 | | |
| 651 | | |
| (902 | ) |
Disposal of assets (gain) loss | |
| (5 | ) | |
| 78 | | |
| 1 | | |
| 78 | |
Disposal of patents | |
| - | | |
| - | | |
| - | | |
| 46 | |
Deferred income tax expense (recovery) | |
| 2,163 | | |
| (2,629 | ) | |
| 5,337 | | |
| (8,080 | ) |
Accrued investment income | |
| (47 | ) | |
| (40 | ) | |
| (139 | ) | |
| (118 | ) |
Change in non-cash working capital balances | |
| | | |
| | | |
| | | |
| | |
Accounts receivable | |
| (1,701 | ) | |
| (6,357 | ) | |
| 5,657 | | |
| (11,099 | ) |
Prepaid expenses and deposits | |
| (124 | ) | |
| (98 | ) | |
| (884 | ) | |
| (465 | ) |
Payments associated with success fee obligation | |
| (869 | ) | |
| (989 | ) | |
| (3,278 | ) | |
| (3,161 | ) |
Accounts payable and accrued
liabilities | |
| 1,436 | | |
| 839 | | |
| 146 | | |
| 9,254 | |
Cash generated from (used in) operations | |
| 10,677 | | |
| (6,663 | ) | |
| 44,590 | | |
| (10,973 | ) |
Financing | |
| | | |
| | | |
| | | |
| | |
Dividends paid | |
| (4,510 | ) | |
| (4,848 | ) | |
| (13,359 | ) | |
| (13,949 | ) |
Common shares repurchased under normal course
issuer bid | |
| (297 | ) | |
| (2,934 | ) | |
| (423 | ) | |
| (5,846 | ) |
Common shares issued for cash on the exercise
of options | |
| 52 | | |
| - | | |
| 696 | | |
| 478 | |
Common
shares issued for cash from Employee Share Purchase Plan | |
| - | | |
| - | | |
| 89 | | |
| 102 | |
Cash used in financing | |
| (4,755 | ) | |
| (7,782 | ) | |
| (12,997 | ) | |
| (19,215 | ) |
Investing | |
| | | |
| | | |
| | | |
| | |
Sale of short-term investments | |
| 69 | | |
| (30 | ) | |
| 73 | | |
| 113 | |
Purchase of furniture and equipment | |
| (44 | ) | |
| (1,541 | ) | |
| (371 | ) | |
| (1,608 | ) |
Purchase of patents and other
intangibles | |
| (19,219 | ) | |
| (687 | ) | |
| (36,327 | ) | |
| (3,702 | ) |
Cash used in investing | |
| (19,194 | ) | |
| (2,258 | ) | |
| (36,625 | ) | |
| (5,197 | ) |
Foreign exchange (loss) gain on cash held in
foreign currency | |
| (651 | ) | |
| (351 | ) | |
| (651 | ) | |
| 902 | |
| |
| | | |
| | | |
| | | |
| | |
Net cash and cash equivalents generated (used) in the period | |
| (13,923 | ) | |
| (17,054 | ) | |
| (5,683 | ) | |
| (34,483 | ) |
Cash and cash equivalents, beginning of period | |
| 138,634 | | |
| 157,817 | | |
| 130,394 | | |
| 175,246 | |
Cash and cash equivalents, end of period | |
$ | 124,711 | | |
$ | 140,763 | | |
$ | 124,711 | | |
$ | 140,763 | |
See accompanying notes to condensed consolidated financial statements
2014 Third Quarter Financial Results | |
|
Financial
statements
|
|
|
Wi-LAN Inc.
