In Q2 of fiscal 2012, four of the Company's licensees each amounted to more than 10% of consolidated revenue from operations. Revenue from one licensee was 23%; revenues from the other three licensees were 19%, 17% and 15%, respectively.
In Q2 of fiscal 2011, four of the Company's licensees each amounted to more than 10% of consolidated revenue from operations. Revenue from one licensee was 25%; revenues from the other three customers were 18%, 16% and 10%, respectively.
13. Contingency and Commitments
As at October 31, 2011, the Company had outstanding letters of guarantee totaling $200,000 (2010 - $200,000). The Company enters into patent licensing agreements in the ordinary course of business. Although the Company does not provide price protection to most of its customers, there are times when it is a necessary means of doing business. Price protection may be offered to earlier licensees in order to ensure that they enjoy more favoured pricing relative to later licensees for comparable license terms. Such protections are not retroactive. At October 31, 2011, the Company estimates the fair value of this obligation as $nil (2010 - $nil) based upon the licenses executed to date.
Contractual obligations:
Operating Lease
The Company has operating leases for office space. The future minimum lease payments over the next four years are as follows:
--------------------------------------------------
2012 $299
2013 $461
2014 $465
2015 $332
--------------------------------------------------
14. Capital Management
The Company's objective is to maintain a strong capital base in order to maintain investor, creditor and market confidence and to sustain future development of the business. Management defines capital as the Company's shareholders' equity excluding accumulated other comprehensive income.
The Company has certain credit facilities with a Canadian chartered bank, which consist of an operating line, a foreign exchange forward contract facility and standby letters of credit. The Board of Directors does not establish quantitative return on capital criteria for management, but rather promotes year-over-year sustainable profitable growth. The Board of Directors also reviews on a quarterly basis the level of dividends paid to the Company's shareholders and monitors the share repurchase program activities. There were no changes in the Company's approach to capital management during the period. Neither the Company nor any of its subsidiaries is subject to externally imposed capital requirements.
15. Transition to IFRS
As disclosed in Note 2, these interim Consolidated Financial Statements represent the Company's presentation of the financial results of operations and financial position under IFRS for the period ended October 31, 2011 in conjunction with the Company's annual audited Consolidated Financial Statements to be issued under IFRS as at and for the year ended April 30, 2012. As a result, these interim Consolidated Financial Statements have been prepared in accordance with IFRS 1, "First-time Adoption of International Financial Reporting Standards" and with IAS 34, "Interim Financial Reporting," as issued by the IASB. Previously, the Company prepared its interim and annual Consolidated Financial Statements in accordance with Canadian GAAP.
IFRS 1 requires the presentation of comparative information as at the May 1, 2010 transition date and subsequent comparative periods as well as the consistent and retrospective application of IFRS accounting policies. To assist with the transition, IFRS 1 provides mandatory and optional exemptions for first-time adopters to alleviate the retrospective application of all IFRS.
The following reconciliations present the adjustments made to the Company's previous GAAP financial results of operations and financial position to comply with IFRS 1. A summary of the significant accounting policy changes and applicable exemptions are discussed following the reconciliations. Reconciliations include the Company's Consolidated Balance Sheet as at May 1, 2010, Equity as of October 31, 2010 and April 30, 2011 and Statement of Income and Statement of Comprehensive Income for the period ended October 31, 2010 and for the year ended April 30, 2011.
