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 May 2013
Commission File Number: 001-35152
__________________________
WI-LAN INC.
(Translation of registrant’s name into English)
__________________________
11 Holland Avenue
Suite 608
Ottawa, Ontario K1Y 4S1
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 | Press release dated May 8, 2013 | |
99.2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Three Months ended March 31, 2013 and 2012 | |
99.3 | Condensed Consolidated Financial Statements for the Three Months ended March 31, 2013 | |
99.4 | Certification of the Chief Executive Officer - Form 52-109F2 Certification of Interim Filings Full Certificate | |
99.5 | Certification of the Chief Financial Officer - Form 52-109F2 Certification of Interim Filings Full Certificate |
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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: May 14, 2013 | By: | /s/ Prashant R. Watchmaker |
Name: Prashant R. Watchmaker Title: Vice-President, Corporate Legal & Corporate Secretary |
- 3 - |
Exhibit 99.1
Press release |
WiLAN Initiates LTE Litigation Against Blackberry
OTTAWA, Canada – May 8, 2013 – Wi-LAN Inc. ("WiLAN") (TSX:WIN) (NASDAQ:WILN) today announced it has initiated new litigation claiming patent infringement in the Southern District of Florida against Research In Motion Limited ("RIM"), which is believed to be doing business under the name “Blackberry”.
The suit against RIM claims infringement of U.S. Patent No. 8,274,991 which relates to LTE-compliant mobile handsets.
WiLAN will be represented by Carlson, Caspers, Vandenburgh, Lindquist & Schuman, P.A..
About WiLAN
WiLAN, founded in 1992, is a leading technology innovation and licensing company. WiLAN has licensed its intellectual property to over 265 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. WiLAN has a large and growing portfolio of more than 3,000 issued or pending patents. 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 “will be” 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 and expected future developments, as well as other factors that WiLAN believes are appropriate in the circumstances. 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 March 7, 2013 annual information form for the year ended December 31, 2012 (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.
- ## -
www.wilan.com | © copyright Wi-LAN 2013 | 1 |
Press release |
For Media or 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 2013 | 2 |
Exhibit 99.2
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
For the Three Months ended March 31, 2013 and 2012
May 7, 2013
MD&A |
Introduction
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (this “MD&A”) is dated May 7, 2013. It should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto for Wi-LAN Inc. for the three months ended March 31, 2013 (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, 2012 and the related management’s discussion and analysis of financial condition and results of operations for our year ended December 31, 2012 dated March 7, 2013 (the “Annual MD&A”), each as filed with the Canadian securities regulators on SEDAR and with 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 months ended March 31, 2013 and up to and including May 7, 2013. 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, 2012, 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; |
2013 Financial 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”, “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 which are discussed in greater detail under the heading “Risk Factors” in our Annual Information Form for the year ended December 31, 2012 (“AIF”).
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 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.
2013 Financial 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 | |||||||||||||||
March 31, 2013 | March 31, 2012 | |||||||||||||||
Revenue | ||||||||||||||||
Royalties | $ | 18,369 | 100 | % | $ | 24,693 | 100 | % | ||||||||
Operating expenses | ||||||||||||||||
Cost of revenue | 19,761 | 108 | % | 11,303 | 46 | % | ||||||||||
Research and development | 2,151 | 12 | % | 2,771 | 11 | % | ||||||||||
Marketing, general and administrative | 2,929 | 16 | % | 3,160 | 13 | % | ||||||||||
Realized foreign exchange loss | 89 | 0 | % | 6 | 0 | % | ||||||||||
Unrealized foreign exchange loss (gain) | 944 | 5 | % | (5,376 | ) | (22 | )% | |||||||||
Total operating expenses | 25,874 | 141 | % | 11,864 | 48 | % | ||||||||||
Earnings (loss) from operations | (7,505 | ) | (41 | )% | 12,829 | 52 | % | |||||||||
Investment income | 195 | 1 | % | 722 | 3 | % | ||||||||||
Interest expense | - | 0 | % | (1,126 | ) | (5 | )% | |||||||||
Debenture financing, net | - | 0 | % | (31,138 | ) | (126 | )% | |||||||||
Loss before income taxes | (7,310 | ) | (40 | )% | (18,713 | ) | (76 | )% | ||||||||
Provision for (recovery of) income tax expense | ||||||||||||||||
Current | 1,301 | 7 | % | 1,225 | 5 | % | ||||||||||
Deferred | (2,177 | ) | (12 | )% | (5,527 | ) | (22 | )% | ||||||||
(876 | ) | (5 | )% | (4,302 | ) | (17 | )% | |||||||||
Net loss | $ | (6,434 | ) | (35 | )% | $ | (14,411 | ) | (58 | )% | ||||||
Loss per share | ||||||||||||||||
Basic | $ | (0.05 | ) | $ | (0.12 | ) | ||||||||||
Diluted | (0.05 | ) | (0.12 | ) | ||||||||||||
Weighted average number of common shares | ||||||||||||||||
Basic | 121,545,062 | 121,816,678 | ||||||||||||||
Diluted | 121,545,062 | 121,816,678 |
Consolidated Balance Sheet Information
As at | March 31, 2012 | December 31, 2012 | ||||||
Cash and cash equivalents | $ | 165,603 | $ | 175,246 | ||||
Short-term investments | 1,565 | 1,617 | ||||||
Total assets | 322,500 | 330,785 | ||||||
Long term debt | - | - | ||||||
Dividends declared per common share | 0.040 | 0.035 |
2013 Financial Quarter Financial Results | 3 |
MD&A |
Results of operations overview
Revenues for the three months ended March 31, 2013 were $18,369 representing a decrease of $6,324 or 26% over the three months ended March 31, 2012. The decrease 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, 2011 for which certain agreements contained higher fixed-payments at the beginning of the license agreement.
