News Release Details

Wi-LAN Announces 2004 Consolidated Results

12/15/2004

CALGARY, Canada - December 15, 2004 - Wi-LAN Inc. (TSX:WIN), a global provider of market-leading broadband wireless communications products and technologies and charter member of the WiMAX Forum (1), today announced financial results for the three months and twelve months ended October 31, 2004. All financial amounts are expressed in thousands of Canadian dollars, except per share amounts or unless otherwise noted.

  • In the twelve months ended October 31, 2004 the Company achieved consolidated revenue of $25,336 compared with $26,862 for the twelve months ended October 31, 2003. Net income (loss) for the 2004 fiscal year was $(7,049) or a loss of $(0.17) per share compared with a net loss of $(4,606) or $(0.15) per share in the 2003 fiscal year. Cash from operations, including changes in non-cash working capital, for the twelve months was $(6,344) compared with $(260) for the 2003 fiscal year.
  • In the three months ended October 31, 2004 the Company achieved consolidated revenue of $6,148, compared with $7,931 for the three months ended October 31, 2003. Net income (loss) for the fourth quarter was $(2,861) or a loss of $(0.07) per share, compared with net income (loss) of $(866) or $(0.03) per share in the 2003 fourth quarter. Cash from operations, including changes in non-cash working capital, for the three months was $(610), compared with $755 for the 2003 fourth quarter.
  • Balance sheet: Consolidated cash on October 31, 2004 was $13,768, compared with $27,553 on October 31, 2003 and $15,344 on July 31, 2004. Working capital on October 31, 2004 was $17,332 compared with $28,607 on October 31, 2003 and $20,218 on July 31, 2004. Wi-LAN’s October 31, 2004 consolidated cash and working capital is expected to be adequate to sustain the Company’s growth in existing operations.

"We are totally unsatisfied with our overall performance in 2004. Although revenue was within our adjusted guidance range, it fell far short of what our expectations were at the beginning of the fiscal year due to a series of issues, which we have outlined in our previous quarterly reports," said Dr. Sayed-Amr El-Hamamsy, President and Chief Executive Officer, Wi-LAN Inc. "The breadth of issues we faced demanded radical and far reaching action to raise the performance bar for Wi-LAN at every level and in every department. As a result, we have launched a complete cultural transformation at Wi-LAN in the form of a Six-Sigma initiative which will ensure that we focus on our customers’ success in all aspects of our performance: product definition, development and delivery to meet the needs of our customers’ business case; effectiveness of our sales force; excellence in marketing; and product reliability and quality. Wi-LAN’s vision, formulated on its foundation in 1992, of providing fixed and mobile broadband wireless connectivity anywhere, anytime has been adopted by the WiMAX Forum (1) and has gained widespread acceptance within the industry. The potential size of the opportunity facing us is huge. Therefore, it is our goal to build a great company dedicated to being a dominant player in this newly emerging market. Six-Sigma is the engine of that transformation with its laser-like focus on customer requirements, on root cause analysis, on measurable targets and on consistent control of all the performance aspects of the company. We expect that the changes made to the company's culture from a technology driven company to a sales driven company and the introduction of solution-oriented packages will increase sales and lead to positive cash flow."

"We believe that with the emergence of WiMAX Forum Certified equipment in 2005, the major barriers to growth of the broadband wireless market will be overcome," continued Dr. El-Hamamsy. "We believe that first, the price performance threshold for mass market adoption will be met by WiMAX equipment using the chip sets provided by semiconductor companies such as our partner Fujitsu, and second, the interoperability of WiMAX Certified (1) equipment will increase customer confidence, allowing them to have access to standardized equipment from multiple vendors. As we look forward to 2005, with our first foray into the Intelligent Transportation Systems market and the introduction of WiMAX compliant equipment, we face considerable uncertainty regarding the speed with which our markets will grow. For this reason we have decided to not provide financial guidance. We will expect the market to judge us by our quarterly results, rather than by our forecasts."

