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MOSAID Reports Results for Second Quarter Fiscal 2012

(November 23, 2011)

OTTAWA, ONTARIO -- (Marketwire) -- 11/23/11 -- MOSAID Technologies Incorporated (TSX:MSD) today announced financial results for the second quarter of fiscal 2012, ended October 31, 2011.

The Company adopted International Financial Reporting Standards ("IFRS") effective May 1, 2011. The accompanying interim financial statements represent the Company's second set of financial statements prepared in accordance with IFRS.

Q2 Fiscal 2012 Results

-- Q2 revenues of $20.2 million, compared with $20.0 million in Q2 fiscal 2011 -- Q2 adjusted net income of $6.4 million, compared with $9.8 million in Q2 fiscal 2011. Adjusted diluted EPS of $0.52, based on 12.2 million diluted shares, compared to $0.82 per diluted share in Q2 fiscal 2011, based on 11.9 million diluted shares -- Q2 IFRS net loss of $4.9 million or $0.40 per share, compared to net income of $6.3 million or $0.53 per share in Q2 fiscal 2011.


"The second quarter was marked by two landmark events: our acquisition of approximately 2,000 wireless patents and patent applications originally filed by Nokia, and the offer from an investment fund under the management of Sterling Fund Management, LLC (Sterling) to acquire all the outstanding common shares of MOSAID for $46.00 in cash per share," said John Lindgren, President and CEO, MOSAID. "We expect the Nokia patents to drive revenue growth for MOSAID and believe the acquisition affirms our position as one of the world's premiere licensing organizations. The transaction with Sterling resulted from an extensive review process of MOSAID's alternatives and, in the view of the Special Committee and the Board, represents the best sale alternative available for shareholders."

MOSAID had cash and marketable securities of $115.9 million at the end of the second quarter of fiscal 2012, compared to $122.9 million at the end of the first quarter of fiscal 2012. In Q2 fiscal 2012, MOSAID returned $3.0 million to shareholders in quarterly dividend payments. As part of MOSAID's arrangement agreement with Sterling Partners, which was announced on October 27, 2011, MOSAID agreed to suspend payment of its quarterly dividend.

A reconciliation of adjusted net income to IFRS net income is included in the adjusted consolidated financial statements accompanying this press release.

Arrangement Agreement with Sterling

On October 27, 2011, MOSAID announced that it had entered into an Arrangement Agreement with Sterling pursuant to which Sterling will acquire all the outstanding common shares of MOSAID for a cash payment of $46.00 per share.

The transaction will be carried out by way of a statutory Plan of Arrangement, the implementation of which will be subject to approval by at least 66 2/3% of the votes cast at the special meeting of MOSAID shareholders to be held on December 19, 2011. This arrangement transaction also requires the approval of the Ontario Superior Court of Justice.

Pursuant to the terms of the Arrangement Agreement between Sterling and MOSAID, the transaction is also subject to applicable regulatory approvals and the satisfaction of certain closing conditions customary in transactions of this nature. On November 17, 2011, MOSAID announced that an advance ruling certificate was received from the Commissioner of Competition confirming that the Commissioner does not intend to challenge the proposed arrangement under the provisions of the Canadian Competition Act. On November 21, 2011, the Company filed its Premerger Notification and Report Form (HSR Form) with the Bureau of Competition, Federal Trade Commission in the United States.

Assuming the required shareholder and Court approvals are received and all other conditions precedent to closing the transaction are satisfied or waived at the time, MOSAID expects that the arrangement will be effected on or about December 23, 2011.

The Arrangement Agreement provides for, among other things, Board support and non-solicitation covenants (subject to the fiduciary obligations of the MOSAID Board and a Sterling "right to match") as well as the payment to Sterling of a break fee equal to $22 million if the proposed transaction is not completed in certain specified circumstances.

Second Quarter Operational Highlights

Patent portfolio development: MOSAID announced the acquisition of Core Wireless S.a.r.l.(Core Wireless), a Luxembourg company, that held approximately 2,000 wireless patents and patent applications originally filed by Nokia. MOSAID believes that revenues from licensing, enforcing and monetizing this portfolio of wireless patents will surpass the Company's total revenues since its formation in 1975.