Operating expenses for the three months ended March 31, 2013 were $25,874 or 141% of revenues, representing an increase of $14,010 or 118% as compared to the three months ended March 31, 2012. The increase in operating expenses is attributable to higher litigation expenses.
Our largest operating expense in each of the presented periods is litigation expense, which is included in cost of revenue. Litigation expense accounted for approximately $12,200 and $3,858 or 47% and 33% of total operating expenses for the three months ended March 31, 2013 and 2012 respectively. Our preference is to negotiate licenses without the use of litigation, however that is not always possible. Given the number of litigations we are currently involved in, if they all proceed to trial, litigation expenses for fiscal 2013 will increase over fiscal 2012 levels, perhaps materially. Litigation activities, and therefore litigation expenses, are difficult to predict as there are many factors that can influence any action that is commenced.
We recorded a net loss for the three months ended March 31, 2013 of $6,434 or $0.05 per basic and diluted share as compared to a net loss for the three months ended March 31, 2012 of $14,411 or $0.12 per basic and diluted share. During the three months ended March 31, 2012, we recorded $31,138 of debenture financing costs related to the financing we put in place late in 2011 to support our bid to acquire MOSAID Technologies Incorporated. These costs are non-recurring in nature.
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 loss to the adjusted earnings.
Three months ended | Three months ended | |||||||
March 31, 2013 | March 31, 2012 | |||||||
Net loss under GAAP | $ | (6,434 | ) | $ | (14,411 | ) | ||
Adjusted for: | ||||||||
Unrealized foreign exchange (gain) loss | 944 | (5,376 | ) | |||||
Depreciation and amortization | 6,703 | 6,167 | ||||||
Stock based compensation | 971 | 1,055 | ||||||
Gain of disposal of assets | (7 | ) | - | |||||
Interest expense | - | 1,126 | ||||||
Debenture financing, net | - | 31,138 | ||||||
Income tax expense (recovery) | (876 | ) | (4,302 | ) | ||||
Adjusted earnings | $ | 1,301 | $ | 15,397 | ||||
Adjusted earnings per basic share | $ | 0.01 | $ | 0.13 | ||||
Weighted average number of common shares | ||||||||
Basic | 121,545,062 | 121,816,678 |
The adjusted earnings for the three months ended March 31, 2013 were $1,301 as compared to $15,397 for the three months ended March 31, 2012. The decrease in adjusted earnings as compared to last year is primarily attributable to the decrease in revenue and an increase in litigation expenses.
2013 Financial Quarter Financial Results | 4 |
MD&A |
Results of Operations for the three months ended March 31, 2013 as compared to the three months ended March 31, 2012
Revenues
Revenues for the three months ended March 31, 2013 were $18,369, representing a decrease of $6,324 or 26%.
Three months ended | ||||||||
March 31, 2013 | March 31, 2012 | |||||||
Revenues | $ | 18,369 | $ | 24,693 | ||||
Decrease from comparative period | (26 | )% |
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 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 | ||||||||
March 31, 2013 | March 31, 2012 | |||||||
Royalties | 100 | % | 100 | % | ||||
Brokerage | 0 | % | 0 | % | ||||
100 | % | 100 | % |
Three licensees accounted for more than 10% of revenues from royalties for the three months ended March 31, 2013 as compared to two licensees for the three months ended March 31, 2012. For the three months ended March 31, 2013 and 2012, the top ten licensees accounted for 81% of revenues from royalties.
Cost of Revenue
Cost of revenue is comprised of patent licensing expenses which includes royalty obligations, cost of patents sold through brokerage activities, employee related costs and other costs incurred in conducting license negotiations as well as litigation expense and amortization of patents expense related to acquired patents. We also include, as a licensing expense, any costs related to sourcing new patent portfolios or developing new strategic partnerships.
Three months ended | ||||||||
March 31, 2013 | March 31, 2012 | |||||||
Patent licensing | $ | 898 | $ | 1,292 | ||||
Litigation | 12,200 | 3,858 | ||||||
Amortization of patents | 6,505 | 5,929 | ||||||
Stock-based compensation | 158 | 224 | ||||||
$ | 19,761 | $ | 11,303 | |||||
Percent of revenue | 108 | % | 46 | % | ||||
Increase from comparative period | 75 | % |
2013 Financial Quarter Financial Results | 5 |
MD&A |
Cost of revenue for the three months ended March 31, 2013 was $19,761 or 108% of revenues as compared to $11,303 or 46% of revenues. The increase in expenses is primarily attributable to an increase in litigation expense and amortization expense as a result of patent acquisitions completed during fiscal 2012, partially offset by a decrease in patent licensing expenses. Litigation and amortization expenses are not necessarily variable with revenues. Patent licensing expense is predominately employee related costs and therefore is not directly variable with revenues. 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. During the three months ended March 31, 2013, our Core Programs have remained consistent with previous years.