Annual and Fourth Quarter Financial Highlights

Consolidated revenue ($000’s)

In the twelve months ended October 31, 2004 the Company achieved consolidated revenue of $25,336, meeting the Company’s adjusted guidance of $25,000 to $28,000 in fiscal year 2004, which is $(1,526) or 5.7% less than revenue of $26,862 for the 2003 fiscal year. Although annual sales of Wi-LAN’s pre-WiMAX Libra product series, based on Wi-LAN’s patented W-OFDM technology, were up 46.2% or $2,086, and license, technology and engineering services revenues were up 40.4% or $95, these improvements were not sufficient to offset a 17.8% or $(3,096) decline in annual sales of other broadband wireless products and a 13.2% or $(611) decline in antenna sales. Consolidated revenue for the three months ended October 31, 2004 was $6,148, which is $(1,783) or 22.5% less than the $7,931 reported for the same period in fiscal year 2003, and $4 or 0.1% more than the $6,144 revenue reported for the prior three months ended July 31, 2004.

The following issues had a negative impact on revenue in the twelve months ended October 31, 2004:

  • Wi-LAN is experiencing a dramatic shift in the broadband wireless marketplace that has effectively caused delays in the purchasing decisions of its customers. Man y of Wi-LAN’s current early adopter customers, including wireless Internet service providers, system integrators and value-added resellers, are entering a new phase where expansion plans are in various stages of finalization, including obtaining financing and regulatory approvals. Larger potential customers such as telecommunications carriers, cable companies, utility companies and large retailers are demonstrating interest in Wi-LAN’s Continuity Program TM and in future WiMAX compliant products but their sales cycle is longer than Wi-LAN’s typical customer.
  • While Wi-LAN’s Continuity Program has been instrumental in encouraging vendors to deploy Wi-LAN’s pre-WiMAX equipment today, the company continued to experience a slow-down in sales in anticipation of Wi-LAN’s Libra MX product series, launched on November 15, 2004, and in anticipation of WiMAX compliant equipment in 2005.
  • Competitive pricing pressure has increased as other broadband wireless equipment vendors are offering BWA equipment at steeply discounted pricing to establish market share, particularly in the Chinese market.

Wi-LAN has undertaken a comprehensive review of its sales, marketing, operations and product development practices, including processes, product features, pricing, and personnel and is taking the actions required to meet today’s challenges:

  • Wi-LAN has hired two new vice presidents to lead its sales and marketing departments. Chris Beadle is Vice President, Global Sales and John Seliga is Vice President, Marketing. Mr. Beadle held vice president level sales and marketing positions at Bell West and TELUS Communications between 1996 and 2002. Mr. Seliga’s most recent position was Vice President Marketing - IP Solutions at TELUS Communications and he has held several executive positions at TELUS over the past eight years. As well, the Company appointed a new vice president, Shawn Lightfoot, former Manager of Hardware Development at Wi-LAN, to head up its technology department following the resignation of Shawn Taylor in August 2004.
  • The sales force is continuing to be restructured and upgraded:
  • Senior sales managers have been appointed for specific global regions, providing more management focus on sales opportunities, and speeding up decision-making where action is necessary to address regional revenue opportunities.
  • The Company has adapted its US sales model, where a few "super distributors" support multiple resellers in their region, to other regions of the world.
  • A new Director of Channel Management has been hired to increase the effectiveness of Wi-LAN’s sales channels.
  • The Company plans to establish regional return and repair centers in Europe and Asia to provide greater support for non-North American distributors, encourage more pilot installations, reduce the cost and time of sourcing product and increase Wi-LAN’s overall value proposition.
  • The Company is planning regional marketing presentations explaining Wi-LAN's WiMAX strategy, and one was recently completed in the Middle East. These presentations enable Wi-LAN’s channel partners to understand the strategic benefits of the Wi-LAN roadmap, in the context of all the market hype associated with WiMAX readiness, and provide straight answers with accurate information on how the WiMAX vision is being turned into commercially deployable product.
  • The Company recently improved its sales opportunities by launching the Libra Mobilis product in October 2004 and the Libra MX product series in November 2004. Wi-LAN has also added new competitively priced products to its VIP product line and provided bundled pricing for its Ultima3 and Libra 5800 products.
  • Entry into the Intelligent Transportation Systems (ITS) market with Wi-LAN’s new Libra Mobilis, the first commercially available two-way broadband wireless product designed for a high-speed mobile environment, is planned in 2005. The market for ITS mobile broadband wireless equipment is in its infancy, so limited trial sales of Libra Mobilis are expected in fiscal year 2005. Wellink, Wi-LAN’s South Korean ITS equipment co-development partner, is marketing Libra Mobilis in South Korea and Wi-LAN has created and staffed sales and marketing positions focused on the ITS market to generate Libra Mobilis sales outside of Korea. Wi-LAN expects to be in various trials of the Libra Mobilis equipment in 2005, and the global demand for this equipment is expected to be significant over the next several years, driven largely by the requirement for better security on public transportation systems. Although Wi-LAN has agreed to provide Wellink with up to several million dollars of Libra Mobilis equipment over the next three quarters, the rate at which Wellink will be able to deliver orders for Libra Mobilis is dependent on Wellink’s customers’ decision making processes and business needs, which will likely result in orders in fiscal year 2005 being significantly less than the maximum amount originally committed.
  • Sales of the new pre-WiMAX Libra MX TM products are expected to gain Wi-LAN a foothold in the emerging WiMAX-standard equipment market. Wi-LAN expects to have this equipment commercially available in February 2005 and Wi-LAN’s C ontinuity Program guarantees its customers a seamless and economic transformation to WiMAX compliant networks when WiMAX compliant equipment comes online later in 2005. Wi-LAN expects to begin to deploy WiMAX compliant Libra MX equipment once the WiMAX Forum makes conformance testing available in 2005.
  • Several new marketing initiatives are being undertaken to drive sales growth:
    • Intense targeting of key customer segments in which Wi-LAN has strong competitive advantage, including transit systems (Libra Mobilis) and Competitive Service Providers (Libra MX).
    • Leverage Wi-LAN's Libra MX platform along with its Continuity Program, the guaranteed path to WiMAX compatibility, to stake out a strong position among the early adopters of WiMAX solutions.
    • Strike mutually beneficial OEM relationships with suppliers to target other key customer segments including tier one Telco’s.
    • Increase prepackaged "application solution sets" such as integrated HotZone solutions and VoIP solutions.
    • Close collaboration with customers and key partners to design and develop the industry's best-in-class WiMAX products.
  • Progress is being made on the WiMAX SoC, in partnership with Fujitsu Microelectronics America (Fujitsu), and the WiMAX Media Access Control (MAC) software project. Both of these projects are focused on ensuring the availability of WiMAX compliant equipment once WiMAX conformance testing is available later in 2005.
  • Wi-LAN will collect royalties on Fujitsu’s sales of the WiMAX SoC once Fujitsu begins marketing this product, and the Company is investigating opportunities to market its MAC software.
  • The Company is engaging in a Six Sigma initiative to radically improve its corporate performance and customer focus. Six Sigma is a measure of quality that strives for near perfection. It is a disciplined, data-driven approach and methodology for eliminating defects in processes. General Electric, one of the most successful companies implementing Six Sigma, has estimated benefits of approximately $10 billion during its first five years of implementation.
  • The Company’s TIL-TEK Antennas division is continuing to actively seek new market opportunities to increase its sales.