Condensed Consolidated Statement of Shareholders' Equity
(Unaudited)
(in thousands of United States dollars)
| |
Capital Stock | | |
Additional Paid-in
Capital | | |
Accumulated Other
Comprehensive Income | | |
Deficit | | |
Total Equity | |
| |
| | |
| | |
| | |
| | |
| |
Balance - December 31, 2012 | |
| 431,067 | | |
| 11,074 | | |
| 16,225 | | |
| (166,104 | ) | |
| 292,262 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Comprehensive loss: | |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss | |
| - | | |
| - | | |
| - | | |
| (18,093 | ) | |
| (18,093 | ) |
Shares issued: | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock-based compensation expense | |
| - | | |
| 4,192 | | |
| - | | |
| - | | |
| 4,192 | |
Exercise of stock options | |
| 721 | | |
| (243 | ) | |
| - | | |
| - | | |
| 478 | |
Sale of shares under Employee Share Purchase Plan | |
| 196 | | |
| - | | |
| - | | |
| - | | |
| 196 | |
Shares repurchased under normal course issuer bid | |
| (6,746 | ) | |
| (388 | ) | |
| - | | |
| - | | |
| (7,134 | ) |
Dividends declared (Note 4) | |
| - | | |
| - | | |
| - | | |
| (18,792 | ) | |
| (18,792 | ) |
Balance - December 31, 2013 | |
$ | 425,238 | | |
$ | 14,635 | | |
$ | 16,225 | | |
$ | (202,989 | ) | |
$ | 253,109 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Comprehensive earnings: | |
| | | |
| | | |
| | | |
| | | |
| | |
Net earnings | |
| - | | |
| - | | |
| - | | |
| 9,193 | | |
| 9,193 | |
Shares issued: | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock-based compensation expense | |
| - | | |
| 1,719 | | |
| - | | |
| - | | |
| 1,719 | |
Exercise of stock options | |
| 1,214 | | |
| (518 | ) | |
| - | | |
| - | | |
| 696 | |
Sale of shares under Employee Share Purchase Plan | |
| 89 | | |
| - | | |
| - | | |
| - | | |
| 89 | |
Shares repurchased under normal course issuer bid (Note 4) | |
| (479 | ) | |
| 56 | | |
| - | | |
| - | | |
| (423 | ) |
Dividends declared (Note 4) | |
| - | | |
| - | | |
| - | | |
| (14,250 | ) | |
| (14,250 | ) |
Balance - September 30, 2014 | |
$ | 426,062 | | |
$ | 15,892 | | |
$ | 16,225 | | |
$ | (208,046 | ) | |
$ | 250,133 | |
See accompanying notes to condensed consolidated financial statements
2014 Third Quarter Financial Results | |
|
NOTES
|
|
|
Wi-LAN Inc.
NOTES TO Unaudited condensed
CONSOLIDATED FINANCIAL STATEMENTS
Three and nine months ended September 30, 2014 and 2013
(in thousands of United States dollars, except share and per
share amounts, unless otherwise stated)
Wi-LAN Inc. (“WiLAN” or the “Company”)
is an intellectual property licensing company which develops, acquires, and licenses and otherwise enforces a range of patented
technologies which are utilized in products in the communications and consumer electronics markets. The Company generates revenue
by licensing its patents to companies that sell products utilizing technologies including: Wi-Fi, WiMAX, LTE, CDMA, DSL, DOCSIS,
Bluetooth and V-Chip. The Company also generates revenue by licensing patent portfolios on behalf of its partners and, if necessary,
the enforcement of their patented technologies.
The unaudited condensed consolidated financial statements of
WiLAN include the accounts of WiLAN and its subsidiaries and have been prepared in accordance with generally accepted accounting
principles in the United States of America (“U.S. GAAP”) for interim financial information, including all normal recurring
adjustments that are, in the opinion of management, necessary for a fair statement of the financial position, operations and cash
flows for the interim periods. As the interim financial statements do not contain all the disclosures required in annual financial
statements, they should be read in conjunction with the Company’s audited consolidated financial statements for the year
ended December 31, 2013 and the accompanying notes. All inter-company transactions and balances have been eliminated.
Patent management costs, which had previously been classified
as research and development, are now classified as cost of revenue and the prior year comparatives have been adjusted accordingly
to conform to the current year’s presentation.
| 3. | Significant accounting policies |
These unaudited condensed consolidated interim financial statements
have been prepared following the same accounting policies disclosed in Note 2 of the Company’s audited consolidated financial
statements and notes for the year ended December 31, 2013.
In May 2014, the Financial Accounting Standards Board issued
Accounting Standards Update (“ASU”) No. 2014-9 “Revenue from Contracts with Customers.” The new accounting
standards update requires an entity to apply a five step model to recognize revenue to depict the transfer of promised goods and
services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those
goods or services, as well as, a cohesive set of disclosure requirements that would result in an entity providing comprehensive
information about the nature, timing, and uncertainty of revenue and cash flows arising from an entity’s contracts with customers.