For the three months ended March 31, 2013, litigation expenses amounted to $12,200 as compared to $3,858 for the same period last year. The increase in litigation for the three months ended March 31, 2013 is attributable to an increase in the level of litigation activities in comparison to the same period last year, including preparation for three claims construction hearings, and preparation for multiple trials scheduled to take place in 2013, of which the first trial is scheduled to commence in July 2013. Litigation expenses are expected to vary from period to period due to the variability of litigation activities and are expected to increase significantly in fiscal 2013 given the level of litigation matters that are currently active.
During the three months ended March 31, 2013, we continued to realize an increased level of litigation activities primarily as a result of patent infringement actions before the U.S. District Court for the Southern District of New York (the “SDNY Court”), the U.S. District Court for the Southern District of Florida (the “SDFL Court”) and the U.S. District Court for the Eastern District of Texas (the “EDTX Court”). The following discloses our litigation activities:
On October 5, 2010, WiLAN filed claims against a number of major companies including Alcatel-Lucent USA Inc. (“Alcatel-Lucent”), Ericsson Inc. (“Ericsson”), Sony Ericsson Mobile Communications (USA) Inc., HTC Corporation (“HTC”) and LGE in the EDTX Court. The Company has claimed that these companies have infringed and continue to infringe our U.S. patent numbers 6,088,326 (the “326 patent”), 6,195,327, 6,222,819 and 6,381,211 by making and/or selling various products including wireless communications products that use technology derived from these patents which relate to the 3GPP standard. This action was settled as against LGE in December 2010. A trial against the remaining defendants in this action is currently scheduled to begin on or about July 1, 2013.
On February 2, 2011, WiLAN filed claims against HTC in the EDTX Court (the “HTC Matter”). The Company claimed that HTC has infringed and continues to infringe our U.S. patent numbers 5,282,222 (the “222 patent”) and RE37,802 (the “802 patent”) by making and/or selling various products including mobile handheld devices and other equipment that use technology derived from these patents. On September 17, 2012, this matter was consolidated with the action we originally filed with the EDTX Court on September 1, 2011 against Apple Inc. (“Apple”) and other parties which is discussed below. A claim construction hearing in these consolidated actions was held on March 21, 2013 and the EDTX Court issued its Markman Order on April 11, 2013. Trial is currently scheduled for October 7, 2013.
On September 1, 2011, WiLAN filed claims against Apple, Alcatel-Lucent, Dell Inc., Hewlett-Packard Company, HTC America, Inc., Kyocera International, Inc., Kyocera Communications, Inc., Novatel Wireless, Inc. and Sierra Wireless America, Inc. (“Sierra Wireless”). The Company has claimed that these companies have infringed and continue to infringe the 222 patent and the 802 patent by making and/or selling various wireless communications products including modems, personal computers and mobile handheld devices that use technology derived from these patents. On September 17, 2012, this matter was consolidated with the action we originally filed with the EDTX Court on February 2, 2011 against HTC which is discussed above. A claim construction hearing in these consolidated actions was held on March 21, 2013 and the EDTX Court issued its claims construction order on April 11, 2013. Trial is currently scheduled for October 7, 2013.
On January 23, 2012, WiLAN filed claims against Research In Motion Limited and Research In Motion Corporation (collectively, “RIM”) before the SDFL Court. The Company has claimed that RIM has infringed and continues to infringe our U.S. patent numbers 5,515,369 (the “369 patent”), 6,240,088 (the “088 patent”) and 6,232,969 (the “969 patent”) by making and/or selling various wireless communications products. A claim construction hearing in this action is currently scheduled for August 1, 2013. Trial in this action is currently scheduled for February 24, 2014.
On October 1, 2012, WiLAN filed claims in the SDFL Court in separate actions against Alcatel-Lucent and against Ericsson and Telefonaktiebolaget LM Ericsson (“LME”) claiming infringement of our U.S. patent numbers 8,229,437, 8,027,298 and 8,249,014 related to LTE technologies. A trial against Ericsson and LME is currently scheduled for September 23, 2013; the SDFL Court has not set a claim construction hearing date for this matter. A claim construction hearing with respect to Alcatel-Lucent is currently scheduled for August 1, 2013. Trial against Alcatel-Lucent is currently scheduled for April 21, 2014.
2013 Financial Quarter Financial Results | 6 |
MD&A |
On October 1, 2012, the Company filed an action against Hon Hai Precision Industry Co. Ltd (“Hon Hai”) in the State Court of Florida concerning Hon Hai’s failure to report sales and revenues as required under a license agreement signed in January, 2008. Although Hon Hai moved to transfer this action to the SDFL Court, upon a motion by WiLAN, the case was remanded to the State Court of Florida and currently continues through the discovery phase. On October 23, 2012, Hon Hai filed an action in the SDNY Court requesting a declaration that Hon Hai does not infringe the 402 patent and that the 402 patent is invalid. The Company has filed a motion to dismiss this action.