Revenue from the Company’s broadband wireless products for the twelve months ended October 31, 2004 was $20,974, which is $(1,010) or 4.6% less than the $21,984 reported for fiscal year 2003. Revenue from the Company’s broadband wireless access products for the three months ended October 31, 2004 was $5,143, which is $(1,181) or 18.7% less than the $6,324 reported for the same period in fiscal year 2003 and $110 or 2.2% more than the $5,033 reported for the prior three months ended July 31, 2004. The fiscal year 2004 broadband wireless revenue consisted of:

  • $6,604 from the company’s Libra product series, based on Wi-LAN’s patented Wide-band Orthogonal Frequency Division Multiplexing (W-OFDM) technology. Wi-LAN’s new Libra MX product will be the platform for Wi-LAN’s Wi-MAX compliant products in 2005. This amount is $2,086 or 46.2% more than the $4,518 of Libra product series revenue reported for fiscal year 2003.
  • $14,370 from Wi-LAN’s other broadband wireless products, which is $(3,096) or 17.7% less than the $17,466 of other broadband wireless revenue reported for fiscal year 2003.

The three-month broadband wireless revenue consisted of:

  • $1,402 from the company’s Libra product series, based on Wi-LAN’s patented Wide-band Orthogonal Frequency Division Multiplexing (W-OFDM) technology. Wi-LAN’s new Libra MX product will be the platform for Wi-LAN’s Wi-MAX compliant products in 2005. This amount is $(712) or 33.7% less than the $2,114 of Libra product series revenue reported for the same period in fiscal year 2003 and $(17) or 1.2% less than the $1,419 reported for the prior three months ended July 31, 2004.
  • $3,741 from Wi-LAN’s other broadband wireless products, which is $(469) or 11.1% less than the $4,210 of other broadband wireless revenue reported for the same period in fiscal year 2003 and $127 or 3.5% more than the $3,614 reported for the prior three months ended July 31, 2004.

Revenue from the Company’s antenna products for the twelve months ended October 31, 2004 was $4,032, which is $(611) or 13.2% less than the $4,643 reported for fiscal year 2003. Revenue from the Company’s antenna products for the three months ended October 31, 2004 was $1,005, which is $(459) or 31.3% less than the $1,464 reported for the same period in fiscal year 2003 and $(67) or 6.2% less than the $1,072 recorded for the prior three months ended July 31, 2004. Antenna product sales have not experienced expected growth over the past several quarters and the division is continuing to actively seek new market opportunities to improve its financial results.

Revenue from the Company’s license, technology and engineering services for the twelve months ended October 31, 2004 was $330, which is $95 or 40.4% more than the $235 reported for fiscal year 2003. License, technology and engineering services revenue for the three months ended October 31, 2004 was $nil, compared with $143 reported for the same period in fiscal year 2003 and $39 reported for the prior three months ended July 31, 2004. License, technology and engineering services revenue for the 2004 fiscal year resulted from third parties assisting with project funding to develop new applications for

Wi-LAN’s W-OFDM technology, namely its Libra Libra Mobilis products and its Libra MX system. These products were launched in October and November 2004, and development continues on value-added features and upgrades for Libra Mobilis and on WiMAX compliance of the Libra MX platform. Progress regarding license, technology and engineering services revenue for the 2004 fiscal year was as follows:

  • Wi-LAN is continuing discussions with Philips Semiconductor regarding the licensing agreement that Wi-LAN signed with Philips in 1999. The agreement relates to Philips’ second-generation Wi-Fi (802.11a/g and 802.11g) chipsets, which became available in production quantities in Q4 2003. Wi-LAN and Philips have differing interpretations of the nature of the agreement and are actively working towards resolving their differences. Wi-LAN still expects an amicable resolution to this matter that will result in payment to Wi-LAN.
  • Royalties from Wi-LAN’s technology development and licensing agreement with Fujitsu are expected as Fujitsu begins to market the WiMAX SoC in 2005.
  • On June 23, 2004 Wi-LAN initiated a patent infringement lawsuit against Cisco Systems and OCR Concepts Canada for sales of Cisco’s 802.11a/g based Linksys and Aironet products in Canada.
  • Wi-LAN’s patent infringement lawsuit with Redline Communications has been settled, and Redline is paying Wi-LAN a royalty for every advanced OFDM wireless device that it has produced and will produce in the future, regardless of where the devices are sold.
  • Wi-LAN recently acquired 17 U.S. Patents and patent applications, including their foreign counterparts from Ensemble Communications Inc., a U.S. broadband wireless equipment supplier that recently decided to wind-up its business. These patents relate to the WiMAX MAC software. This acquisition advances Wi-LAN’s goal to produce the world’s first WiMAX compliant broadband wireless systems and strengthens Wi-LAN’s technology licensing strategy with regard to such systems.

