MOSAID Technologies Inc. is one of the world's leading intellectual property companies. MOSAID licenses patented intellectual property in the areas of semiconductors and communications technologies and develops semiconductor memory technology. MOSAID counts many of the world's largest technology companies among its licensees. Founded in 1975, MOSAID is based in Ottawa, Ontario, Canada. Visit www.mosaid.com and InvestorChannel.mosaid.com for more information.
Pro forma net income, a non-GAAP measure, is GAAP net income adjusted for stock-based compensation, patent amortization and imputed interest, foreign exchange gains and losses on "Other long-term liabilities," and any other non-recurring items. The Company uses pro forma measures internally to evaluate and manage operating performance, and to forecast and plan. Non-GAAP measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers.
Forward-Looking Information
This document and certain other public documents incorporated by reference in this document, contain forward-looking statements to the extent they relate to MOSAID or its management, including those identified by the expressions "anticipate," "believe," "could," "estimate," "expect," "foresee," "intend," "may," "plan," "will," "would" and similar expressions. Similarly, statements in this document that describe MOSAID's business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. These forward-looking statements are not historical facts, but rather reflect MOSAID's current expectations regarding future events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results, performance or achievements to differ materially from those in such forward-looking statements. Assumptions made in preparing forward-looking statements and financial guidance include, but are not limited to, the following: MOSAID's continued expansion of its patent portfolio and of its opportunities for future patent licensing revenue as a result of MOSAID's acquisition of patents from third parties and from development of new inventions; semiconductor and telecommunications product vendors continuing to infringe MOSAID's patents; the timing and amount of MOSAID's litigation expenses; MOSAID's ability to sign new patent licensees; current assumptions as to the identification of products that are unlicensed to MOSAID's wireless patents; and the timing and amount of MOSAID's Research & Development expenses.
Factors that could cause actual results to differ materially from expected results include, but are not limited to, the following: MOSAID's ability to negotiate settlements with licensees; legal rulings and/or regulatory investigations, audits or complaints having an adverse impact on the validity, enforceability, royalty rates, potential royalty rates, and strength or breadth of coverage of MOSAID's essential and/or nonessential patents (including, but not limited to, adverse results from litigation or proceedings in patent offices and government regulatory agencies in various countries around the world); judicial, legislative or regulatory changes that impair the ability of patent holders to earn licensing revenues; worldwide economic conditions and demand for technology products; economic, social, and political conditions both globally and in the countries in which MOSAID or patent licensees operate, including conflict, war and, other security risks, health conditions, possible disruptions in transportation networks and fluctuations in foreign currency exchange rates; non-payment or delays in payment by or insolvency of licensees or other debtors; variability in patent licensees' sales of licensed products; failure to maintain and enforce MOSAID's existing patent portfolio, or failure to obtain valuable patents as a result of R&D activities, or failure to acquire valuable patents from third parties; MOSAID's ability to recruit and retain skilled personnel; change in MOSAID's financial position; consolidation of MOSAID's licensees; natural events, such as severe weather and earthquakes in the locations in which MOSAID or patent licensees operate; and changes in the tax rate applicable to MOSAID as the result of changes in the tax law in the jurisdictions in which profits are determined to be earned and taxed, the outcome of tax audits and the ability to realize deferred tax assets.
Except as may be required by applicable law or stock exchange regulation, we undertake no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events. Accordingly, readers should not place undue reliance on forward-looking statements. If we do update one or more forward-looking statements, no inference should be drawn that additional updates will be made with respect to those or other forward-looking statements. Additional information identifying risks and uncertainties affecting MOSAID's business and other factors that could cause MOSAID's financial results to fluctuate are contained in MOSAID's Annual Information Form, under the section entitled "Risk Factors," and in MOSAID's other public filings available online at www.sedar.com.
MOSAID Technologies Incorporated
Unaudited Pro Forma Consolidated Statements of Income
For the Quarter Ended April 30, 2011
The attached pro forma consolidated financial statements have been prepared by Management of MOSAID Technologies Incorporated and have not been reviewed by an auditor.