MOSAID had approximately 5,385 patents and applications at the end of Q2 fiscal 2012, up 88% from 2,869 at the end of Q2 fiscal 2012, and up 126% from 2,381 one year ago. The increase was driven by the 2,000 wireless patents and patent applications acquired from Core Wireless, and the 500 patents and patent applications acquired earlier in calendar 2011 from Hynix Semiconductor Inc., both of which were recorded during the second quarter.

MOSAID also announced the sale of five patent families for US$11.0 million to an unnamed buyer. MOSAID will collect payment for the patents over several quarters, with the revenue being recognized as amounts become due.

Wireless patent licensing: MOSAID signed a patent license and settlement agreement with Digi International Inc., ending the patent infringement litigation between the two companies. MOSAID granted Digi International a 10-year license to MOSAID's standards-essential Wi-Fi patents, with running royalty payments due on a quarterly basis. MOSAID initiated wireless patent infringement litigation against 17 companies, including Digi International, in March 2011 in the United States District Court for the Eastern District of Texas, Marshall Division.

Research and Development: MOSAID unveiled the industry's fastest Flash memory semiconductor device. The Company's 256Gb HLNAND(TM) (HyperLink NAND) device operates at up to 800MB/s per channel, twice the speed of any other NAND Flash device now on the market. Targeting mass storage applications, including enterprise data centers and high-performance computing applications, MOSAID's HLNAND2 technology enables product designers to build SSDs (Solid State Drives) with Gigabyte-per-second performance and Terabyte-class storage capacity.

Litigation update: on August 9, 2011, MOSAID filed suit against seven companies, including Adobe Systems, Inc., Alcatel-Lucent USA, Inc., IBM Corp. and Juniper Networks, Inc., for infringing certain of MOSAID's computer networking patents.

Also on August 9, 2011, MOSAID announced that ARM, Ltd. and ARM, Inc. filed a Complaint for Declaratory Judgment against the Company. On April 7, 2011, MOSAID filed suit against NVIDIA Corporation, Freescale Semiconductor, Inc. and Interphase Corp., alleging infringement of seven U.S. patents related primarily to power management techniques and microprocessor architecture. ARM, in its complaint, is seeking a declaration of non-infringement and invalidity with respect to the same seven U.S. patents at issue in MOSAID's suit against NVIDIA, Freescale and Interphase.

On August 12, 2011, MOSAID added a mobile DRAM (Dynamic Random Access Memory) patent to its infringement claims against Elpida Memory, Inc., Buffalo Inc., and Axiontech Technologies. The amended complaint now alleges infringement of seven of MOSAID's U.S. patents.

MOSAID's revenues result primarily from intellectual property agreements, which by their nature may actually close on dates other than those projected. MOSAID's priority and focus is on obtaining the best terms possible under its agreements, rather than on the particular timing of agreement closure. MOSAID's revenues depend upon, among other items, the continued ability of its licensees to pay amounts as they become due. The Company takes steps, including monitoring the creditworthiness of its licensees, in order to manage this risk.

Due to the nature of the expense, patent licensing and litigation expense can vary significantly quarter-to-quarter.

The complete financial statements and management's discussion and analysis for second quarter ended October 31, 2011 are available on MOSAID's website at www.mosaid.com or at www.sedar.com.

About MOSAID

MOSAID Technologies Inc. is one of the world's leading intellectual property management companies. MOSAID licenses patented intellectual property in the areas of semiconductors and communications and develops semiconductor memory technology. MOSAID counts many of the world's largest technology companies among its licensees. Founded in 1975, MOSAID has offices in Ottawa, Ontario and Plano, Texas. For more information, please visit www.mosaid.com and http://InvestorChannel.mosaid.com

Non-GAAP Measures and Definitions

Throughout this press release, we refer to a number of measures which we believe are meaningful in the assessment of the Company's performance. All these metrics are non-standard measures under IFRS, and are unlikely to be comparable to similarly titled measures reported by other companies. Readers are cautioned that the disclosure of these items is meant to add to, and not replace, the discussion of financial results or cash flows from operations as determined in accordance with IFRS. For a discussion of the purpose of these non-GAAP measures, please refer to the Company's Fiscal 2011 MD&A on SEDAR at www.sedar.com.

