Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis (“MD&A”) is dated February 2, 2015. It should be read in conjunction with the audited consolidated financial statements and notes thereto for Wi-LAN Inc. for the year ended December 31, 2014 (the “Financial Statements”). References in this MD&A to “WiLAN,” “Company”, “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”) and applicable United States Securities and Exchange Commission (“SEC”) regulations for annual financial information.

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 year ended December 31, 2014 and up to and including January 30, 2015. 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, 2014 (our “AIF”), 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”).

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:

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.

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, without limitation, the following factors, which are discussed in greater detail under the heading “Risk Factors” in our AIF and should be reviewed in detail by all readers:

These factors should be considered carefully, and readers should not place undue reliance on our forward-looking statements and forward-looking information.

On October 30, 2013 we announced that the Board had initiated a process to explore and evaluate potential strategic alternatives for WiLAN, 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.

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 all as disclosed in the reconciliation of net earnings/loss to adjusted earnings included in this MD&A. 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.

Generally, in exchange for disclosing specific, novel and non-obvious inventions that meet applicable legal requirements in a particular country, a granted patent will provide its holder with time-limited, legally enforceable exclusive rights in that country to practice the inventions disclosed in the patent and to exclude others from practicing those inventions. If the inventions disclosed in the claims of a granted patent meet applicable legal validity and enforceability requirements and are important enough that a third-party wishes to practice those inventions or cannot conduct its business without practicing those inventions, the patent may be of great value to that third-party. Unfortunately, many third-parties are content to practice such inventions, thereby infringing the patent in which they are disclosed, without compensating its holder, believing the holder will not discover the infringement, will be unable to convince the third-party to pay any compensation, or will be unable to prove infringement sufficiently to convince a court to force the third-party to pay appropriate compensation.

If the infringer of patented inventions is willing to properly compensate the patent holder for its unauthorized use of these inventions, however, then the holder will typically grant the infringer permission (i.e. a license) to practice those inventions for a period of time (which may be for the life of the patent), free from the threat of legal action. Compensation for such a license may be a single amount (whether paid in a lump sum or over time) or may be based on sales of products or services that rely on the patented inventions as they are sold over the life of the license.

We seek to apply our licensing, technology, and legal expertise to crystallize the value in patented inventions by obtaining licenses to use inventions we own outright and licenses for the inventions for which third-party inventors and assignees have entrusted the licensing program to us.

During our entire corporate history, we have developed and patented inventions that have proven of great value to third-parties. In addition, we also have a history of acquiring patents that we believe hold great value from other inventors. We also work with patent inventors and owners to unlock the value trapped in patents by developing and licensing their patents while sharing with those inventors and assignees both any revenues generated by these patents and much of the financial risk associated with these licensing programs.

In mid-2006, WiLAN re-focused its business on technology innovation and licensing. At that time, we owned approximately twenty patents including certain patents we believed could be used in a licensing program. In launching this new form of business, a key strategy was to strengthen WiLAN’s patent portfolio to sustain long-term revenue opportunities and associated growth.

Over the past eight years, we have grown from 1 employee in mid-2006 to 66 employees at December 31, 2014, increased our patent portfolio from approximately 20 patents in two portfolios to more than 4,000 patents and patent applications worldwide in more than 40 technology portfolios, signed close to 300 licensees, and grown annual revenues from approximately $1.9 million in 2006 to over $98 million in 2014, representing a compound annual growth rate of over 63%.

We plan to build upon our significant base of signed license agreements and increase our licensing opportunities by growing our patent offerings with a combination of technology innovation through internal research and development, patent acquisitions, licensing partnerships with third-party inventors or prior assignees and corporate mergers and acquisitions.

Historically, we licensed patents categorized as Wireless Access and Digital TV and Display technologies.

Technology areas generally included in the Wireless Access program include 3G/4G, Wi-Fi and Bluetooth, as well as other technologies generally applicable to handheld devices or to infrastructures necessary to operate wireless networks. We have generated licensing revenue from companies that sell products described as cellular handsets (such as smart phones) and infrastructure, tablets, laptop computers and Wi-Fi routers. The Wireless Access portfolio contains more than 1,100 patents and patent applications.

The Digital TV and Display portfolio originated with the acquisition of our V-Chip technology patents in July 2007 and has been augmented with acquisitions from several other sources. This portfolio now includes approximately 1,400 patents and patent

applications around such technology areas as multimedia processing, display and touch screens and graphical user interfaces, all of which are potentially used in smart phones, digital televisions, “smart” televisions, tablet computers and laptop computers. Approximately 35 - 45% of the available North American digital television market has been licensed to our V-Chip patents and signed agreements are expected to generate revenues for an additional two to three years. This market is not, however, expected to grow any further and, consequently, revenues derived from these signed agreements are also not expected to grow any further. The Digital TV and Display program does, however, have significant depth beyond V-Chip and we are actively licensing these additional technologies.

In addition to our historic patent licensing programs, we are focusing on entering into relationships with third-party inventors and patent owners to license their patents in exchange for sharing in both the reward and the risk in such licensing programs. In these relationships, instead of paying significant amounts up front for the acquisition of patents, we acquire patents from their inventors or owners through a dedicated subsidiary in exchange for a percentage of the recoveries derived from licensing those patents paid to the inventors or owners. We strive to conduct any litigation relating to these patents by way of contingency or “hybrid contingency” arrangements with appropriate legal counsel through which a significant portion of the costs of such counsel are contingent upon and tied to recovery made in any litigation involving the patents. Given the sharing of recoveries among the original inventor or owner of the patents, external legal counsel, and ourselves, we believe that all parties’ interests are aligned towards obtaining an appropriate recovery from licensing these patents.