Product gross margin ($000 and % of product revenue)

Product gross margin (excluding license, technology and engineering services revenue) was $11,996 or 48.0% of product revenue for the twelve months ended October 31, 2004, which is $(864) or (0.3) percentage points less than the product gross margin of $12,860 or 48.3% of product revenue for the 2003 fiscal year. Product gross margin for the three months ended October 31, 2004 was $2,895 or 47.1% of product revenue, which is $(650) less or 1.6 percentage points more than the $3,545 or 45.5% of product revenue reported for the same period in fiscal year 2003, and $34 or 0.2 percentage points more than the $2,861 or 46.9% of product revenue reported for the prior three months ended July 31, 2004.

Operating expenses ($000’s)

Operating expenses for the twelve months ended October 31, 2004 were $19,701, an increase of $2,701 or 15.9% compared with $17,000 for the 2003 fiscal year. Operating expenses for the three months ended October 31, 2004 were $5,552, an increase of $1,247 or 29.0% compared with $4,305 for the same period in fiscal year 2003, and an increase of $413 or 8.0% compared with $5,139 for the prior quarter ended July 31, 2004.

Sales and marketing (S&M) expense for the twelve months ended October 31, 2004 was $6,135, an increase of $712 or 13.1% compared with $5,423 for the 2003 fiscal year. S&M expense for the three months ended October 31, 2004 was $1,627, an increase of $228 or 16.3% compared with $1,399 for the same period in fiscal year 2003, and an increase of $167 or 11.4% compared with $1,460 for the prior quarter ended July 31, 2004. In Q4 Wi-LAN continued to strengthen its sales and marketing in an effort to grow future sales. This included replacing two vice presidents (see consolidated revenue disclosure above) and the creation and staffing of new sales and marketing positions focused on key markets and on improving performance of channel partners.

Research and development (R&D) expense for the twelve months ended October 31, 2004 was $6,987, an increase of $2,405 or 52.5% compared with $4,582 for the 2003 fiscal year. R&D expense for the three months ended October 31, 2004 was $2,033, an increase of $564 or 38.4% compared with $1,469 for the same period in fiscal year 2003, and an increase of $343 or 20.3% compared with $1,690 for the prior quarter ended July 31, 2004 . During the quarter Wi-LAN continued to develop its Libra MX system, its Libra Mobilis products, its WiMAX MAC software and, in collaboration with Fujitsu, the WiMAX compliant System-on-Chip (SoC). R&D expense is expected to stabilize in 2005.

The Company accounts for its obligation to issue warrants under the Technology Partnerships Canada (TPC) program as a charge (amortization of TPC warrants) to R&D expense and an accrual to shareholders’ equity. In accordance with revised Canadian accounting standards, the Company will account for its obligation to TPC as a financial liability, rather than an accrual to shareholders’ equity, effective November 1, 2004. R&D expense is reduced by received and accrued cash receipts from TPC, and increased by the non-cash amortization of future warrants owed to TPC, as detailed in the following table:

R&D Expense

3 months ended

12 mo. ended October 31

$000’s

Oct. 31, 2004

Jul. 31, 2004

Oct. 31, 2003

2004

2003

Total R&D expenditures

$ 2,622

$ 2,139

$ 1,359

$ 7,867

$ 4,466

Less: TPC contributions

800

660

369

2,260

2,169

% of expenditures

30.5%

30.9%

27.1%

28.7%

48.6%

Cash R&D expense

1,822

1,479

990

5,607

2,297

Add: Amortization of

TPC warrants

211

211

479

1,380

2,285

Reported R&D expense

2,033

1,690

1,469

6,987

4,582

Wi-LAN believes it is critical to maintain key R&D expenditures, in spite of lagging revenue, because the company must over the next three quarters complete the development of products for potentially large opportunities for WiMAX and Intelligent Transportation Systems (ITS) products. Essential product development projects are as follows:

  • Several projects are underway to further develop Wi-LAN’s Libra MX equipment, and Wi-LAN expects to begin to deploy WiMAX compliant Libra MX equipment once the WiMAX Forum makes conformance testing available in 2005. This market has been estimated by Intel to be in the range of 11 million subscribers, a multi-billion dollar equipment market, by 2008 and to grow significantly thereafter as mobile applications are addressed. Wi-LAN believes it can grow its share of this market due to its solid track record in building commercial OFDM equipment.
  • Wi-LAN’s Libra Mobilis product series was launched on October 19, 2004, and development continues on further product enhancements. Wi-LAN believes it has a significant technology lead over its competition in this market and further product enhancements will maintain this advantage, allowing the Company to capitalize on the expected market demand. These mobile wireless systems are initially intended for broadband communications for high-speed trains in the Asia-Pacific region, including real-time video security, video advertising and broadband wireless Internet.

Operations expense for the twelve months ended October 31, 2004 was $2,292, an increase of $219 or 10.6% compared with $2,073 for the 2003 fiscal year. Operations expense for the three months ended October 31, 2004 was $676, an increase of $138 or 25.6% compared with $538 for the same period in fiscal year 2003, and a decrease of $(39) or 5.4% compared with $715 for the prior quarter ended July 31, 2004. The increases were largely due to a generous customer satisfaction program that began in Q2, initiation of new quality control processes, and proactive product refurbishment initiatives. These actions are expected to result in improved product quality and higher customer retention / satisfaction rates.

General and administration (G&A) expense for the twelve months ended October 31, 2004 was $2,990, an increase of $57 or 1.9% compared with $2,933 for the 2003 fiscal year. G&A expense for the three months ended October 31, 2004 was $762, a decrease of $(24) or 3.0% compared with $786 for the same period in fiscal year 2003, and a decrease of $(106) or 12.2% compared with $868 for the prior quarter ended July 31, 2004. G&A expenses vary from quarter to quarter due to variations in various finance, legal, business development, investor relations and corporate communications activities. Included in 2004 G&A expense are the following fees from KPMG llp:

  • Annual financial statement audit and interim financial statement review fees of $96 ($96 in 2003);
  • $83 ($23 in 2003) related to reporting advisory services; and
  • $36 ($36 in 2003) relating primarily to income tax return preparation services.

Interest on long term debt was $102 and $227 for the three months and twelve months ended October 31, 2004 respectively, compared to $nil in the same periods in fiscal year 2003, due to the mortgage on the Company’s head office building which the Company purchased in March 2004. The Company leased the building in 2003, so no interest on long-term debt was recorded in that year.

Net income (loss) ($000’s)

Net income (loss) for the twelve months ended October 31, 2004 was $(7,049) compared with the Company’s adjusted guidance of not less than $(7,000) in fiscal year 2004, and compared with $(4,606) in the 2003 fiscal year, a change of $(2,443). Net income (loss) for the three months ended October 31, 2004 was $(2,861), which is $(1,995) less than the $(866) reported for the same period in fiscal year 2003, and $(693) less than the $(2,168) net loss for the prior three months ended July 31, 2004. Net income in the year and the quarter declined due to lower dollar product gross margins and higher operating expenses, which are detailed above.

Cash management ($000’s)

Consolidated cash on October 31, 2004 was $13,768 compared with $27,553 on October 31, 2003, a reduction of $(13,785), and a reduction of $(1,576) compared with $15,344 on July 31, 2004. The twelve-month reduction of consolidated cash of $(13,785) consisted of $(6,344) used in operations (including changes in non-cash working capital balances), $11,774 from financing (including $(775) of restricted cash provided as security on the Company’s mortgage on its head office building), and $(19,215) spent on investments. The three-month reduction of consolidated cash of $(1,576) consisted of $(610) used in operations (including changes in non-cash working capital balances), $(874) from financing (including the $(775) of restricted cash mentioned in the prior sentence), and $(92) from investments. Wi-LAN is committed to returning to positive cash from operations beginning in the third quarter of fiscal year 2005.