Adjusted net income, a non-IFRS measure, is IFRS net income adjusted for share-based compensation, patent amortization, imputed interest, foreign exchange gains and losses on "Other long-term liabilities," and any other non-recurring items. The Company uses adjusted measures internally to evaluate and manage operating performance, and to forecast and plan. Non-IFRS measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers.

MOSAID Technologies Incorporated Unaudited Adjusted Consolidated Financial Statements For the Quarter Ended October 31, 2011 The attached consolidated financial statements have been prepared by Management of MOSAID Technologies Incorporated and have not been reviewed by an auditor.

Adjusted net income, which is not an International Financial Reporting Standard (IFRS) measure, is IFRS net income adjusted for stock-based compensation, patent amortization, imputed interest, foreign exchange gains and losses on "other long-term liabilities," and non-recurring items as reconciled below. The Company uses adjusted measures internally to evaluate and manage operating performance as well as to forecast and plan. Non-IFRS measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers.

MOSAID TECHNOLOGIES INCORPORATED CONSOLIDATED ADJUSTED STATEMENTS OF INCOME (In thousands of Canadian Dollars, except per share amounts) (Unaudited) Quarter Ended Six Months Ended October 31, October 31, 2011 2010 2011 2010 ---------------------------------------------------------------------------- Revenues $20,224 $19,962 $38,474 $38,450 Operating expenses Patent portfolio management 2,622 2,248 4,753 4,434 Patent licensing and litigation 7,180 2,328 11,732 4,821 Research and development 929 509 1,792 984 General and administration 1,264 961 2,470 2,016 Foreign exchange (gain) loss (249) 209 (308) 135 ---------------------------------------------------------------------------- 11,746 6,255 20,439 12,390 ---------------------------------------------------------------------------- Adjusted income from operations 8,478 13,707 18,035 26,060 Investment income 389 275 787 617 ---------------------------------------------------------------------------- Adjusted income before income tax expense 8,867 13,982 18,822 26,677 Income tax expense 2,483 4,195 5,270 8,003 ---------------------------------------------------------------------------- Adjusted net income $ 6,384 $ 9,787 $13,552 $18,674 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Adjusted earnings per share Basic $0.54 $0.83 $1.14 $1.59 Diluted $0.52 $0.82 $1.11 $1.57 Weighted average number of shares Basic 11,918,488 11,790,143 11,911,419 11,779,049 Diluted 12,246,825 11,898,957 12,191,297 11,860,073 Adjusted net income is reconciled to IFRS net income as follows: (Dollar amounts in thousands) Quarter ended Six Months Ended October 31, October 31, 2011 2010 2011 2010 ---------------------------------------------------------------------------- IFRS net (loss) income $(4,899) $6,310 $(2,323) $11,393 Add (deduct): Share-based compensation 2,389 1,341 3,696 2,212 Patent amortization 4,467 3,380 8,308 6,760 Imputed interest 1,143 747 1,778 1,493 Special committee 4,195 - 4,195 - Foreign exchange loss (gain) 2,392 (390) 2,589 228 Income tax expense - for the above items (3,303) (1,601) (4,691) (3,412) ---------------------------------------------------------------------------- Adjusted net income $ 6,384 $9,787 $13,552 $18,674 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Adjusted foreign exchange (gain) loss is reconciled to IFRS foreign exchange loss (gain) as follows: (Dollar amounts in thousands) Quarter ended Six Months ended October 31, October 31, 2011 2010 2011 2010 ---------------------------------------------------------------------------- IFRS foreign exchange loss (gain) $2,143 $(181) $2,281 $363 Less: foreign exchange loss (gain) on long-term debt 2,392 (390) 2,589 228 ---------------------------------------------------------------------------- Adjusted foreign exchange (gain) loss $ (249) $ 209 $ (308) $135 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- MOSAID Technologies Incorporated Unaudited Consolidated Condensed Financial Statements For the Period Ended October 31, 2011

The attached consolidated financial statements have been prepared by Management of MOSAID Technologies Incorporated and have not been reviewed by an auditor.