On October 3, 2012 and October 15, 2012, WiLAN filed separate actions in the SDFL Court against each of LGE and Toshiba Corporation, respectively, claiming infringement of our U.S. patent numbers 6,359,654 and 7,034,889 related to digital television and display technology. A trial against Toshiba Corporation is currently scheduled for October 7, 2013. A trial date has not been set for action against LGE.
On December 6, 2012, the Company filed separate claims in the SDFL Court against Apple, HTC and Sierra Wireless claiming infringement of our U.S. patent numbers 8,315,640 and 8,311,040 related to LTE technologies. These actions have since been transferred to the U.S. District Court for the Southern District of California (the “SDCA Court”).
On December 6, 2012, WiLAN filed separate claims in the EDTX Court against each of Apple and Sierra Wireless claiming infringement of our U.S. patent number 6,381,211 related to 3G HSPA handset products. These actions remain pending before the EDTX Court and are awaiting the Court to enter a scheduling order.
On December 12, 2012, the Company filed claims in the SDFL Court against RIM claiming infringement of our U.S. patent number 6,260,168 related to Bluetooth technologies. A trial in this action is currently scheduled for November 11, 2013. The SDFL Court has not set a claim construction hearing date for this matter.
On November 14, 2012, Ericsson filed a request for ex parte re-examination at the USPTO with respect to our 326 patent. On February 7, 2013, the USPTO granted this re-examination request. On April 30, 2013, the USPTO issued an Office Action in which it found Claims 1-10 of the 326 patent subject to re-examination, Claims 11-15 of the 326 patent not subject to re-examination, and rejected Claims 1-10 in view of various prior art allegations; WiLAN expects to respond to this office action in due course. We expect that this re-examination process to continue for up to another 18 months. The 326 patent remains valid and enforceable unless and until a final contrary determination has been made by the USPTO and all appeal rights have been exhausted.
On January 25, 2013, Research In Motion Corporation filed petitions for inter partes review at the USPTO with respect to each of our 369 patent and 088 patent. We expect each such inter partes review process to continue for approximately 12 to 24 months. Each such patent remains valid and enforceable unless and until a final contrary determination has been made by the USPTO and all appeal rights have been exhausted.
We have a success fee obligation which is pursuant to our engagement with a law firm, for which the firm is entitled to a percentage of proceeds actually received from certain license agreements signed by us related to certain litigation matters in which the firm was representing us. Should we collect these amounts as contemplated in the agreements, the firm will be entitled to the entire success fee of $27,986. As at March 31, 2013, the current and long term portion of this success fee obligation is $3,853 and $9,937, respectively. As of March 31, 2013 we have made payments to the firm totaling $14,196 based on proceeds collected as of December 31, 2012.
2013 Financial Quarter Financial Results | 7 |
MD&A |
Research and development expense (“R&D”)
Three months ended | ||||||||
March 31, 2013 | March 31, 2012 | |||||||
Research expenses | $ | 525 | $ | 1,162 | ||||
Patent management | 1,414 | 1,241 | ||||||
Depreciation | 74 | 104 | ||||||
Stock-based compensation | 138 | 264 | ||||||
$ | 2,151 | $ | 2,771 | |||||
Percent of revenue | 12 | % | 11 | % | ||||
Decrease from comparative period | (22 | )% |
For the three months ended March 31, 2013, R&D expenses were $2,151 or 12% of revenue as compared to $2,771 or 11% of revenue for the three months ended March 31, 2012. The decrease in spending for the three months ended March 31, 2013 is primarily attributable to a decrease in the number of employees engaged in the research function partially offset by an increase in patent management, principally patent application prosecution and maintenance costs, as a result of the increased size and breadth of our patent portfolio.
Research expense is predominately employee related costs and therefore any changes in spending will be a result of changes to future staffing levels. Many of the patent management costs are directly related to the size and breadth of our patent portfolio and, therefore, as we add patents, these costs would be expected to increase.
Marketing, general and administration expense
Three months ended | ||||||||
March 31, 2013 | March 31, 2012 | |||||||
Marketing, general and administration costs | $ | 2,130 | $ | 2,458 | ||||
Depreciation | 124 | 135 | ||||||
Stock-based compensation | 675 | 567 | ||||||
$ | 2,929 | $ | 3,160 | |||||
Percent of revenue | 16 | % | 13 | % | ||||
Decrease from comparative period | (7 | )% |
Marketing, general and administration (“MG&A”) expenses for the three months ended March 31, 2013, amounted to $2,929 or 16% of revenues as compared to $3,160 or 13% of revenue. The decrease in spending for the three months ended March 31, 2013 is primarily attributable to a decrease in the accrued variable compensation costs related to employee restricted share units.
MG&A costs will vary from period to period depending on activities and initiatives undertaken, and changes in staffing levels in any given period.