IFRS Opening Consolidated Balance Sheet
As at May 1, 2010
(In thousands of Canadian Dollars)
IFRS Adjustments
-----------------------------------
Deferred Deferred
gain on Share-based tax
sale- compen- reclassi-
Previous leaseback sation fication
GAAP (Note (a)) (Note (b)) (Note (c)) IFRS
----------------------------------------------------------------------------
Current Assets
Cash and cash
equivalents $70,732 $- $- $- $70,732
Marketable
securities 30,096 30,096
Accounts
receivable 4,880 4,880
Prepaid expenses 698 698
Other asset 2,053 2,053
Deferred income
tax asset 10,930 (10,930) -
----------------------------------------------------------------------------
119,389 (10,930) 108,459
Property and
equipment 257 257
Acquired
intangible assets 80,685 80,685
Deferred income
tax asset - (263) 298 4,783 4,818
Investment tax
credits
receivable 15,748 15,748
----------------------------------------------------------------------------
$216,079 $(263) $298 $(6,147) $209,967
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Current
Liabilities
Accounts payable
and accrued
liabilities $7,734 $- $487 $- $8,221
Deferred revenue 4,611 (211) 4,400
Other liability 992 992
Current portion
of other long-
term
liabilities 8,294 8,294
----------------------------------------------------------------------------
21,631 (211) 487 21,907
Deferred gain on
sale-leaseback 828 (828) -
Other long-term
liabilities 33,132 33,132
Deferred income
tax liability 6,147 (6,147) -
----------------------------------------------------------------------------
61,738 (1,039) 487 (6,147) 55,039
----------------------------------------------------------------------------
Shareholders'
Equity
Share capital 126,573 126,573
Contributed
surplus 3,452 701 4,153
Retained
earnings 22,702 776 (890) 22,588
Accumulated
other
comprehensive
income 1,614 1,614
----------------------------------------------------------------------------
154,341 776 (189) 154,928
----------------------------------------------------------------------------
$216,079 $(263) $298 $(6,147) $209,967
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Reconciliation of Shareholders' Equity
As at October 31, 2010
(In thousands of Canadian Dollars)
IFRS Adjustments
----------------------------
Deferred
gain on Share-based
sale- compen-
Previous leaseback sation
GAAP (Note (a)) (Note (b)) IFRS
Shareholders'
Equity
Share capital $126,937 $126,937
Contributed
surplus 3,366 892 4,258
Retained earnings 28,587 696 (1,189) 28,094
Accumulated other
comprehensive
income 678 678
----------------------------------------------------------------------------
$159,568 696 (297) $159,967
----------------------------------------------------------------------------
----------------------------------------------------------------------------
As at April 30, 2011
(In thousands of Canadian Dollars)
IFRS Adjustments
----------------------------
Deferred
gain on Share-based
sale- compen-
Previous leaseback sation
GAAP (Note (a)) (Note (b)) IFRS
----------------------------------------------------------------------------
Shareholders'
Equity
Share capital $129,021 $129,021
Contributed
surplus 3,592 934 4,526
Retained earnings 35,905 618 (1,088) 35,435
Accumulated other
comprehensive
income 848 848
----------------------------------------------------------------------------
$169,366 618 (154) $169,830
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Consolidated Statement of Income
Period ended October 31, 2010
(In thousands of Canadian Dollars)
IFRS Adjustments
-----------------------------------
Deferred Income
gain on Share-based Statement
sale- compen- Reclassi-
Previous leaseback sation fications
GAAP (Note (a)) (Note (b)) (Note (d)) IFRS
----------------------------------------------------------------------------
Revenues $19,962 $- $- $- $19,962
----------------------------------------------------------------------------
Operating
expenses
Patent
portfolio
management 2,248 2,248
Patent
licensing and
litigation 2,435 (107) 2,328
Research and
development 625 (116) 509
General and
administration 1,393 (422) (10) 961
Foreign
exchange
(gain) (181) (181)
Share-based
compensation 445 896 1,341
Patent
amortization 3,380 3,380
Imputed
interest 747 747
----------------------------------------------------------------------------
11,092 251 (10) 11,333
----------------------------------------------------------------------------
Income from
operations 8,870 (251) 10 8,629
Investment
income 275 275
----------------------------------------------------------------------------
Income before
income tax
expense and