MOSAID TECHNOLOGIES INCORPORATED CONSOLIDATED CONDENSED BALANCE SHEETS (In thousands of Canadian Dollars) (Unaudited) ---------------------------------------------------------------------------- October 31, April 30, May 1, 2011 2011 2010 ---------------------------------------------------------------------------- Current Assets Cash and cash equivalents $106,999 $ 97,809 $ 70,732 Marketable securities (Note 11) 8,940 17,021 30,096 Accounts receivable 7,232 13,301 4,880 Prepaid expenses 867 542 698 Other asset (Note 11) - 1,136 2,053 ---------------------------------------------------------------------------- 124,038 129,809 108,459 Property and equipment 505 321 257 Acquired intangible assets (Note 5) 129,569 71,292 80,685 Deferred income tax asset 3,694 1,990 4,818 Investment tax credits receivable 16,380 16,118 15,748 ---------------------------------------------------------------------------- $274,186 $219,530 $209,967 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Current Liabilities Accounts payable and accrued liabilities $ 16,695 $ 12,893 $ 8,221 Deferred revenue - - 4,400 Other liability (Note 11) 724 - 992 Current portion of other long- term liabilities 11,306 9,896 8,294 ---------------------------------------------------------------------------- 28,725 22,789 21,907 Other long-term liabilities 83,702 26,911 33,132 ---------------------------------------------------------------------------- 112,427 49,700 55,039 ---------------------------------------------------------------------------- Shareholders' Equity Share capital (Note 6) 130,846 129,021 126,573 Contributed surplus 4,300 4,526 4,153 Retained earnings 27,156 35,435 22,588 Accumulated other comprehensive income (543) 848 1,614 ---------------------------------------------------------------------------- 161,759 169,830 154,928 ---------------------------------------------------------------------------- $274,186 $219,530 $209,967 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- See accompanying Notes to the Condensed Consolidated Financial Statements MOSAID TECHNOLOGIES INCORPORATED CONSOLIDATED CONDENSED STATEMENTS OF INCOME (In thousands of Canadian Dollars, except per share amounts) (Unaudited) Quarter ended Six Months ended October 31, October 31, 2011 2010 2011 2010 ---------------------------------------------------------------------------- Revenues $20,224 $19,962 $38,474 $38,450 ---------------------------------------------------------------------------- Operating expenses Patent portfolio management 2,622 2,248 4,753 4,434 Patent licensing and litigation 7,180 2,328 11,732 4,821 Research and development 929 509 1,792 984 General and administration 1,264 961 2,470 2,016 Foreign exchange loss 2,143 (181) 2,281 363 Share-based compensation (Note 7) 2,389 1,341 3,696 2,212 Special committee 4,195 - 4,195 - Patent amortization 4,467 3,380 8,308 6,760 Imputed interest 1,143 747 1,778 1,493 ---------------------------------------------------------------------------- 26,332 11,333 41,005 23,083 ---------------------------------------------------------------------------- (Loss) income from operations (6,108) 8,629 (2,531) 15,367 Investment income 389 275 787 617 ---------------------------------------------------------------------------- (Loss) income before income tax expense (5,719) 8,904 (1,744) 15,984 Income tax (recovery) expense (820) 2,594 579 4,591 ---------------------------------------------------------------------------- Net(loss) income $(4,899) $ 6,310 $(2,323) $11,393 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Earnings per share (Note 9) Basic - net (loss) earnings $(0.41) $0.54 $(0.20) $0.97 Diluted - net (loss) earnings $(0.40) $0.53 $(0.19) $0.96 Weighted average number of shares Basic 11,918,488 11,790,143 11,911,419 11,779,049 Diluted 12,246,825 11,898,957 12,191,297 11,860,073 See accompanying Notes to the Condensed Consolidated Financial Statements CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (In thousands of Canadian Dollars) (Unaudited) Quarter ended Six Months ended October 31, October 31, 2011 2010 2011 2010 ---------------------------------------------------------------------------- Net (loss) income $(4,899) $6,310 $(2,323) $11,393 ---------------------------------------------------------------------------- Other comprehensive income, net of tax: Gains (losses) on derivatives designated as cash flow hedges (1,403) 240 (968) (127) Gains (losses) on derivatives designated as cash flow hedges in prior periods transferred to earnings in the current period 91 (303) (423) (809) ---------------------------------------------------------------------------- Other comprehensive (loss) (1,312) (63) (1,391) (936) ---------------------------------------------------------------------------- Comprehensive (loss) income $(6,211) $6,247 $(3,714) $10,457 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- See accompanying Notes to the Consolidated Condensed Financial Statements MOSAID TECHNOLOGIES INCORPORATED CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (In thousands of Canadian Dollars) (Unaudited) Accumu- lated Other Contri- Compreh- Common Common buted Retained ensive Share Shares Surplus earnings Income Total (Number) ($) ($) ($) ($) ($) ---------------------------------------------------------------------------- Balance at May 1, 2010 $11,763,626 $126,573 $4,153 $22,588 $1,614 $154,928 Net income - - - 11,393 - 11,393 Dividends - - - (5,887) - (5,887) Employee and Director Stock Option Plan 77,040 2,164 (668) - - 1,496 Employee and Director Stock Purchase Plan 6,448 31 (23) - - 8 Restricted share unit plan - (1,831) (238) - - (2,069) Stock-based compensation - - 1,034 - - 1,034 Dividend reinvestment plan - - - - - - Other comprehensive income - - - - (936) (936) ---------------------------------------------------------------------------- Balance at October 31, 2010 11,847,114 $126,937 $4,258 $28,094 $678 $159,967 ---------------------------------------------------------------------------- Balance at April 30, 2011 $11,900,198 $129,021 $4,526 $35,435 $848 $169,830 Net (loss) income - - - (2,323) - (2,323) Dividends - - - (5,956) - (5,956) Employee and Director Stock Option Plan 4,750 139 (50) - - 89 Employee and Director Stock Purchase Plan 3,503 132 (46) - - 86 Restricted share unit plan - 1,180 (1,180) - - - Stock-based compensation - - 1050 - - 1,050 Dividend reinvestment plan 11,958 374 - - - 374 Other comprehensive income - - (1,391) (1,391) ---------------------------------------------------------------------------- Balance at October 31, 2011 $11,920,409 $130,846 $4,300 $27,156 $(543)$161,759 ---------------------------------------------------------------------------- See accompanying Notes to the Condensed Consolidated Financial Statements MOSAID TECHNOLOGIES INCORPORATED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In thousands of Canadian Dollars) (unaudited)