2013 Financial Quarter Financial Results | 8 |
MD&A |
Realized foreign exchange loss
Three months ended | ||||||||
March 31, 2013 | March 31, 2012 | |||||||
Realized foreign exchange loss | $ | 89 | $ | 6 | ||||
Percent of revenue | 0 | % | 0 | % | ||||
Decrease from comparative period | NM | * |
* NM - percentage is not meaningful as the change is too large
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.
We cannot accurately predict foreign exchange movements and as such, cannot accurately predict future gains and losses related to unhedged transactions denominated in currencies other than U.S. dollars.
Unrealized foreign exchange gain/loss
Three months ended | ||||||||
March 31, 2013 | March 31, 2012 | |||||||
Unrealized foreign exchange loss (gain) | $ | 944 | $ | (5,376 | ) | |||
Percent of revenue | 5 | % | (22 | )% | ||||
Decrease from comparative period | (118 | )% |
The unrealized foreign exchange loss recognized in the three months ended March 31, 2013 resulted from the translation of monetary accounts denominated in Canadian dollars to U.S. dollars at March 31, 2013. The change from 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.
In addition to the impact of the translation of our foreign currency denominated monetary balances in the three months ended March 31, 2013, the unrealized foreign exchange loss relates to the foreign exchange contracts we held as at March 31, 2013. 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 March 31, 2013, we held foreign exchange forward contracts totaling approximately $29,937 which mature at various dates through to January 2014. During the three months ended March 31, 2013, we recorded a loss of approximately $346 related to the foreign exchange forward contracts held as at March 31, 2013.
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 months ended March 31, 2013 was $195 as compared to $722 for the three months ended March 31, 2012. Investment income includes interest earned on deposits and short-term investments The decrease in investment income for the three months ended March 31, 2013 is attributable to a decreased cash position. The decrease in the cash position is attributable to the repayment of the remaining aggregate principal amount of the outstanding Debentures and accrued and unpaid interest on January 31, 2012.
2013 Financial Quarter Financial Results | 9 |
MD&A |
Debenture financing costs and Interest expense
Three months ended | ||||||||
March 31, 2013 | March 31, 2012 | |||||||
Accretion of debt discount | $ | - | $ | 25,175 | ||||
Foreign exchange loss on debenture retirement | - | 4,217 | ||||||
Amortization of financing costs | - | 1,746 | ||||||
$ | - | $ | 31,138 | |||||
Percent of revenue | 0 | % | 126 | % | ||||
Increase from comparative period | NM | * |
* NM - percentage is not meaningful as the change is too large
On January 31, 2012 we repaid in cash the remaining aggregate principal amount of the outstanding debentures issued in 2011 to support our bid to acquire MOSAID Technologies Incorporated and accrued and unpaid interest and therefore there are no further expenses or costs related to these debentures.
Provision for (recovery of) income taxes
Three months ended | ||||||||
March 31, 2013 | March 31, 2012 | |||||||
Current income tax expense | $ | 1,301 | $ | 1,225 | ||||
Deferred income tax recovery | (2,177 | ) | (5,527 | ) | ||||
$ | (876 | ) | $ | (4,302 | ) | |||
Current income tax expense % of revenue | 7.1 | % | 5.0 | % |
Income tax recovery for the three months ended March 31, 2013 was $876 as compared to an income tax recovery of $4,302 for the same period 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 months ended March 31, 2013 and 2012 was approximately 26.5%.
The decrease in the net income tax recovery is primarily attributable to the reversal of a valuation allowance against certain deferred taxes liabilities in the three months ended March 31, 2012. There is a valuation allowance of $8,113 as at March 31, 2013 (December 31, 2012 - $7,626). We will continue to evaluate our deferred income tax position quarterly and record any adjustment necessary in that period.
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 months ended March 31, 2013, we recorded non-refundable investment tax credits earned of nil.
The current income tax expense for the three months ended March 31, 2013 and 2012, 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 months ended March 31, 2013 and 2012 was 7.1% of revenue and 5.0% of revenue, respectively. The increase in withholding tax expense as a percentage of revenue is attributable to the increase in revenue from jurisdictions for which there is no tax treaty relief.