Current patent portfolios that we have acquired through such relationships with third-party inventors and patent owners include patents relating to 3D television technologies, automotive headlight assemblies, phased loop technology, microcontrollers applicable to safety-critical aerospace, medical, industrial and automotive applications, computer gaming, medical stent technologies, irrigation technologies, CMOS image sensors, streaming video technologies, Internet search, building automation, non-volatile Flash memory, semiconductor clocking technologies, smart meter monitoring, LED lighting technologies and many other technologies.

In all of the our licensing programs, if court action is required to protect and enforce our rights, we strive to use legal counsel based on either a “full” or “hybrid” contingency basis through which we share the financial risks of such litigation with its legal counsel. Historically, and in particular for the Wireless Access and Digital TV and Display programs, we sought to retain 100% of the benefits of any patent litigation and therefore we bore 100% of the costs relating to that litigation.

Where we retain litigation counsel on a “full” contingency basis, we pay no legal fees relating to such litigation, instead compensating counsel based on a portion of any actual recovery from the infringer(s) in that litigation, although we may bear the expense of third-parties and disbursements incurred related to that litigation.

Where we retain litigation legal counsel on a “hybrid” contingency basis, we would modify a full contingency model as outlined above to include an agreement to pay a set regular amount to counsel throughout the conduct of a litigation, often subject to a maximum amount, with such payments being considered an advance against the agreed contingency amount.

Finally, our internal research and development efforts seek to generate new inventions in next generation communications technologies and to identify new technology opportunities. This technology innovation complements our ongoing activities to acquire appropriate technology or to partner with technology inventors and owners permitting us to grow our revenues over time. We are actively engaged in ongoing technology research activities generally in the area of wireless broadband, but we continue to engage in research and development in other technology areas as opportunities present themselves.

We have developed licensing programs that have yielded strong results since mid-2006, having generated cumulative revenues to the end of 2014 of more than half a billion dollars. When approaching a potential licensee, we present compelling reasons to enter into a license agreement with detailed infringement analysis along with a fair and reasonable license rate. In many circumstances, we also present a potential licensee with an array of patents or patent families that may be applicable to the licensee’s business or products thus increasing the value in signing a license. We continue to consistently sign licenses every year and have entered into 11 renewal and 18 entirely new licenses in the last twelve months.

Generally our license agreements take into consideration rights to license the patents covered and releases for past infringement. Related payments may be lump-sum, fixed-price with set payments made over a specified period of time or running royalty based depending on a price per-unit and/or a percentage of product sales or service revenues enjoyed by licensees. Running royalty based licensees generally provide us with quarterly or semi-annual royalty reports which are typically received subsequent to the period in which the underlying sales occurred.

Consideration for license agreements is generally paid in cash, although we have accepted a combination of cash and in-kind patents in the past and may do so again in the future if the patents fit our value proposition and strategic objectives. We recognize revenue from these arrangements as amounts become due and collection is assured.

Royalty rates and the consideration for a license may vary significantly with different licensees because there are many factors that may make different rates and other terms appropriate. These include, without limitation: the clarity of the reads of patent claims on the prospective licensee’s products; the significance of the patented invention to the performance of such products; the strength of the patents generally; the profitability of the products in question; the propensity of the prospective licensee to resist taking a license or to litigate; the number of applicable patents; the volume of products that infringe; the geographies in which infringing products are manufactured and sold; the prospective licensee’s future sales plans; and the prospective licensee’s financial position.

Although we prefer to negotiate license agreements without litigation, we are prepared to take all necessary steps, including investing in litigation, to ensure we receive fair compensation for the use of our patented inventions. If litigation is initiated against a prospective licensee, we seek resolution of the litigation through the signing of a license agreement as early as possible. Licensing discussions may be ongoing with a number of prospective licensees at any time and although we cannot anticipate how any litigation may affect ongoing discussions, our experience is that discussions will often continue through the litigation process and that some parties may be inclined to take licenses before the commencement of trial proceedings or even after the conclusion of trial proceedings.

Notwithstanding our early success in many areas, the business and legal environment for patent licensing companies has become increasingly difficult during the past several years. In this more difficult licensing environment, we will continue to adapt and evolve to achieve success. Recent examples of this evolution include the hiring of highly qualified specialists and subject matter experts in applicable technologies, acquisitions of patents that have strengthened our patent portfolio and entry into significant relationships to gain access to additional patents. As well we signed a number of significant license agreements with large industry leaders in 2011 and 2013. We believe these recent accomplishments have established a strong foundation for our future operations and growth. It may be, however, that the United States Patent and Trademark Office, U.S. courts and U.S. juries are becoming less willing to side with patent assertion companies in proceedings brought by or against technology manufacturers, which may lead to those manufacturers and other potential licensees delaying or resisting taking licenses to our patents or taking licenses on terms less favourable to us.

We have addressed changes in the licensing and the litigation landscape proactively. In our initial phase of development, we adopted a strategy characterized by outright acquisitions of patent portfolios and a full fee litigation model. Under this model, we would retain all of the benefit of a license agreement and would pay the litigation expenses as and when incurred. This model would generally be characterized by litigation expense accounting for approximately 35% of the total license revenue available which is consistent with our experience to date.