discontinued
operations 9,145 (251) 10 8,904
Income tax
expense 2,631 (37) 2,594
----------------------------------------------------------------------------
Income before
discontinued
operations 6,514 (214) 10 6,310
Discontinued
operations
income
(net of tax) 50 (40) (10) -
----------------------------------------------------------------------------
Net Income $ 6,564 $(40) $(214) $- $ 6,310
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings per
share
Basic - net
earnings $0.56 $0.54
Diluted - net
earnings $0.55 $0.53
Consolidated Statement of Comprehensive Income
Period ended October 31, 2010
(In thousands of Canadian Dollars)
IFRS Adjustments
---------------------------
Deferred
gain on Share-based
sale- compen-
Previous leaseback sation
GAAP (Note (a)) (Note (b)) IFRS
----------------------------------------------------------------------------
Net Income $6,564 $(40) $(214) $6,310
Other comprehensive
income, net tax
Gains (losses) on
derivatives
designated as cash
flow hedges 240 240
Gains (losses) on
derivatives
designated as cash
flow hedges in
prior periods
transferred to
earnings in the
current period (303) (303)
----------------------------------------------------------------------------
Other comprehensive
income (loss) (63) (63)
----------------------------------------------------------------------------
Comprehensive income $6,501 $(40) $(214) $6,247
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Consolidated Statement of Income
Year ended April 30, 2011
(In thousands of Canadian Dollars)
IFRS Adjustments
-----------------------------------
Deferred Income
gain on Share-based Statement
sale- compen- Reclassi-
Previous leaseback sation fications
GAAP (Note (a)) (Note (b)) (Note (d)) IFRS
----------------------------------------------------------------------------
Revenues $80,537 $ - $ - $- $80,537
----------------------------------------------------------------------------
Operating
expenses
Patent
portfolio
management 9,570 9,570
Patent
licensing and
litigation 13,082 (298) 12,784
Research and
development 2,974 (306) 2,668
General and
administratio
n 5,798 (1,460) (87) 4,251
Foreign
exchange
(gain) (1,450) (1,450)
Share-based
compensation 1,989 2,179 4,168
Patent
Amortization 13,551 13,551
Imputed
interest 2,906 2,906
----------------------------------------------------------------------------
48,420 115 (87) 48,448
----------------------------------------------------------------------------
Income from
operations 32,117 (115) 87 32,089
Investment
income 1,345 1,345
----------------------------------------------------------------------------
Income before
income tax
expense and
discontinued
operations 33,462 (115) 87 33,434
Income tax
expense 8,679 (81) 8,760
----------------------------------------------------------------------------
Income before
discontinued
operations 24,783 (196) 87 24,674
Discontinued
operations
income
(net of tax) 247 (160) (87) -
----------------------------------------------------------------------------
Net Income $25,030 $(160) $(196) $- $24,674
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings per
share
Basic - net
earnings $2.12 $2.09
Diluted - net
earnings $2.09 $2.06
Consolidated Statement of Comprehensive Income
Year ended April 30, 2011
(In thousands of Canadian Dollars)
IFRS Adjustments
-----------------------
Deferred
gain on Share-based
sale- compen-
Previous leaseback sation
GAAP (Note (a)) (Note (b)) IFRS
----------------------------------------------------------------------------
Net Income $25,030 $(160) $(196) $24,674
Other comprehensive income,
net tax
Gains (losses) on
derivatives designated as
cash flow hedges 754 754
Gains (losses) on
derivatives designated as
cash flow hedges in prior
periods transferred to
earnings in the current
period (1,520) (1,520)
----------------------------------------------------------------------------
Other comprehensive income
(loss) (766) (766)
----------------------------------------------------------------------------
Comprehensive income $24,264 $(160) $(196) $23,908
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The following discussion explains the significant differences between the Company's previous GAAP accounting policies and those applied by the Company under IFRS. IFRS policies have been retrospectively and consistently applied except where specific IFRS 1 optional and mandatory exemptions permitted an alternative treatment upon transition to IFRS for first-time adopters. The descriptive note captions below correspond to the adjustments presented in the preceding reconciliations.