2013 Financial Quarter Financial Results | 10 |
MD&A |
selected consolidated quarterly Results
(Unaudited)
Thousands of U.S. dollars except per share amounts | Three
months ended March 31, 2013 | Three months
ended December 31, 2012 | Three months
ended September 30, 2012 | Three months ended June 30, 2012 | ||||||||||||
Revenues | $ | 18,369 | $ | 21,183 | $ | 21,293 | $ | 20,791 | ||||||||
Adjusted earnings | $ | 1,301 | $ | 7,036 | $ | 9,260 | $ | 10,069 | ||||||||
Adjusted earnings per share | ||||||||||||||||
Basic | $ | 0.01 | $ | 0.06 | $ | 0.08 | $ | 0.08 | ||||||||
Diluted | $ | 0.01 | $ | 0.06 | $ | 0.08 | $ | 0.08 | ||||||||
Net earnings (loss) | $ | (6,434 | ) | $ | (2,119 | ) | $ | 2,159 | $ | (149 | ) | |||||
Net earnings (loss) per share | ||||||||||||||||
Basic | $ | (0.05 | ) | $ | (0.02 | ) | $ | 0.02 | $ | 0.00 | ||||||
Diluted | $ | (0.05 | ) | $ | (0.02 | ) | $ | 0.02 | $ | 0.00 | ||||||
Weighted average number of common shares | ||||||||||||||||
Basic | 121,545,062 | 121,429,318 | 121,225,793 | 121,338,319 | ||||||||||||
Diluted | 122,166,911 | 122,417,211 | 122,086,343 | 122,505,346 |
Thousands of U.S. dollars except per share amounts | Three months
ended March 31, 2012 | Three months
ended December 31, 2011 | Three months
ended September 30, 2011 | Three months ended June 30, 2011 | ||||||||||||
Revenues | $ | 24,693 | $ | 24,224 | $ | 27,821 | $ | 27,419 | ||||||||
Adjusted earnings | $ | 15,397 | $ | 17,761 | $ | 22,769 | $ | 20,442 | ||||||||
Adjusted earnings per share | ||||||||||||||||
Basic | $ | 0.13 | $ | 0.14 | $ | 0.18 | $ | 0.17 | ||||||||
Diluted | $ | 0.13 | $ | 0.14 | $ | 0.18 | $ | 0.16 | ||||||||
Net earnings (loss) | $ | (14,411 | ) | $ | (5,618 | ) | $ | 7,317 | $ | 10,299 | ||||||
Net earnings (loss) per share | ||||||||||||||||
Basic | $ | (0.12 | ) | $ | (0.05 | ) | $ | 0.06 | $ | 0.08 | ||||||
Diluted | $ | (0.12 | ) | $ | (0.05 | ) | $ | 0.06 | $ | 0.08 | ||||||
Weighted average number of common shares | ||||||||||||||||
Basic | 121,816,678 | 123,581,452 | 123,443,900 | 122,391,639 | ||||||||||||
Diluted | 123,086,211 | 125,216,782 | 125,618,973 | 124,821,577 |
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 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; |
2013 Financial Quarter Financial Results | 11 |
MD&A |
· | 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.
Capital and Liquidity
Cash and cash equivalents, and short-term investments amounted to $167,168 at March 31, 2013, representing a decrease of $9,695 from the $176,863 held at December 31, 2012. The decrease is primarily attributable to $5,042 cash utilized in operations, the payment of dividends totaling $4,234, and the repurchase of common shares totaling $656.
At March 31, 2013 we had working capital of $145,697, long-term success fee obligation of $9,937 and patent finance obligations of $2,014 which relates to deferred payment terms on patents we acquired during the three months ended March 31, 2011.
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 months ended March 31, 2013, we had no borrowings under this facility.
On March 7, 2013, we received regulatory approval to make a normal course issuer bid (“NCIB”) through the facilities of the TSX. Under the NCIB, we could purchase up to 11,846,843 common shares. The NCIB commenced on March 11, 2013 and is to be completed on March 10, 2014. We repurchased 145,000 common shares under the NCIB during the three months ended March 31, 2013 for a total of $656.
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.
2013 Financial Quarter Financial Results | 12 |
MD&A |
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 March 31, 2013, there were 121,537,250 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 March 31, 2013, 12,153,725 common shares combined. As at March 31, 2013, we had 9,774,227 options outstanding and 80,316 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, 2012. 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, 2012 and our Annual MD&A. Refer to Note 2, “Basis of Presentation,” in the Notes to Condensed Unaudited 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 months ended March 31, 2013.
Goodwill
We have determined that there were no indications of possible impairment during the three months ended March 31, 2013.
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 March 31, 2013, 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.
2013 Financial Quarter Financial Results | 13 |
MD&A |
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 March 31, 2013. 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 March 31, 2013, 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 three months ended March 31, 2013 which have materially affected or are reasonably likely to materially affect the internal control over financial reporting.
2013 Financial Quarter Financial Results | 14 |
Wi-LAN Inc.
11 Holland Avenue, Suite 608
Ottawa, ON Canada
K1Y 4S1
Tel: 1.613.688.4900
Fax: 1.613.688.4894
www.wilan.com
Exhibit 99.3
Wi-LAN Inc.