While we retain a higher portion of the overall revenues under such a model, the risks are more significant and therefore the rate of return is commensurate. We have adopted a new fee model for the majority of our litigations which include an increased component of the compensation for the external litigation counsel being comprised of a percentage of actual license revenues received in consequence of the particular litigation.

In the hybrid model, generally applicable to license programs where we do not have a recovery sharing component, we will agree to a fixed fee amount, generally a fraction of the overall expected litigation budget, which is a component of an overall contingent amount that reflects the success of the licensing program. We have contingent amounts under such programs ranging from 25% to 35% as of the date of this MD&A.

As outlined above, we have adopted a model wherein the third-party inventor or prior assignee of patents we acquire will be compensated as a percentage of the net recoveries from those patents. Generally, these arrangements are characterized by contingent litigation relationships which may be of the hybrid nature referred to above or where the litigation counsel is exclusively paid through a share of the overall proceeds. The third-party inventor or prior assignee of patents we acquire will share with WiLAN in any recoveries from such patents, generally on a 50/50 basis. We have the flexibility to structure arrangements in a number of ways to address the needs and specific sets of circumstances presented by each of the unique third-party inventors or prior assignees of patents

we acquire, and the above discussion is intended to provide a general overview of the various approaches employed to both acquire and license portfolios in the face of a constantly changing marketplace.

The following charts have been included to assist in understanding the various strategies we employ and generally reflect the strategies and outcomes in four broad categories.

The following table sets forth consolidated statements of operations data, which is expressed in thousands of U.S. dollars, except share and per share amounts, for the indicated years as well as certain balance sheet data as at December 31, 2014, 2013, and 2012.

	Year ended December 31, 2014				Year ended December 31, 2013						Year ended December 31, 2012
	$000's		%		$000's			%			$000's			%
Revenue
Royalties	$	98,311		100	$	88,209			100		$	87,960			100
		98,311		100		88,209			100			87,960			100
Operating expenses
Cost of revenue		63,201		64		88,648			100			60,984			69
Research and development		2,416		2		2,858			3			3,964			5
Marketing, general and administrative		10,565		11		13,065			15			12,300			14
Foreign exchange loss (gain)		2,038		2		2,538			3			(5,191	)		(6	)
Restructuring charges		—		—		—			—			418			0
Total operating expenses		78,220		80		107,109			121			72,475			82
Earnings (loss) from operations		20,091		20		(18,900	)		(21	)		15,485			18
Investment income		533		1		728			1			1,277			1
Interest expense		—		—		—			—			(1,247	)		(1	)
Debenture financing, net		—		—		—			—			(31,138	)		(35	)
Earnings (loss) before income taxes		20,624		21		(18,172	)		(21	)		(15,623	)		(18	)
Provision for (recovery of) income tax expense
Current		4,623		5		5,980			7			3,480			4
Future		6,290		6		(6,059	)		(7	)		(4,583	)		(5	)
Provision for (recovery) of income tax expense		10,913		11		(79	)		(0	)		(1,103	)		(1	)
Net earnings (loss)	$	9,711		10	$	(18,093	)		(21	)	$	(14,520	)		(17	)
Earnings (loss) per share
Basic	$	0.08			$	(0.15	)				$	(0.12	)
Diluted		0.08				(0.15	)					(0.12	)
Weighted average number of common shares
Basic		120,103,422				120,856,511						121,451,967
Diluted		120,368,583				120,856,511						121,451,967

Revenues for the twelve months ended December 31, 2014 were $98,311 representing an increase of $10,102 over the twelve months ended December 31, 2013. The increase in revenue is attributable to license agreements signed during the twelve months ended December 31, 2014.

Our license agreements can generally be classified as either: (1) running royalty agreements in which licensees provide reports on their sales activities for the previous fiscal quarter, and calculate and remit the appropriate royalty; or (2) fixed fee arrangements with periodic payments that may be over a period shorter than or equal to the license term. In all cases, licenses provide for a release of past infringement and a license to some or all of our patents for a specified period of time. In certain cases, licenses may also extend to certain patents acquired by us during the term of the license. In all cases, the continued right to the license is subject to the licensee making the required payments defined in the agreement, all of which are non-refundable once received by us. We recognize revenue, generally, when the license fee is earned, fixed and determinable, collectability is reasonably assured, and all other conditions of revenue recognition are met.

Our business is unique because, left to their own devices, entities who infringe our patents are content to not pay fair compensation to us for the right to use the inventions claimed in those patents. Our licensing process involves the preparation of claim charts which are detailed descriptions of the claims in our patents and how those claims relate to a particular technology standard or a particular product offering. These claim charts are presented to entities which we believe to be infringing these patents as the first step in commencing licensing discussions. The licensing process then generally includes countering arguments relating to technology and legal matters relating to these and other patents, arriving at mutually satisfactory business, financial and legal terms for license agreements and signing such license agreements. We note that with more than 4,000 patents, we generally only prepare claim charts on a small subset of the entire portfolio. Accordingly, we will commence license discussions focusing on only a small number of patents that we believe are being infringed.

If licensing discussions are not productive, we may resort to litigation as a means to motivate a potential licensee to negotiate a license. Although our preference is to reach a negotiated license agreement without commencing patent litigation, we have found that many entities will not engage in substantive discussions without litigation. If litigation is required, it will most certainly be on only a subset of the patents that we believe are infringed, for example on only two or three patents out of our entire portfolio. We may also engage in additional infringement litigation against a potential licensee to create additional pressure to enter into a negotiated license agreement.