The standard becomes effective for reporting periods beginning after December 15, 2016, with no early adoption permitted. The Company
is currently assessing the impact of this new standard.
The Company paid quarterly cash dividends as follows:
| |
2014 | | |
2013 | |
| |
Per Share | | |
Total | | |
Per Share | | |
Total | |
1st Quarter | |
$ | 0.040 | | |
$ | 4,510 | | |
$ | 0.035 | | |
$ | 4,234 | |
2nd Quarter | |
| 0.040 | | |
| 4,339 | | |
| 0.040 | | |
| 4,867 | |
3rd Quarter | |
| 0.040 | | |
| 4,510 | | |
| 0.040 | | |
| 4,848 | |
| |
$ | 0.120 | | |
$ | 13,359 | | |
$ | 0.115 | | |
$ | 13,949 | |
2014 Third Quarter Financial Results | 5 |
|
NOTES
|
|
|
Wi-LAN
Inc.
NOTES TO Unaudited condensed
CONSOLIDATED FINANCIAL STATEMENTS
Three and nine months ended September 30, 2014 and 2013
(in thousands of United States dollars, except share and per
share amounts, unless otherwise stated)
The Company declared quarterly dividends as follows:
| |
2014 | | |
2013 | |
1st Quarter | |
$ | 0.040 | | |
$ | 0.040 | |
2nd Quarter | |
| 0.040 | | |
| 0.040 | |
3rd Quarter | |
| 0.050 | | |
| 0.040 | |
On May 27, 2014, the Company received regulatory approval to
make a normal course issuer bid (“NCIB”) through the facilities of the Toronto Stock Exchange. Under the NCIB, the
Company is permitted to purchase up to 11,676,510 common shares. The NCIB commenced on May 29, 2014 and is expected to be completed
on May 28, 2015. The Company repurchased 135,000 common shares under the NCIB during the nine months ended September 30, 2014 for
a total of $423.
The weighted average number of common shares outstanding used
in the basic and diluted earnings per share (“EPS”) computation was:
| |
Three months ended
September 30, 2014 | | |
Three months ended
September 30, 2013 | | |
Nine months ended
September 30, 2014 | | |
Nine months ended
September 30, 2013 | |
Basic weighted average common shares outstanding | |
| 120,211,493 | | |
| 121,225,490 | | |
| 119,991,276 | | |
| 121,384,394 | |
Effect of options | |
| - | | |
| - | | |
| 306,108 | | |
| - | |
Diluted weighted average common shares outstanding | |
| 120,211,493 | | |
| 121,451,967 | | |
| 120,297,384 | | |
| 121,451,967 | |
For the three months ended September 30, 2014, the effect of
stock options totaling 231,121 were anti-dilutive (three and nine months ended September 30, 2013 - 430,838 and 521,627, respectively).
| 5. | patent finance obligation |
During the three months ended June 30, 2014, the Company acquired
certain patents for future considerations while entering into a licensing agreement with the same counter-party. The obligation
was based on an initial payment of $2,143, a $12,000 payment in July 2014 and, beginning August 2014, six quarterly payments of
$2,143 using a discount rate of 4.75%. The discount rate is based on interest rates for secured term debt with fixed payments over
a two year term.
The acquired patents were recorded at the fair value of $26,482.
As at September 30, 2014, the current and long term portion of this obligation is $8,256 and $2,126, respectively.
As of September 30, 2014, the Company held foreign exchange
forward contracts totaling approximately $20,500 which mature at various dates through to June 2015. The foreign exchange forward
contracts require the Company to sell U.S. dollars for Canadian dollars at prescribed rates. The Company uses quoted market prices
for similar instruments in an active market and, therefore, the foreign exchange forward contracts are classified as Level 2 in
the fair value hierarchy which resulted in the Company recording an unrealized foreign exchange loss of approximately $606 during
the nine months ended September 30, 2014 related to the foreign exchange forward contracts held as at September 30, 2014.
Cash and cash equivalents, short-term investments,
accounts receivables, accounts payable and accrued liabilities are short-term financial instruments whose carrying value approximates
their fair value.
The Company considers the rates used to determine the carrying
value of the patent finance obligation and loan receivable to be reflective of current rates and therefore their carrying value
approximates their fair value.