MOSAID TECHNOLOGIES INCORPORATED
(Subject to the Canada Business Corporations Act)
CONSOLIDATED PRO FORMA STATEMENTS OF INCOME
(In thousands of Canadian Dollars, except per share amount)
(Unaudited)
Quarter Ended Year Ended
April 30 April 30
2011 2010 2011 2010
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Revenues $21,876 $19,886 $80,537 $71,110
Operating expenses
Patent portfolio
management 3,000 2,282 9,570 7,485
Patent licensing and
litigation 5,756 2,573 13,082 9,239
Research and development 986 716 2,974 2,853
General and administration 1,289 1,613 5,798 5,978
Foreign exchange loss 807 29 1,017 423
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11,838 7,213 32,441 25,978
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Pro forma income from
operations 10,038 12,673 48,096 45,132
Investment income 391 128 1,345 439
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Pro forma income before
income tax expense 10,429 12,801 49,441 45,571
Income tax expense 3,129 4,224 14,832 15,040
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Pro forma net income $ 7,300 $ 8,577 $34,609 $30,531
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Pro forma earnings per share
Basic $0.61 $0.74 $2.93 $2.89
Diluted $0.60 $0.74 $2.89 $2.87
Weighted average number of
shares
Basic 11,884,586 11,522,272 11,826,997 10,580,958
Diluted 12,090,772 11,611,053 11,976,458 10,651,777
See accompanying Notes to the Consolidated Financial Statements
Pro forma net income is reconciled to GAAP net income as follows:
(Dollar amounts in
thousands) Quarter Ended Year Ended
April 30 April 30
2011 2010 2011 2010
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GAAP net income $5,883 $8,051 $25,030 $21,750
Add (deduct):
Stock-based compensation 574 400 1,989 1,189
Patent amortization and
imputed interest 4,075 3,888 16,457 15,215
Foreign exchange (gain) (2,067) (1,761) (2,467) (4,972)
Special committee - - - 719
Income tax expense - for the
above items (1,112) (992) (5,953) (4,437)
Future income tax
revaluation - (862) (200) 1,844
Discontinued operations (net
of tax) (53) (147) (247) (777)
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Pro forma net income $7,300 $8,577 $34,609 $30,531
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Pro forma foreign exchange loss is reconciled to GAAP foreign exchange (gain) as follows:
(Dollar amounts in
thousands) Quarter Ended Year Ended
April 30 April 30
2011 2010 2011 2010
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GAAP foreign exchange (gain) $(1,260) $(1,732) $(1,450) $(4,550)
Less: foreign exchange
(gain) on long-term debt (2,067) (1,761) (2,467) (4,972)
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Pro forma foreign exchange
loss $ 807 $ 29 $ 1,017 $ 423
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See accompanying Notes to the Consolidated Financial Statements
MOSAID TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(In thousands of Canadian Dollars, except per share amount)
(Unaudited)
Quarter Ended Year Ended
April 30 April 30
2011 2010 2011 2010
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Revenues $21,876 $19,886 $80,537 $71,110
Operating expenses
Patent portfolio
management 3,000 2,282 9,570 7,485
Patent licensing and
litigation 5,756 2,573 13,082 9,239
Research and development 986 716 2,974 2,853
General and administration 1,289 1,613 5,798 5,978
Foreign exchange (gain) (1,260) (1,732) (1,450) (4,550)
Stock-based compensation
(Note 6) 574 400 1,989 1,189
Special committee - - - 719
Patent amortization and
imputed interest 4,075 3,888 16,457 15,215
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14,420 9,740 48,420 38,128
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Income from operations 7,456 10,146 32,117 32,982
Investment income 391 128 1,345 439
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Income before income tax
expense and discontinued
operations 7,847 10,274 33,462 33,421
Income tax expense 2,017 2,370 8,679 12,448
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Income before discontinued
operations 5,830 7,904 24,783 20,973
Discontinued operations
income
(net of tax) (Note 5) 53 147 247 777
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Net income 5,883 8,051 25,030 21,750
Dividends 2,972 2,941 11,827 10,655
Retained earnings, beginning
of period 32,994 17,592 22,702 11,607
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Retained earnings, end of
period $35,905 $22,702 $35,905 $22,702
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Earnings per share (Note 4)
Basic - before
discontinued operations $0.49 $0.69 $2.10 $1.98
Diluted - before
discontinued operations $0.48 $0.68 $2.07 $1.97
Basic - net earnings $0.50 $0.70 $2.12 $2.06
Diluted - net earnings $0.49 $0.69 $2.09 $2.04
Weighted average number of
shares
Basic 11,884,586 11,522,272 11,826,997 10,580,958
Diluted 12,090,772 11,611,053 11,976,458 10,651,777
See accompanying Notes to the Consolidated Financial Statements
MOSAID TECHNOLOGIES INCORPORATED
CONSOLIDATED BALANCE SHEETS
(In thousands of Canadian Dollar)
As at As at
April 30, 2011 April 30, 2010
(unaudited) (audited)
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Current Assets