As a result of the above, we are not necessarily in control of when a license is executed and, accordingly, we may experience fluctuations in revenues year over year.

Operating expenses for the twelve months ended December 31, 2014 were $78,220 or 80% of revenues, representing a decrease of $28,889 or 27% as compared to the twelve months ended December 31, 2013. The decrease in operating expenses is primarily attributable to lower litigation expenses partially offset by an increase in amortization expense.

Litigation expense accounted for approximately $9,908 and $44,942 or 13% and 42% of total operating expenses in each of fiscal 2014 and 2013 respectively. As noted, we would prefer to negotiate licenses without the use of litigation but that is not always possible. Given the number of litigations we are currently involved in, litigation expenses for 2015 are expected to increase over the 2014 levels, perhaps materially. Litigation activities, and therefore expenses, are difficult to predict as there are many factors that can influence any action that is commenced.

We recorded net earnings for the twelve months ended December 31, 2014 of $9,711 or $0.08 per basic and diluted share as compared to a net loss for the twelve months ended December 31, 2013 of $18,093 or $0.15 per basic and diluted share.

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.

	Twelve months ended
	December 31, 2014		December 31, 2013			December 31, 2012
Net earnings (loss) under GAAP	$	9,711	$	(18,093	)	$	(14,520	)

Adjusted for:
Unrealized foreign exchange loss (gain)		892		1,730			(5,213	)
Depreciation and amortization		35,139		29,682			25,693
Stock based compensation		2,081		4,192			3,894
Restructuring charges		—		—			418
Asset write-off relating to restructuring		—		—			209
Interest expense		—		—			1,247
Debenture financing, net		—		—			31,138
Disposal of assets loss		1		123			-
Income tax expense (recovery)		10,913		(79	)		(1,103	)
Adjusted earnings	$	58,737	$	17,555		$	41,763
Adjusted earnings per basic share	$	0.49	$	0.15		$	0.34
Earnings (loss) per basic share under GAAP		0.08		(0.15	)		(0.12	)

Weighted average number of common shares
Basic		120,103,422		120,856,511			121,451,967
Diluted		120,368,583		120,856,511			121,451,967

The adjusted earnings for the twelve months ended December 31, 2014 were $58,737 as compared to $17,555 for the twelve months ended December 31, 2013. The increase in adjusted earnings as compared to last year is primarily attributable to an increase in revenue and a decrease in litigation expenses.

Results of Operations for the twelve months ended December 31, 2014 as compared to the twelve months ended December 31, 2013

Revenues for the twelve months ended December 31, 2014 were $98,311, representing an increase of $10,102.

Our revenues are derived from five principal sources: (i) running royalty agreements pursuant to which licensees pay us royalties based on either a percentage of the net selling price of licensed products or a fixed fee per licensed product sold; (ii) fixed fee royalties consisting of a set quarterly or annual amount for all licensed products sold by licensees; (iii) one-time lump sum fees to cover the sale of all licensed products by a particular licensee, subject to certain limitations; (iv) licensing patents on behalf of our partners; or (v) brokerage which provides the acquirer exclusive rights to the technology. License agreements are generally for a five to eight year period but can be significantly longer. We consider revenue to be earned when we have persuasive evidence of an arrangement, all obligations that we need to perform have been fulfilled in accordance with the terms of the license agreement, including delivery and acceptance, the revenue amount is reasonably determinable and collection is reasonably assured.

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.

Two licensees individually accounted for 15% and 13%, respectively, of revenues from royalties for the twelve months ended December 31, 2014 as compared to two licensees individually accounted for 20% and 14%, respectively, of revenues from royalties for the twelve months ended December 31, 2013. For the twelve months ended December 31, 2014, the top ten licensees accounted for 74% of revenues from royalties, whereas in the comparable period last year the top ten licensees accounted for 79% of revenues from royalties, respectively.

For the twelve months ended December 31, 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.

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.

Litigation and amortization expenses are not necessarily variable with revenues. We also include, as a cost of revenue, any costs related to sourcing new patent portfolios or developing new strategic partnerships.

Cost of revenue for the twelve months ended December 31, 2014 was $63,201 or 64% of revenues as compared to $88,648 or 100% of revenues.

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 2015.

Patent management expenses were reclassified as cost of revenue for the twelve months ended December 31, 2014 and the comparative periods adjusted accordingly.

A key element of our strategy involves acquiring additional patents or obtaining exclusive licensing arrangements through relationships with patent holders that may be accounted for as acquisitions. Any further acquisitions will increase amortization expense from our current levels. We have acquired approximately $304,000 in patents since November 1, 2006.

Litigations are a normal part of our business which may extend over multiple years and are principally a discretionary cost, not directly related to or necessarily proportional to the revenues we generate. Our litigation expenses consist of all expenses related to the 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 of 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 licensing 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 December 31, 2014, the current and long term portion of the success fee obligation is $3,736 and $3,639, respectively. During the twelve months ended December 31, 2014, we paid McKools $4,032 (twelve months ended December 31, 2013 - $3,896) based on proceeds collected as of September 30, 2014.

For the twelve months ended December 31, 2014, litigation expenses amounted to $9,908 as compared to $44,942 for the same period last year. The decrease in litigation expenses is attributable to a decrease in the level of litigation activities in comparison to the same period last year and new shared risk fee arrangements entered into with our external counsel. 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. We expect an increase in litigation expenses in fiscal 2015 as a result of an increase in litigation activities.