Quarter ended Six Months ended October 31, October 31, 2011 2010 2011 2010 ---------------------------------------------------------------------------- Operating Net (loss) income $ (4,899) $ 6,310 $ (2,323) $11,393 Items not affecting cash Amortization and imputed interest 5,213 3,417 9,264 6,828 Stock-based compensation 490 548 1,050 1,034 Loss on disposal of assets 34 - 34 - Unrealized foreign exchange loss on other long-term liabilities 2,392 (390) 2,589 228 Deferred income taxes and investment tax credits (1,807) 1,046 (1,497) 1,261 ---------------------------------------------------------------------------- 1,423 10,931 9,117 20,744 Change in non-cash working capital items (Note 10) 6,043 (1,012) 9,546 (5,849) ---------------------------------------------------------------------------- 7,466 9,919 18,663 14,895 ---------------------------------------------------------------------------- Investing Acquisition of property and equipment and acquired intangibles (11,965) (67) (13,072) (141) Acquisition of marketable securities (2,500) (17,596) (8,198) (27,505) Proceeds on disposal and maturity of marketable securities 4,997 14,210 16,279 24,702 ---------------------------------------------------------------------------- (9,468) (3,453) (4,991) (2,944) ---------------------------------------------------------------------------- Financing Increase in other long-term liabilities 468 747 925 1,494 Dividends paid (2,959) (2,944) (5,582) (5,887) Funding of restricted share unit plan - (2,068) - (2,068) Issuance of common shares 36 1,426 175 1,504 ---------------------------------------------------------------------------- (2,455) (2,839) (4,482) (4,957) ---------------------------------------------------------------------------- Net cash (outflow) inflow (4,457) 3,627 9,190 6,994 Cash and cash equivalents, beginning of period 111,456 74,099 97,809 70,732 ---------------------------------------------------------------------------- Cash and cash equivalents, end of period $106,999 $77,726 $106,999 $77,726 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Supplementary Information: Cash on hand and bank balances $106,999 $74,707 $106,999 $74,707 Short-term investments - 3,019 - 3,019 ---------------------------------------------------------------------------- Total cash and cash equivalents $106,999 $77,726 $106,999 $77,726 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- See accompanying Notes to the Condensed Consolidated Financial Statements