Cash and cash equivalents $ 97,809 $ 70,732
Marketable securities 17,021 30,096
Accounts receivable 13,301 4,880
Prepaid expenses 542 698
Other asset 1,136 2,053
Future income tax asset 7,591 10,930
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137,400 119,389
Property and equipment 321 257
Acquired intangibles 71,292 80,685
Investment tax credits
receivable 16,118 15,748
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$225,131 $216,079
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Current Liabilities
Accounts payable and
accrued liabilities $12,504 $ 7,734
Deferred revenue 213 4,611
Other liability - 992
Current portion of other
long-term liabilities 9,896 8,294
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22,613 21,631
Deferred gain on sale-
leaseback 616 828
Other long-term liabilities 26,911 33,132
Future income tax liability 5,625 6,147
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55,765 61,738
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Shareholders' Equity
Share capital (Note 3) 129,021 126,573
Contributed surplus 3,592 3,452
Retained earnings 35,905 22,702
Accumulated other
comprehensive income 848 1,614
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169,366 154,341
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$225,131 $216,079
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See accompanying Notes to the Consolidated Financial Statements
MOSAID TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Canadian Dollar)
(Unaudited)
Quarter Ended Year Ended
April 30 April 30
2011 2010 2011 2010
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Operating
Income before discontinued
operations $ 5,830 $ 7,904 $24,783 $20,973
Items not affecting cash
Amortization and imputed
interest 4,184 3,165 14,438 12,252
Stock-based compensation 574 455 1,989 1,189
Loss on disposal of assets 42 73 42 73
Unrealized foreign
exchange (gain) on other
long-term liabilities (2,067) (1,761) (2,467) (4,972)
Future income taxes and
investment tax credits (596) 2,426 1,559 8,507
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7,967 12,262 40,344 38,022
Change in non-cash working
capital items from
continuing operations (1,556) (2,324) (7,895) 8,074
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6,411 9,938 32,449 46,096
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Investing
Acquisition of property
and equipment and
acquired intangibles (2,919) (494) (4,420) (1,134)
Acquisition of marketable
securities (5,000) (26,370) (43,758) (29,686)
Proceeds on
disposal/maturity of
marketable securities 17,624 (9) 56,833 18,478
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9,705 (26,873) 8,655 (12,342)
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Financing
(Decrease) in long-term
liabilities (5,074) (5,342) (2,838) (14,399)
Dividends paid (2,640) (2,941) (11,495) (10,655)
Funding of Restricted
Share Unit plan - - (2,085) (880)
Net proceeds from bought
deal - 29,342 - 29,342
Issuance of common shares 198 121 2,354 1,416
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(7,516) 21,180 (14,064) 4,824
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Net cash inflow from
continuing operations 8,600 4,245 27,040 38,578
Net cash inflow (outflow)
from discontinued
operations 4 (52) 37 (745)
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Net cash inflow 8,604 4,193 27,077 37,833
Cash and cash equivalents,
beginning of period 89,205 66,539 70,732 32,899
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Cash and cash equivalents,
end of period $97,809 $70,732 $97,809 $70,732
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Supplementary Information:
Cash on hand and bank
balances $97,809 $54,802 $97,809 $54,802
Short-term investments - 15,930 - 15,930
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Total cash and cash
equivalents $97,809 $70,732 $97,809 $70,732
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See accompanying Notes to the Consolidated Financial Statements
MOSAID TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of Canadian Dollar)
(Unaudited)
Quarter Ended Year Ended
April 30 April 30
2011 2010 2011 2010
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Net income $5,883 $ 8,051 $25,030 $21,750
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Other comprehensive income,
net of tax:
Gains and losses on
derivatives designated as
cash flow hedges 557 1,670 754 3,149
Gains and losses on
derivatives designated as
cash flow hedges in prior
periods transferred to
earnings in the current
period (224) 310 (1,520) (1,981)
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Other comprehensive income
(loss) 333 1,980 (766) 1,168
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Comprehensive income $6,216 $10,031 $24,264 $22,918
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See accompanying Notes to the Consolidated Financial Statements
MOSAID TECHNOLOGIES INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Quarters ended April 30, 2011 and 2010
(tabular dollar amounts in thousands of Canadian Dollars, except per share
amount)
(unaudited)
1. Basis of Presentation