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 December 31, 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 relate 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.

We designed, developed and sold or licensed a variety of advanced digital wireless technologies, systems and products since our inception in the early 1990s until 2006. Over the course of our history, we have been able to explore emerging technologies, identify needs created by the development of advanced wireless systems and build technologies for those new requirements. Today, we are focusing our research and development (“R&D”) efforts on advanced wireless technologies. These efforts have fostered inventions that form the basis of a number of new patent applications. The costs associated with these efforts, principally staff costs (including stock-based compensation) and certain external consultants, are classified as R&D. Research expense is predominately employee related costs and therefore any changes in spending will be a result of changes to future staffing levels.

For the twelve months ended December 31, 2014, R&D expenses were $2,416 or 2% of revenue as compared to $2,858 or 3% of revenue for the twelve months ended December 31, 2013. The decrease in spending for the twelve months ended December 31, 2014 is primarily attributable to a decrease in stock-based compensation expense and depreciation partially offset by an increase in staffing costs as a result of an increase in R&D staffing from six to seven and accrued variable compensation costs.

Marketing, general and administration (“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.

For the twelve months ended December 31, 2014, MG&A expenses amounted to $10,565 or 11% of revenues as compared to $13,065 or 15% of revenue. The decrease in spending for the twelve months ended December 31, 2014 is primarily attributable to a decrease in staffing costs as a result of changes in staffing levels, stock-based compensation, consulting costs, travel costs 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.

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 twelve months ended December 31, 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 December 31, 2014. The change from the same period last year is attributable to the decrease in 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 twelve months ended December 31, 2014, the unrealized foreign exchange loss relates to the foreign exchange contracts we held as at December 31, 2014. 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 December 31, 2014, we held foreign exchange forward contracts totaling approximately $17,700 which mature at various dates through to October 2015. During the twelve months ended December 31, 2014, we recorded an unrealized foreign exchange loss of approximately $732 related to the foreign exchange forward contracts held as at December 31, 2014.

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.

Our recorded investment income for the twelve months ended December 31, 2014 was $533 as compared to $728 for the twelve months ended December 31, 2013. Investment income includes interest earned on deposits and short-term investments as well as, gains on equity holdings. For the twelve months ended December 31, 2014 and 2013, investment income included gains on equity holdings of nil. The decrease in investment income for the twelve months ended December 31, 2014 is attributable to a decreased cash position.

Income tax expense for the twelve months ended December 31, 2014 was $10,913 as compared to an income tax recovery of $79 for the same period last year.

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 $14,323 as at December 31, 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 twelve months ended December 31, 2014, we recorded non-refundable investment tax credits earned of nil.

The current income tax expense for the twelve months ended December 31, 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 twelve months ended December 31, 2014 was 4.7% of revenue as compared to 6.8% of revenue for the same period 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.

Thousands of U.S. dollars except per share amounts	Three months ended December 31, 2014		Three months ended September 30, 2014			Three months ended June 30, 2014		Three months ended March 31, 2014

Revenues	$	22,102	$	24,576		$	25,655	$	25,978

Adjusted earnings	$	12,182	$	13,162		$	16,623	$	16,769

Adjusted earnings per share
Basic	$	0.10	$	0.11		$	0.14	$	0.14
Diluted	$	0.10	$	0.11		$	0.14	$	0.14

Net earnings (loss)	$	518	$	(375	)	$	5,599	$	3,969

Net earnings (loss) per share
Basic	$	0.00	$	(0.00	)	$	0.05	$	0.03
Diluted	$	0.00	$	(0.00	)	$	0.05	$	0.03

Weighted average number of common shares
Basic	120,215,989			120,211,493			120,065,465		119,916,260
Diluted	120,415,297			120,211,493			120,335,029		120,260,260

Thousands of U.S. dollars except per share amounts	Three months ended December 31, 2013		Three months ended September 30, 2013			Three months ended June 30, 2013			Three months ended March 31, 2013

Revenues	$	29,175	$	20,724		$	19,941		$	18,369

Adjusted earnings (loss)	$	17,227	$	(263	)	$	(762	)	$	1,353

Adjusted earnings (loss) per share
Basic	$	0.14	$	-		$	(0.01	)	$	0.01
Diluted	$	0.14	$	-		$	(0.01	)	$	0.01

Net earnings (loss)	$	2,432	$	(6,459	)	$	(7,632	)	$	(6,434	)

Net earnings (loss) per share
Basic	$	0.02	$	(0.05	)	$	(0.06	)	$	(0.05	)
Diluted	$	0.02	$	(0.05	)	$	(0.06	)	$	(0.05	)

Weighted average number of common shares
Basic		119,972,775		120,701,944			121,225,490			121,545,062
Diluted		120,350,286		120,701,944			121,225,490			122,166,911

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:

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.

Cash and cash equivalents, and short-term investments amounted to $127,647 at December 31, 2014, representing a decrease of $4,204 from the $131,851 held at December 31, 2013. The decrease is primarily attributable to the payments for patents acquired in the current and previous years totaling $43,062 and the payment of dividends totaling $18,725, partially offset by cash generated from operations of $58,629.

At December 31, 2014 we had working capital of $94,006, long-term success fee obligation of $3,639 and patent finance obligations of $27,465 which relates to deferred payment terms on patents and patent rights we acquired in fiscal 2013 and 2014.