MOSAID TECHNOLOGIES INCORPORATED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Periods ended October 31, 2011 and 2010 (tabular dollar amounts in thousands of Canadian Dollars, except per share amounts) (unaudited)

1. Nature of Operations

MOSAID Technologies Incorporated (the "Company") was continued under the Canada Business Corporations Act. The Company monetizes patented intellectual property in the areas of semiconductors and communications systems and develops semiconductor memory technology. Founded in 1975, the Company has operations and is headquartered in Ottawa, Ontario, Canada. The Company also has operations in Plano, Texas, U.S.A.

These interim Consolidated Financial Statements were approved and authorized for issuance by the Board of Directors on November 22, 2011. On October 27, 2011, MOSAID announced that it had entered into an arrangement agreement with Sterling Partners. Sterling will acquire all the outstanding common shares of MOSAID for a cash payment of $46.00 per share as disclosed in Note 16.

2. Basis of Presentation

In conjunction with the Company's annual audited consolidated financial statements to be issued under International Financial Reporting Standard ("IFRS") for the year ended April 30, 2011, these interim consolidated financial statements present the Company's financial results of operations and financial position under IFRS, as at and for the three and six months ended October 31, 2011, including fiscal year 2011 comparative periods. As a result, they have been prepared in accordance with IFRS 1, "First-time Adoption of International Financial Reporting Standard" and with IAS 34, "Interim Financial Reporting." The consolidated interim financial statements do not include all of the information required for full annual financial statements. Previously the Company prepared its interim and annual consolidated Financial Statements in accordance with Canadian generally accepted accounting principles ("previous GAAP").

The preparation of these interim consolidated financial statements resulted in selected changes to the Company's accounting policies as compared to those disclosed in the Company's annual audited consolidated financial statements for the period ended April 30, 2011 issued under previous GAAP. A summary of significant changes to MOSAID's accounting policies is disclosed in Note 15 along with reconciliations presenting the impact of the transition to IFRS for comparative periods as at May 1, 2010, for the six months ended October 31, 2010, and for the twelve months ended April 30, 2011.

A summary of MOSAID's significant accounting policies under IFRS is presented in Note 3. These policies have been retrospectively and consistently applied except where specific exemptions permitted an alternative treatment upon transition to IFRS in accordance with IFRS 1 as disclosed in Note 15.

The consolidated interim financial statements have been prepared on the historical cost basis except for marketable securities, derivative financial instruments and share-based payment transactions that are measured at fair value.

These consolidated interim financial statements are presented in Canadian dollars, which is the functional currency of the Company and its subsidiaries.

3. Accounting Policies

Consolidation

These consolidated financial statements include the accounts of MOSAID Technologies Incorporated and its wholly-owned subsidiaries. Significant intercompany accounts and transactions have been eliminated.

Cash and cash equivalents

Cash and cash equivalents include all readily tradable instruments such as bonds, debentures and discount notes with an original maturity of three months or less.

Marketable securities

Marketable securities include readily tradable instruments such as bonds, debentures and discount notes with original maturities in excess of three months and are carried at their fair value as they are classified as held for trading.

Property and equipment

Property and equipment are recorded at cost. Amortization is provided over the estimated useful lives of the assets as follows:

Equipment 35% declining balance Furniture and fixtures 20% declining balance Leasehold improvement shorter of useful life or term of the lease

Amortization commences when an asset is available for use. Amortization methods and useful lives are reviewed at each annual reporting date and adjusted if appropriate.

Acquired intangible assets

Acquired intangible assets consist of patents, exclusive sub-licensing rights, and software. Acquired intangible assets are recorded at their fair value at the date of acquisition. Amortization is provided over the estimated useful lives of the assets as follows:

Patents and exclusive sub-licensing rights 1-14 years Software 35% declining balance

Amortization commences when an asset is available for use. Amortization methods and useful lives are reviewed at each annual reporting date and adjusted if appropriate.