2014 Third Quarter Financial Results | 6 |
|
NOTES
|
|
|
Wi-LAN
Inc.
NOTES TO Unaudited condensed
CONSOLIDATED FINANCIAL STATEMENTS
Three and nine months ended September 30, 2014 and 2013
(in thousands of United States dollars, except share and per
share amounts, unless otherwise stated)
| 7. | Commitments and contingencies |
The Company, in the course of its normal operations, is subject
to claims, lawsuits and contingencies. Accruals are made in instances where it is probable that liabilities may be incurred and
where such liabilities can be reasonably estimated.
Management has evaluated the likelihood of an
unfavourable outcome and determined that no amount should be accrued with respect to any outstanding matters.
In connection with the acquisition of certain patents and patent
rights, the Company has agreed to future additional payments to the former owners of the respective patents or patent rights, based
on future revenues (as defined in the respective agreements) generated as a result of licensing the respective patents or patent
portfolios. For the nine months ended September 30, 2014, the Company has recorded $998 of contingent partner payments.
On December 16, 2013, the Company engaged the services of an
external law firm to represent the Company in certain patent infringement litigations. Pursuant to this engagement, in consideration
for a discounted fixed fee arrangement, the Company has agreed to pay the firm a success fee which is based on a percentage of
proceeds received (as defined in the respective agreements) pursuant to future license agreements resulting from these patent infringement
litigations. As at September 30, 2014, the success fees are not yet determinable because the total proceeds have not yet been determined
and therefore no amounts have been accrued.
2014 Third Quarter Financial Results | 7 |
Wi-LAN Inc.
303 Terry Fox Drive Suite 300
Ottawa, ON Canada
K2K 3J1
Tel: |
1.613.688.4900 |
|
Fax: |
1.613.688.4894 |
|
|
www.wilan.com |
|
Exhibit 99.3
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, James D. Skippen, President &
Chief Executive Officer of Wi-LAN Inc., certify the following:
| 1. | Review: I have reviewed the interim financial report and interim MD&A (together, the
“interim filings”) of Wi-LAN Inc. (the “issuer”) for the interim period ended September 30, 2014. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the
interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or
that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the
period covered by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim
financial report together with the other financial information included in the interim filings fairly present in all material respects
the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in
the interim filings. |
| 4. | Responsibility: The issuer’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR),
as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings,
for the issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s
other certifying officer(s) and I have, as at the end of the period covered by the interim filings |
| (a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance
that |
| (i) | material information relating to the issuer is made known to us by others, particularly during
the period in which the interim filings are being prepared: and |
| (ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other
reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods
specified in securities legislation; and |
| (b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with the issuer’s GAAP. |
| 5.1 | Control framework: The control framework the issuer’s other certifying officer(s)
and I used to design the issuer’s ICFR is the Internal Control – Integrated Framework (COSO Framework) published by
The Committee of Sponsoring Organizations of the Treadway Commission (COSO). |
| 5.2 | ICFR - material weakness relating to design: N/A |
| 5.3 | Limitation on scope of design: N/A |
| 6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in
the issuer’s ICFR that occurred during the period beginning on July 1, 2014 and ended on September 30, 2014
that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
Date: October 30, 2014
(signed) James D. Skippen |
|
James D. Skippen |
|
President & Chief Executive Officer |
|
Exhibit 99.4
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Shaun McEwan, Chief Financial
Officer of Wi-LAN Inc., certify the following:
| 1. | Review: I have reviewed the interim financial report and interim MD&A (together, the
“interim filings”) of Wi-LAN Inc. (the “issuer”) for the interim period ended September 30, 2014. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the
interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or
that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the
period covered by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim
financial report together with the other financial information included in the interim filings fairly present in all material respects
the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in
the interim filings. |
| 4. | Responsibility: The issuer’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR),
as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings,
for the issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s
other certifying officer(s) and I have, as at the end of the period covered by the interim filings |
| (a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance
that |
| (i) | material information relating to the issuer is made known to us by others, particularly during
the period in which the interim filings are being prepared: and |
| (ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other
reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods
specified in securities legislation; and |
| (b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with the issuer’s GAAP. |
| 5.1 | Control framework: The control framework the issuer’s other certifying officer(s)
and I used to design the issuer’s ICFR is the Internal Control – Integrated Framework (COSO Framework) published by
The Committee of Sponsoring Organizations of the Treadway Commission (COSO). |
| 5.2 | ICFR - material weakness relating to design: N/A |
| 5.3 | Limitation on scope of design: N/A |
| 6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in
the issuer’s ICFR that occurred during the period beginning on July 1, 2014 and ended on September 30, 2014
that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
Date: October 30, 2014
(signed) Shaun McEwan |
|
Shaun McEwan |
|
Chief Financial Officer |
|
Exhibit 99.5
|
Press release |
|
|
WiLAN Subsidiary Enters into Patent Agreement with ROHM Co.,
Ltd.