During the twelve months ended December 31, 2014, patent acquisitions have totaled approximately $29,198 of which $26,500 were acquired under deferred payment terms. As at December 30, 2014, the current and long-term portions of the patent finance obligation are $17,418 and $27,465, respectively. We expect the repayment of the long-term portion of the patent finance obligation to be completed within the next one to four years.

The $43,062 of payments for patents acquired in the current and previous years is comprised of $2,716 for patents acquired during fiscal 2014, $5,000 for patents acquired in fiscal 2013, and $35,346 for patents acquired under deferred payment terms in fiscal 2011, 2013 and 2014.

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 twelve months ended December 31, 2014, we had no borrowings under this facility.

On March 7, 2013, we received regulatory approval to make a normal course issuer bid (the “2013NCIB”) through the facilities of the TSX. Under the 2013 NCIB, we could purchase up to 11,846,843 common shares. The 2013 NCIB commenced on March 11, 2013 and wascompleted on March 10, 2014. We repurchased 1,903,200 common shares under the 2013 NCIB during the twelve months ended December 31, 2013 for a total of $7,134. During the twelve months ended December 31, 2014, nil common shares were repurchased under the 2013 NCIB.

Effective May 27, 2014, we received regulatory approval to make a normal course issuer bid (the “2014 NCIB”) pursuant to which we are permitted to purchase up to 11,676,510 common shares for cancellation. The 2014 NCIB commenced on May 29, 2014 and will be completed on May 28, 2015. During the twelve months ended December 31, 2014, we repurchased 150,000 common shares under the 2014 NCIB for a total of $472.

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.

A summary of our contractual obligations due by period for the next 5 years is noted below:

	Payments due by Period
Contractual Obligations	Total		Less than 1 Year		1-3 Years		4-5 Years		After 5 Years
Long term debt	$	-	$	-	$	-	$	-	$	-
Capital lease obligations		-		-		-		-		-
Operating leases		4,349		667		1,608		830		1,244
Purchase obligations		-		-		-		-		-
Other long term obligations		54,780		21,863		32,917		-		-
Total contractual obligations	$	59,129	$	22,530	$	34,525	$	830	$	1,244

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 December 31, 2014, there were 120,247,647 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 the Share Option Plan, we can issue a maximum of 10% of our issued and outstanding common shares from time to time which was, as at December 31, 2014, 12,024,765 common shares combined. The common shares authorized for issuance under the Employee Share Purchase Plan and the Deferred Stock Option Plan are limited to 500,000 and 430,000, respectively. As at December 31, 2014, we had 9,465,372 options outstanding, 244,526 deferred stock units outstanding and have issued 441,400 shares under the Employee Share Purchase Plan.

Dr. Michel Fattouche, a member of our Board of Directors, has provided consulting services to us. For the twelve months ended December 31, 2014, consulting services have totaled $76 (twelve months ending December 31, 2013 – $98) all of which had been paid as at year end.

Results of Operations for the three months ended December 31, 2014 as compared to the three months ended December 31, 2013

Revenues for the three months ended December 31, 2014 were $22,102, representing a decrease of $7,073 or 24% over the same period last year. The decrease in revenues is primarily attributable to license agreements signed during fiscal 2013 certain of which had front end loaded fixed payment amounts.

Three licensees individually accounted for 14%, 12%, and 10%, respectively, of revenues from royalties for the three months ended December 31, 2014 as compared to three licensees individually accounted for 24%, 15%, and 11%, respectively, for the three months ended December 31, 2013. For the three months ended December 31, 2014 and 2013, the top ten licensees accounted for 81% and 88% respectively, of revenues from royalties.

Cost of revenue for the three months ended December 31, 2014 was $16,460 or 74% of revenues as compared to $17,532 or 60% of revenues. The decrease in expenses is primarily attributable to a decrease in litigation expenses partially offset by an increase in amortization and compensation and benefits costs.

For the three months ended December 31, 2014, litigation expenses amounted to $3,471 as compared to $4,565 for the same period last year. The decrease in litigation for the three months ended December 31, 2014 is attributable to a decrease in the level of litigation

activities in comparison to the same period last year and new shared risk fee arrangements entered into with our external counsel. Litigation expenses are expected to vary from period to period due to the variability of litigation activities.

During the three months ended December 31, 2014, we paid McKools $869 of the success fee payable based on proceeds collected during the three months ended September 30, 2014.

For the three months ended December 31, 2014, R&D expenses were $572 or 3% of revenue as compared to $662 or 2% of revenue for the three months ended December 31, 2013. The decrease in spending for the three months ended December 31, 2014 is primarily attributable to a decrease in stock-based compensation and depreciation partially offset by an increase in staffing costs.

For the three months ended December 31, 2014, MG&A expenses amounted to $2,131 or 10% of revenues as compared to $3,546 or 12% of revenue. The decrease in spending for the three months ended December 31, 2014 is primarily attributable to a decrease in staffing costs, stock based compensation, and consulting costs in support of the strategic alternative review announced in October 2013 which was concluded in May 2014.

The unrealized foreign exchange loss recognized in the three months ended December 31, 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 December 31, 2014. The change from the same period last year is attributable to the decrease in the level of monetary accounts denominated in Canadian dollars.

Our recorded investment income for the three months ended December 31, 2014 was $131 as compared to $175 for the three months ended December 31, 2013. Investment income includes interest earned on deposits and short-term investments, as well as, gains on equity holdings.

Income tax expense for the three months ended December 31, 2014 was $1,868 as compared to $4,114 for the same period last year.