2013 First Quarter
Condensed Unaudited Consolidated
Financial Results
Interim Report
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 | |||||||
March 31, 2013 | March 31, 2012 | |||||||
Revenue | ||||||||
Royalties | $ | 18,369 | $ | 24,693 | ||||
Operating expenses | ||||||||
Cost of revenue | 19,761 | 11,303 | ||||||
Research and development | 2,151 | 2,771 | ||||||
Marketing, general and administration | 2,929 | 3,160 | ||||||
Realized foreign exchange loss | 89 | 6 | ||||||
Unrealized foreign exchange loss (gain) | 944 | (5,376 | ) | |||||
Total operating expenses | 25,874 | 11,864 | ||||||
Earnings (loss) from operations | (7,505 | ) | 12,829 | |||||
Investment income | 195 | 722 | ||||||
Interest expense | - | (1,126 | ) | |||||
Debenture financing, net | - | (31,138 | ) | |||||
Loss before income taxes | (7,310 | ) | (18,713 | ) | ||||
Provision for (recovery of) income tax expense | ||||||||
Current | 1,301 | 1,225 | ||||||
Deferred | (2,177 | ) | (5,527 | ) | ||||
(876 | ) | (4,302 | ) | |||||
Net and comprehensive loss | (6,434 | ) | (14,411 | ) | ||||
Loss per share (Note 4) | ||||||||
Basic | $ | (0.05 | ) | $ | (0.12 | ) | ||
Diluted | $ | (0.05 | ) | $ | (0.12 | ) | ||
Weighted average number of common shares | ||||||||
Basic | 121,545,062 | 121,816,678 | ||||||
Diluted | 121,545,062 | 121,816,678 |
See accompanying notes to condensed consolidated financial statements
2013 First Quarter Financial Results | 1 |
Financial statements |
Wi-LAN Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands of United States dollars)
As at | March 31, 2013 | December 31, 2012 | ||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 165,603 | $ | 175,246 | ||||
Short-term investments | 1,565 | 1,617 | ||||||
Accounts receivable | 6,465 | 1,139 | ||||||
Prepaid expenses and deposits | 849 | 314 | ||||||
174,482 | 178,316 | |||||||
Loan receivable | 950 | 911 | ||||||
Furniture and equipment, net | 1,091 | 1,272 | ||||||
Patents and other intangibles, net | 110,360 | 116,846 | ||||||
Deferred tax asset | 22,994 | 20,817 | ||||||
Goodwill | 12,623 | 12,623 | ||||||
$ | 322,500 | $ | 330,785 | |||||
Current liabilities | ||||||||
Accounts payable and accrued liabilities (Note 5) | $ | 26,208 | $ | 22,406 | ||||
Current portion of patent finance obligation | 2,577 | 2,547 | ||||||
28,785 | 24,953 | |||||||
Patent finance obligation | 2,014 | 2,670 | ||||||
Success fee obligation | 9,937 | 10,900 | ||||||
40,736 | 38,523 | |||||||
Commitments and contingencies (Note 6) | ||||||||
Shareholders' equity | ||||||||
Capital stock (Note 4) | 431,091 | 431,067 | ||||||
Additional paid-in capital | 11,726 | 11,074 | ||||||
Accumulated other comprehensive income | 16,225 | 16,225 | ||||||
Deficit | (177,278 | ) | (166,104 | ) | ||||
281,764 | 292,262 | |||||||
$ | 322,500 | $ | 330,785 |
See accompanying notes to condensed consolidated financial statements
2013 First Quarter Financial Results | 2 |
Financial statements |
Wi-LAN Inc.
Condensed Consolidated Statements of Cash Flow
(Unaudited)
(in thousands of United States dollars)
Three months ended | Three months ended | |||||||
March 31, 2013 | March 31, 2012 | |||||||
Operations | ||||||||
Net loss | $ | (6,434 | ) | $ | (14,411 | ) | ||
Non-cash items | ||||||||
Stock-based compensation | 971 | 1,055 | ||||||
Depreciation and amortization | 6,703 | 6,167 | ||||||
Foreign exchange (gain) loss | (581 | ) | 333 | |||||
Deferred financing costs | - | 1,746 | ||||||
Accretion of debt discount | - | 25,175 | ||||||
Disposal of patents | 46 | - | ||||||
Deferred income tax recovery | (2,177 | ) | (5,527 | ) | ||||
Accrued investment income | (39 | ) | - | |||||
(1,511 | ) | 14,538 | ||||||
Change in non-cash working capital balances | ||||||||
Accounts receivable | (5,326 | ) | (636 | ) | ||||
Prepaid expenses and deposits | (84 | ) | (662 | ) | ||||
Payments associated with success fee obligation | (1,512 | ) | - | |||||
Due to related party | - | (7,102 | ) | |||||
Accounts payable and accrued liabilities | 3,391 | (140 | ) | |||||
Cash (used in) generated from operations | (5,042 | ) | 5,998 | |||||
Financing | ||||||||
Dividends paid | (4,234 | ) | (3,041 | ) | ||||
Repayment of convertible debentures | - | (233,247 | ) | |||||
Common shares repurchased under normal course issuer bid | (656 | ) | (11,467 | ) | ||||
Common shares issued for cash on the exercise of options | 361 | 1,016 | ||||||
Cash used in financing | (4,529 | ) | (246,739 | ) | ||||
Investing | ||||||||
Sale (purchase) of short-term investments | 52 | (70 | ) | |||||
Purchase of furniture and equipment | (17 | ) | (109 | ) | ||||
Purchase of patents and other intangibles | (688 | ) | (687 | ) | ||||
Cash used in investing | (653 | ) | (866 | ) | ||||
Foreign exchange gain on cash held in foreign currency | 581 | 3,854 | ||||||
Net cash and cash equivalents used in the period | (9,643 | ) | (237,753 | ) | ||||
Cash and cash equivalents, beginning of period | 175,246 | 432,186 | ||||||
Cash and cash equivalents, end of period | $ | 165,603 | $ | 194,433 |
See accompanying notes to condensed consolidated financial statements
2013 First Quarter Financial Results | 3 |
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 | - | - | - | (6,434 | ) | (6,434 | ) | |||||||||||||
Shares issued: | ||||||||||||||||||||
Stock-based compensation expense | - | 971 | - | - | 971 | |||||||||||||||
Exercise of stock options | 538 | (177 | ) | - | - | 361 | ||||||||||||||
Shares repurchased under normal course issuer bid (Note 4) | (514 | ) | (142 | ) | - | - | (656 | ) | ||||||||||||
Dividends declared (Note 4) | - | - | - | (4,740 | ) | (4,740 | ) | |||||||||||||
Balance - March 31, 2013 | $ | 431,091 | $ | 11,726 | $ | 16,225 | $ | (177,278 | ) | $ | 281,764 |
See accompanying notes to condensed consolidated financial statements
2013 First Quarter Financial Results | 4 |
NOTES |
Wi-LAN Inc. |
NOTES TO condensed Unaudited CONSOLIDATED FINANCIAL STATEMENTS |
Three months ended March 31, 2013 and 2012 |
(in thousands of United States dollars, except share and per share amounts, unless otherwise stated) |
1. | nature of business |
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 third-party patent holders and, if necessary, the enforcement of their patented technologies.