Cash used in operations in fiscal year 2004 (including changes in non-cash working capital balances) of $(6,344) was due to the cash net loss from continuing operations, which decreased cash from operations by $(4,341), and changes in non-cash operating working capital balances that reduced cash from operations by $(2,003). The annual cash used in operations was marginally short of guidance of not less than $(6,000).

  • The cash net loss from continuing operations in the twelve months ended October 31, 2004 of $(4,341) was composed of net loss from continuing operations of $(7,049), which was partly offset by items not involving cash of $2,708. Net loss from continuing operations is explained in the "Net income (loss)" section above.
  • Non-cash working capital changes in the year were an increase in accounts receivable of $(1,319), an increase in inventories of $(831), an increase in prepaid expenses and deposits of $(170), an increase in deferred revenue of $(290), and a decrease in the cost of excess space of $(76). These were partly offset by an increase in accounts payable and accrued liabilities of $612 and increased warranty liabilities of $71.

Cash used in operations in the fourth quarter of fiscal year 2004 (including changes in non-cash working capital balances) of $(610) was due to the cash net loss from continuing operations, which decreased cash from operations by $(2,025), and changes in non-cash operating working capital balances that increased cash from operations by $1,415.

  • The cash net loss from continuing operations in the three months ended October 31, 2004 of $(2,025) was composed of net loss from continuing operations of $(2,861), which was partly offset by items not involving cash of $836. Net loss from continuing operations is explained in the "Net income (loss)" section above.
  • Positive non-cash working capital changes in the quarter of $1,415 were primarily due to an increase in accounts payable and accrued liabilities, which generated $1,252 of cash in the quarter. This was due to changes in the timing of cash payments throughout the quarter. Other working capital items generated an additional $163 of cash in the quarter.

Cash from financing in fiscal year 2004 of $11,774 originated from share capital issued for cash of $4,167, share capital issued on exercise of stock options of $689, and long-term debt of $8,000, partly offset by $(775) of restricted cash, payments against long-term debt of $(158), and share issue costs and capital lease payments of $(149). Share capital issued for cash of $4,167 related primarily to the exercise of warrants and underwriters’ options from the company’s February 14, 2002 equity unit financing, which expired on February 14, 2004. Share capital in 2004 includes share issuance and French language translation costs of $24 ($84 in 2003) for services performed by KPMG llp relating to financings. The long-term debt of $8,000 is a mortgage relating to Wi-LAN’s purchase of its Calgary office building in March 2004 and the restricted cash of $(775) is provided as security on the mortgage.

Cash used in investing in fiscal year 2004 of $(19,215) consisted of $(13,803) for property, plant and equipment, related primarily to the purchase of the Company’s Calgary office building in March 2004, and $(5,412) for trademarks, patents and licenses, related primarily to the Company’s purchase of patents and patent applications from Ensemble Communications in May 2004.

Financial summary ($000’s)

($000’s unless stated otherwise)

3 months ended

12 months ended

Statement of Operations Info.

Oct. 31, 2004

July 31, 2004

Oct. 31, 2003

Oct. 31, 2004

Oct. 31, 2003

Revenue - geographic

Americas

$ 3,552

$ 3,292

$ 3,288

$ 13,407

$ 12,306

Europe, Middle East & Africa

2,187

2,026

2,621

8,674

8,346

Asia Pacific

409

826

2,022

3,255

6,210

Subtotal

6,148

6,144

7,931

25,336

26,862

Revenue by product category

OFDM radios

1,402

1,419

2,114

6,604

4,518

Other radios

3,741

3,614

4,210

14,370

17,466

Antennas

1,005

1,072

1,464

4,032

4,643

Subtotal

6,148

6,105

7,788

25,006

26,627

License, tech. & eng. revenue

0

39

143

330

235

Total revenue

6,148

6,144

7,931

25,336

26,862

Product gross margin (1)