The decrease in the deferred income tax expense as compared to the same period last year is primarily attributable to a decrease in earnings resulting in a decrease in the utilization of certain previously recognized Canadian loss carryforwards .

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 December 31, 2014, we recorded non-refundable investment tax credits earned of nil.

The current income tax expense for the three months ended December 31, 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 months ended December 31, 2014 was 4.1% of revenue as compared to 7.2% of revenue for the same period 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.

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. The following outlines the accounting policies and practices involving the use of professional judgment and estimates that are critical to determining our financial results.

Our revenue consists principally of royalty revenue from licensing our own patent portfolio. We also generate royalty revenue from licensing patent portfolios on behalf of our partners. We consider revenue to be earned when we have persuasive evidence of an arrangement, the obligation has been fulfilled in accordance with the terms of the licensing agreement, including delivery and acceptance, the amounts are fixed or determinable and collection is reasonably assured. We defer recognizing revenue until such time as all criteria are met. Determination of whether or not these criteria have been met may require us to make judgments, assumptions and estimates based upon current information and historical experience.

Royalties from running royalty arrangements can be based on either a percentage of sales or number of units sold for which we earn royalties at the time the licensees’ sales occur. The licensees are obligated to provide us with quarterly or semi-annual royalty reports. Our licensees do not, however, report and pay royalties owed for sales in any given reporting period until after the conclusion of that reporting period. As we are unable to estimate the licensees’ sales in any given reporting period to determine the royalties due to us, we recognize running royalty revenues based on royalties reported by the licensees during the quarter and when other revenue recognition criteria are met. We monitor the receipt of reports to ensure that there is not a disproportionate number of months of revenue in any given fiscal year.

Royalties from fixed fee royalty arrangements may consist of one or more installments of cash. The timing and amount of revenue recognized from each licensee depends upon a variety of factors, including the specific terms of each agreement and the nature of the deliverables and obligations. Where agreements include multiple elements, we assess if the deliverables have standalone value upon delivery, and if so, we account for each deliverable separately. When multiple-deliverables included in an arrangement are separated into different units of accounting, the arrangement consideration is allocated to the identified separate units based on a relative selling price hierarchy. We determine the relative selling price for a deliverable based on our best estimate of selling price (“BESP”). We determine BESP by considering our overall pricing objectives and market conditions. Significant pricing practices taken into consideration include discounting practices, the size and volume of transactions, the customer demographic, the geographic area

covered by licenses, price lists, licensing strategy, historical standalone licenses and contracted royalty rates. The determination of BESP is made through consultation with and approval by management, taking into consideration the licensing strategy.

Generally, as part of our partnering agreements with third-parties, we are able to recover certain out-of-pocket expenses and legal costs. These amounts are included in revenue in the period which the aforementioned revenue criteria is met and the amounts become reimbursable.

Revenue arrangements with extended payment terms, where fees are fixed in one or more installments of cash and which contain terms that could impact the amounts ultimately collected, are generally recognized as collection becomes reasonably assured.

At December 31, 2014, we have approximately $6,171 (December 31, 2013 - $5,935) of non-refundable investment tax credits carried forward, relating primarily to past R&D. These credits can be applied against future income taxes payable and are subject to a 20 year carry-forward period. Judgment is required in determining the amount of unutilized investment tax credits to record as an asset. In assessing the potential utilization of investment tax credits, we have considered whether it is more likely than not that some portion or all of the unutilized investment tax credits will be realized based upon estimates of our anticipated income tax position in future periods. We will continue to evaluate our future income tax position quarterly and record any adjustment necessary in that period.

As at December 31, 2014, we had accumulated $19,813 of unused R&D expenditures for income tax purposes. These deductions are available without expiry to reduce future year’s taxable income. We also had approximately $92,396 of temporary differences and tax losses available for carry forward. As a result, as of December 31, 2014, we have a deferred income tax asset of $34,910 of which $20,587 has been recorded. Judgment is required in determining the amounts of deferred income tax assets and liabilities and the related valuation allowance recorded against the net deferred income tax assets. In assessing the potential realization of deferred income tax assets, we consider all available evidence, both positive and negative. The realization of deferred tax assets is dependent on our ability to generate sufficient future taxable income during periods prior to the expiration of tax attributes to fully utilize these assets. Our forecasted future operating results are highly influenced by, among other factors, assumptions regarding (1) our ability to achieve forecasted revenue, (2) our ability to effectively manage our expenses relative to our forecasted revenue and (3) market conditions in the technology areas in which we operate. We considered both positive and negative evidence and based on revenue from existing contracts and spending managed to the revenue levels determined future taxable income will be sufficient to utilize existing tax attributes.

We assess the probability that deferred income tax assets will be recovered from future taxable income, and whether a valuation allowance is required to reflect any uncertainty at each reporting period. We will continue to evaluate our deferred income tax position quarterly and record any adjustment necessary in that period. As at December 31, 2014, we had a valuation allowance of $14,323 (December 31, 2013 - $10,983) primarily related to net operating losses and capital losses in certain operating subsidiaries which we have assessed as more likely than not that these losses will not be utilized.