Asset impairment

At each balance sheet date, the Company reviews the carrying amount of tangible and intangible assets to determine whether there is an indication that those assets have suffered an impairment loss. If any such indication exists the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash generating unit to which the asset belongs. An impairment loss is recorded if the recoverable amount, determined as the higher of its fair value less costs to sell and the value in use of the individual asset or the cash generating unit as appropriate, is less than its carrying value.

Research and development

Research costs are expensed as incurred. Development costs are capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Company intends to and has sufficient resources to complete development and to use or sell the asset. Such costs are amortized, commencing when the product is available for use, over the expected life of the product. To date, no development costs have met the criteria for deferral.

Government assistance and investment tax credits

Government assistance and investment tax credits are recorded as a reduction of the related expense or cost of the asset acquired. The benefits are not recognized until there is reasonable assurance that the Company has complied with the terms and conditions of the approved grant program or applicable tax legislation and the grants will be received.

Revenue recognition

The Company earns revenue from monetizing patented technology, primarily through licensing agreements. Revenue is measured at the fair value of the consideration received or receivable and is recognized on an accrual basis when it is probable that the economic benefits will flow to the Company and the amount of revenue can be measured reliably.

Revenue from fixed payments associated with long-term license agreements is recognized as payments become due from the licensee. Royalty revenue from long-term license agreements, which is typically based upon sale of product by the licensee, is recognized upon notification of the sale by the licensee. The Company from time to time may sell patents within its portfolio and revenue is recognized as payments become due.

Deferred revenue arises on license agreements where the payment is received in advance of being due, or where the earnings process is complete but there is not reasonable assurance of collectability at the time of billing.

Foreign currency translation

Transactions in foreign currencies are translated into Canadian dollars at the exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated at the rate of exchange in effect at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated to Canadian dollars at the exchange rate at the date that the fair value was determined. Non-monetary items denominated in a foreign currency that are measured in terms of historical cost are translated at historical exchange rates. Revenues and expenses are translated at rates in effect during the year except for amortization, which is translated at the same rate as the asset to which it relates. The resulting translation adjustments are included in the determination of net income.

Income taxes

The Company follows the asset and liability method of accounting for income taxes. Under the asset and liability method, the change in the deferred income tax asset and liability is to be included in the determination of net income. Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The Company recognizes deferred income tax assets to the extent that it is probable that future taxable profits will be available against which they can be utilized.

Stock option plan

The Company has three equity settled compensation plans: an Employee and Director Stock Option Plan (ESOP), an Employee and Director Stock Purchase Plan (ESPP) and a Restricted Share Unit Plan (RSU) as described in Note 7 to these consolidated financial statements. The Company measures equity settled stock options based on their fair value at the grant date and recognizes compensation expense over the vesting period. Details regarding the determination of the fair value of equity settled share-based transactions are set out in Note 7. Expected forfeitures are estimated at the date of grant and subsequently adjusted if further information indicates actual forfeitures may vary from the original estimate. The impact of the revision to the original estimate is included in earnings.

The Company has a cash settled Deferred Share Unit (DSU) Plan as described in Note 7 to these consolidated financial statements. The Company accounts for DSUs by estimating the fair value of the units at the grant date and recording the expense on a straight-line basis over the vesting period of the DSUs. Expected forfeitures are estimated at the date of grant and subsequently adjusted if further information indicates actual forfeitures may vary from the original estimate. The impact of the revision to the original estimate is included in earnings. Since this award will be settled in cash, at the end of the reporting period until the liability is settled, and at the date of settlement, the fair value of the liability is re-measured, with any changes in fair value recognized in profit or loss for the year.

Financial instruments

Financial instruments are measured at fair value on initial recognition of the instrument. Measurement in subsequent periods depends on the classification of the financial instrument.