OTTAWA,
Canada – October 29, 2014 – Top intellectual property licensing company, WiLAN (TSX:WIN) (NASD:WILN),
today announced that a wholly-owned subsidiary of the company has entered into a patent assignment agreement with ROHM Co.,
Ltd. (“ROHM”) under which WiLAN’s subsidiary is to receive full ownership of a portfolio of patents related
to semiconductor packaging. All other terms of the agreement are confidential.
“We are very pleased that ROHM has
selected WiLAN to be their licensing partner on this portfolio,” said Jim Skippen, President & CEO, WiLAN.
“ROHM, a leader in the development of semiconductor technologies for decades, has built a valuable patent portfolio
that we believe could establish several licensing programs in the future. We look forward to continuing to work with Rohm and
its subsidiary to help them generate a greater return from their investments in research and development.”
“We welcome the opportunity to work with
WiLAN,” said Mr.Hidemi Takasu, Managing Director, ROHM. “WiLAN’s professional
licensing approach and its commitment to R&D activity were key considerations in the decision to select WiLAN in this transaction.”
About ROHM Co., Ltd.
Founded in 1958, ROHM (CEO Satoshi Sawamura) offers system solutions
for a broad range of markets, including consumer devices, mobile phones and telecommunications, and automotive equipment. ROHM
provides LSI and discrete semiconductors characterized by outstanding quality and reliability via its global development and sales
network. Headquartered in Kyoto, the company had consolidated net sales for March 2014 of 331 billion yen and currently employs
19,985. See http://www.rohm.com for more information.
About WiLAN
WiLAN, founded in 1992, is a leading technology innovation and
licensing company. WiLAN has licensed its intellectual property to over 285 companies worldwide. Inventions in our portfolio have
been licensed by companies that manufacture or sell a wide range of communication and consumer electronics products including 3G
and 4G handsets, Wi-Fi-enabled laptops, Wi-Fi and broadband routers, xDSL infrastructure equipment, cellular base stations and
digital TV receivers. For more information: www.wilan.com.
Forward-looking Information
This news release contains forward-looking statements and forward-looking
information within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and other United States and Canadian
securities laws. The phrases “could establish several licensing programs in the future”, ”to work”,
”to help them generate a greater return from their investments” and similar terms and phrases are intended to identify
these forward-looking statements. Forward-looking statements and forward-looking information are based on estimates and assumptions
made by WiLAN in light of its experience and its perception of historical trends, current conditions, expected future developments
and the expected effects of new business strategies, as well as other factors that WiLAN believes are appropriate in the circumstances.
www.wilan.com
|
© copyright Wi-LAN 2014
|
1 |
|
Press release |
|
|
Many factors could cause WiLAN's actual performance or achievements
to differ materially from those expressed or implied by the forward-looking statements or forward-looking information. Such factors
include, without limitation, the risks described in WiLAN’s February 3, 2014 annual information form for the year ended December
31, 2013 (the “AIF”). Copies of the AIF may be obtained at www.sedar.com or www.sec.gov. WiLAN recommends
that readers review and consider all of these risk factors and notes that readers should not place undue reliance on any of WiLAN's
forward-looking statements. WiLAN has no intention and undertakes no obligation to update or revise any forward-looking statements
or forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.
All trademarks and brands mentioned in this
release are the property of their respective owners.
- ## -
For media and investor inquiries, please
contact:
Tyler Burns
Director, Investor Relations
O: 613.688.4330
C: 613.697.0367
E: tburns@wilan.com
www.wilan.com
|
© copyright Wi-LAN 2014
|
2 |
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