We have acquired patents and patent rights (hereinafter, collectively “patents”) directly, through business acquisitions or as full or partial payments for licensing fees. In determining the fair value of these patents, we make estimates and judgments about the future income-producing capabilities of these assets and related future cash flows. We also make estimates about the useful lives of these assets based on assessment of the legal and economic lives of the patents and potential future licensing revenues achievable from our patent portfolio. Our patent portfolio as at December 31, 2014 is being amortized on a straight-line basis over the remaining useful lives of the patents which range from approximately one to fourteen years. If our basis for assessing the useful lives of the intangibles and potential future licensing revenues achievable from our patent portfolio is adversely affected by future events or circumstances, we will record write-downs of patents, write-down of other intangible assets, or changes in the estimated useful lives of these assets, which would result in changes to amortization expense in the future. Such changes would not affect cash flows.

The carrying value of patents is reviewed for impairment when events or circumstances indicate that the carrying amount may not be recoverable. Impairments are determined by comparing the carrying value to the estimated undiscounted future cash flows to be generated by those assets. If this assessment indicates that the carrying value of the patents is not recoverable, the carrying value is

then compared with the estimated fair value of the assets, and the carrying value is written down to the estimated fair value. We have determined that there were no indications of possible impairment during the twelve months ended December 31, 2014.

Goodwill is subject to annual impairment tests or on a more frequent basis if events or conditions indicate that goodwill may be impaired.

As a whole, we are considered one reporting unit. We estimate the value of our reporting unit based on market capitalization. If we determine that our carrying value exceeds our fair value, we would conduct the second step of the goodwill impairment test which compares the implied fair value of the goodwill (determined as the excess fair value over the fair value assigned to our other assets and liabilities) to the carrying amount of goodwill.

We have determined there were no indications of possible impairment during the twelve months ended December 31, 2014.

Critical accounting policies and estimates utilized in the normal course of preparing our consolidated financial statements require the determination of the best estimate of selling price, future cash flows utilized in assessing net recoverable amounts and net realizable values, discount rates, amortization, allowance for bad debt, legal contingency estimate, useful lives of property, equipment and intangible assets, valuation of intangibles, valuation of debt securities, assumptions for the fair value of stock options granted, timing of payments related to patent finance obligations and measurement of deferred taxes. In making estimates, management relies on external information and observable conditions where possible, supplemented by internal analysis where required.

These estimates have been applied in a manner consistent with that in the prior periods and there are no known trends, commitments, events or uncertainties that we believe will materially affect the methodology or assumptions utilized in the consolidated financial statements. The estimates are impacted by many factors, some of which are highly uncertain. The interrelated nature of these factors prevents us from quantifying the overall impact of these movements on our financial statements in a meaningful way. These sources of estimation uncertainty relate in varying degrees to virtually all asset and liability account balances.

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.

Critical accounting estimates and accounting policies are reviewed annually or more often if needed, by the Audit Committee.

See Note 2, “Significant Accounting Policies”, of Notes to Audited Consolidated Financial Statements for a full description of recent accounting pronouncements including the respective expected dates of adoption.

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 December 31, 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.

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 December 31, 2014. We based our evaluation on criteria established in “Internal Control over Financial Reporting – 2013” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and, based on that evaluation, we have concluded that, as of December 31, 2014, our internal control over financial reporting is effective.

Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to an exemption for emerging growth companies under the U.S. Jumpstart Our Business Startups Act.

We shall continue to be deemed an emerging growth company until the earliest of:

As an emerging growth company we are exempt from Section 404(b) of the U.S. Sarbanes-Oxley Act of 2002 and in particular exempt from the requirement that the registered accounting firm attest to and report on the assessment on the effectiveness of the internal control structure and procedures for financial reporting.

There have been no changes in our “internal control over financial reporting” that occurred during the twelve months ended December 31, 2014 which have materially affected or are reasonably likely to materially affect the internal control over financial reporting.

	As at December 31, 2014		As at December 31, 2013		As at December 31, 2012
Cash and cash equivalents	$	126,311	$	130,394	$	175,246
Short-term investments		1,336		1,457		1,617
Total assets		313,194		337,201		330,785
Long-term debt		—		—		—
Dividends declared per common share		0.18		0.16		0.13

	Twelve months ended
	December 31, 2014			December 31, 2013

Compensation and benefits	$	7,883		$	5,920
Litigation		9,908			44,942
Patent maintenance, prosecution, and evaluation		6,864			6,130
Contingent partner payments and legal fees		1,704			—
Amortization of patents		34,400			28,855
Stock-based compensation		840			1,103
Other		1,602			1,698
	$	63,201		$	88,648
		64	%		100	%
Decrease from comparative period		(29	%)

	Twelve months ended
	December 31, 2014			December 31, 2013
Compensation and benefits	$	1,990		$	1,609
Depreciation		153			483
Stock-based compensation		26			426
Other		247			340
	$	2,416		$	2,858
Percent of revenue		2	%		3	%
Decrease from comparative period		(15	%)

	Twelve months ended
	December 31, 2014			December 31, 2013
Compensation and benefits	$	4,258		$	5,173
Depreciation		568			528
Stock-based compensation		1,181			2,479
Public company costs		1,999			1,596
Facilities		689			562
Other		1,870			2,727
	$	10,565		$	13,065
Percent of revenue		11	%		15	%
Decrease from comparative period		(19	%)

	Three months ended
	December 31, 2014			December 31, 2013

Compensation and benefits	$	1,862		$	1,561
Litigation		3,471			4,565
Patent maintenance, prosecution, and evaluation		1,769			1,987
Contingent partner payments and legal fees		89			—
Amortization of patents		8,774			8,562
Stock-based compensation		125			341
Other		370			516
	$	16,460		$	17,532
Percent of revenue		74	%		60	%
Decrease from comparative period		(6	%)