The Company classifies its financial instruments as fair value through profit and loss, loans and receivables, or other liabilities. The classification depends on the purpose for which the financial instruments were acquired, their characteristics and management's intent. Management determines the classification of financial assets and liabilities at initial recognition and, except in very limited circumstances, the classification is not changed subsequent to initial recognition. Financial assets and liabilities at fair value through profit or loss include financial assets and liabilities held-for-trading and financial assets and liabilities designated upon initial recognition at fair value through profit or loss. Financial assets and liabilities are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. The company does not hold any financial instruments that have been designated upon initial recognition as at fair value through profit and loss. The Company classifies its cash and cash equivalents and marketable securities as fair value through profit and loss, which are measured at fair value, with changes in fair value being recorded in net earnings. Accounts receivable have been classified as loans and receivables, which are measured at amortized cost using the effective interest rate method. Accounts payables and accrued liabilities and long-term liabilities have been classified as other financial liabilities, which are measured at amortized cost using the effective interest rate method.

The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

Financial assets, other than those classified as fair value through profit and loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

Hedging relationships and derivative financial instruments

The Company utilizes derivative financial instruments in the management of its foreign currency exposures. The Company's policy is not to utilize derivative financial instruments for trading or speculative purposes. The Company applies hedge accounting when appropriate documentation and effectiveness criteria are met.

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives to specific contractually related firm commitments on projects.

The Company also formally assesses, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

Derivatives are recorded on the balance sheet as other assets or liabilities at fair value, with changes in fair value recorded in net income unless the derivative is designated as a cash flow hedge. Fair value of the forward exchange contracts reflects the cash flows due to or from the Company if settlement had taken place at the end of the period. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is recorded in other comprehensive income and is recognized in net income when the hedged item affects net income.

Derivatives embedded in non-derivative host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts, and the host contracts are not measured at fair value through profit and loss.

Critical accounting judgments and accounting estimates

The preparation of financial statements in conformity with IFRS requires the Company's management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as at the date of the financial statements and the reported amounts of revenues and expenses. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results could differ from those estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The determination of functional currency and level of impairment testing and cash generating units are matters of judgment.

Estimation uncertainty

Significant estimates and assumptions included in these financial statements relate to the useful lives of acquired intangible assets, measurement of deferred taxes and investment tax credits, valuation of equity instruments granted under share based payment transactions and allowance for doubtful accounts.

4. Recent Pronouncements Issued Not Yet Adopted

The Company has reviewed new and revised accounting pronouncements that have been issued but are not yet effective and determined that the following may have an impact on the Company.

IAS 12 Income Taxes ("IAS 12")

IAS 12 was amended in December 2010 to remove subjectivity in determining on which basis an entity measures the deferred tax relating to an asset. The amendment introduces a presumption that an entity will assess whether the carrying value of an asset will be recovered through the sale of the asset. The amendment to IAS 12 is effective for reporting periods beginning on or after January 1, 2012. The Company is currently evaluating the impact of this amendment to IAS 12 on its consolidated financial statements.

IAS 27 Separate Financial Statements ("IAS 27")

IAS 27 replaced the existing IAS 27 "Consolidated and Separate Financial Statements". IAS 27 contains accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity prepares separate financial statements. IAS 27 requires an entity preparing separate financial statements to account for those investments at cost or in accordance with IFRS 9 Financial Instruments. IAS 27 is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements.

IAS 28 Investments in Associates and Joint Ventures ("IAS 28")

IAS 28 was amended in 2011 which prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures. IAS 28 is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted. The Company is currently evaluating the impact of this amendment to IAS 28 on its consolidated financial statements.

IFRS 7 Financial Instruments: Disclosures ("IFRS 7")

IFRS 7 was amended in October 2010 to provide additional disclosure on the transfer of financial assets including the possible effects of any residual risks that the transferring entity retains. These amendments are effective as of July 1, 2011. The Company is currently evaluating the impact of these amendments to IFRS 7 on its consolidated financial statements.

IFRS 9 Financial Instruments ("IFRS 9")

IFRS 9 was issued in November 2009 and is the first step to replace current IAS 39, "Financial Instruments: Recognition and Measurement." IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2013. The Company is currently evaluating the impact of IFRS 9 on its consolidated financial statements.

IFRS 10 Consolidated Financial Statements ("IFRS 10")

IFRS 10 establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entitie
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