2. | basis of presentation |
The condensed unaudited 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 presentation 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, 2012 and the accompanying notes. All inter-company transactions and balances have been eliminated.
3. | Significant accounting policies |
These condensed consolidated interim unaudited 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, 2012.
In February 2013, the Financial Accounting Standards Board (the “FASB”) issued final guidance on the presentation of reclassifications out of other comprehensive income. The amendments require an entity to provide information about the amounts reclassified out of other comprehensive income by component. In addition, an entity is required to present, either on the face of the income statement or in a footnote, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, only if the amount reclassified is required by U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide detail about those amounts. This amendment is effective for interim and fiscal years beginning after December 15, 2012. The amended standard will not impact the Company's financial position or results of operations.
4. | share capital |
The Company paid quarterly cash dividends as follows:
2013 | 2012 | |||||||||||||||
Per Share | Total | Per Share | Total | |||||||||||||
1st Quarter | $ | 0.035 | $ | 4,234 | $ | 0.025 | $ | 3,041 |
The Company declared quarterly dividends as follows:
2013 | 2012 | |||||||
1st Quarter | $ | 0.040 | $ | 0.030 |
2013 First Quarter Financial Results | 5 |
NOTES |
Wi-LAN Inc. |
NOTES TO condensed Unaudited CONSOLIDATED FINANCIAL STATEMENTS |
Three months ended March 31, 2013 and 2012 |
(in thousands of United States dollars, except share and per share amounts, unless otherwise stated) |
On March 7, 2013, the Company received regulatory approval to make a normal course issuer bid (“NCIB”) through the facilities of the TSX. Under the NCIB, the Company is permitted to purchase up to 11,846,843 common shares. The NCIB commenced on March 11, 2013 and is expected to be completed on March 10, 2014. The Company repurchased 145,000 common shares under the NCIB during the three months ended March 31, 2013 for a total of $656.
The weighted average number of common shares outstanding used in the basic and diluted earnings per share (“EPS”) computation was:
Three months ended March 31, 2013 | Three months ended March 31, 2012 | |||||||
Basic weighted average common shares outstanding | 121,545,062 | 121,816,678 | ||||||
Effect of stock options | - | - | ||||||
Diluted weighted average common shares outstanding | 121,545,062 | 121,816,678 |
For the three months ended March 31, 2013, the effect of stock options totaling 621,849 were anti-dilutive (three months ended March 31, 2012 – 1,269,533).
5. | financial instruments |
The Company’s loan receivable is a term loan facility which is collateralized by a general security agreement. Management does not expect the borrower to fail to meet its obligations.
As of March 31, 2013, the Company held foreign exchange forward contracts totaling approximately $29,937 which mature at various dates through to January 2014. During the three months ended March 31, 2013, the Company recorded an unrealized foreign exchange loss of approximately $346 related to the foreign exchange forward contracts held as at March 31, 2013. 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.
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.
6. | Commitments and contingencies |
The Company, in the course of its normal operations, is subject to claims, lawsuits and contingencies. Although it is possible that liabilities may be incurred in instances for which no accruals have been made, WiLAN has no reason to believe that the ultimate outcome of these matters would have a significant impact on its consolidated financial position. Management has evaluated the likelihood of an unfavourable outcome and determined that no amount should be accrued with respect to any outstanding matters.
2013 First Quarter Financial Results | 6 |
Wi-LAN Inc.
11 Holland Avenue, Suite 608
Ottawa, ON Canada
K1Y 4S1
Tel: | 1.613.688.4900 |
Fax: | 1.613.688.4894 |
www.wilan.com |
Exhibit 99.4
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 March 31, 2013. |
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 January 1, 2013 and ended on March 31, 2013 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
Date: May 10, 2013
(signed) James D. Skippen |
James D. Skippen
President & Chief Executive Officer
Exhibit 99.5
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 March 31, 2013. |
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 January 1, 2013 and ended on March 31, 2013 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
Date: May 10, 2013
(signed) Shaun McEwan |
Shaun McEwan
Chief Financial Officer