2,895

2,861

3,545

11,996

12,860

% of product revenue

47.1%

46.9%

45.5%

48.0%

48.3%

Operating income (loss)

(2,657)

(2,239)

(617)

(7,375)

(3,905)

Net income (loss)

(2,861)

(2,168)

(866)

(7,049)

(4,606)

Earnings (loss) per share ($/share)

$ (0.07)

$ (0.05)

$ (0.03)

$ (0.17)

$ (0.15)

Cash Flow Information

Oct. 31, 2004

July 31, 2004

Oct. 31, 2003

Oct. 31, 2004

Oct. 31, 2003

Cash from (used in) operations (2)

$ (610)

$ (4,002)

$ 755

$ (6,344)

$ (260)

Financing

(874)

(22)

22,302

11,774

22,222

Investments

(92)

(5,507)

28

(19,215)

5

Change in cash

(1,576)

(9,531)

23,085

(13,785)

21,967

Cash, beginning of period

15,344

24,875

4,468

27,553

5,586

Cash, end of period

13,768

15,344

27,553

13,768

27,553

Balance Sheet Information

Oct. 31, 2004

July 31, 2004

Oct. 31, 2003

 

Working capital

$ 17,332

$ 20,218

$ 28,607

 

Long term debt

7,842

7,932

0

 

Shareholders’ equity

39,495

41,881

34,880

 

Total assets

54,234

55,349

44,683

 

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By clicking “Accept” you acknowledge and agree that neither WIN nor third party provider Virtua Research, Inc. (“Virtua) is responsible, or accepts or assumes any responsibility or liability whatsoever for, the content, the data or the technical operation of the Linked Site. Further, by entering the External Site, you also acknowledge and agree that you completely and irrevocably waive any and all rights and claims against WIN and Virtua and further acknowledge and agree that in no event shall WIN or Virtua, or their respective officers, employees, directors and agents be liable for any (i) indirect, consequential, incidental, special, compensatory or punitive damages, (ii) damages for loss of income, loss of business profits, business interruption, loss of data or business information, loss of or damage to property, (iii) claims of third parties, or (iv) other pecuniary loss, arising out of or related to the Legal Notice, this disclaimer or the External Site

By entering the External Site, you further acknowledge and agree that the disclaimer of warranties and limitations of liability set out in this disclaimer shall apply regardless of the causes, circumstances or form of action giving rise to the loss, damage, claim or liability, even if such loss, damage, claim or liability is based upon breach of contract (including, without limitation, a claim of fundamental breach or breach of a fundamental term), tort (including, without limitation, negligence), strict liability or any other legal or equitable theory, and even if WIN and Virtua are advised of the possibility of the loss, damage, claim or liability. The waiver and release specifically includes, without limitation, any and all rights and claims pertaining to the processing of personal data, including but not limited to any rights under any applicable data protection statute(s).

If in any jurisdiction, any part of this disclaimer is held to be unenforceable by a court of competent jurisdiction, such part of this disclaimer shall be restricted or eliminated to the minimum extent and the remaining disclaimer shall otherwise remain in full force and effect.

Please note the information presented is deemed representative at the time of its original release. Changes in historical information may occur due to adjustments in accounting and reporting standards & procedures.

Non-GAAP Information

In addition to disclosing results determined in accordance with GAAP, WIN may also disclose certain non-GAAP and pro forma non-GAAP results of operations, including certain ratios, operational and miscellaneous data, as well as net income, diluted earnings per share, operating expenses, and operating income that make certain adjustments or exclude certain charges and gains that are outlined in the schedules included in this website. Management believes that this non-GAAP and pro forma non-GAAP information provides investors with additional information to assess WIN operating performance by making certain adjustments or excluding costs or gains and assists investors in comparing WIN's operating performance to prior periods. Management uses this non-GAAP and pro forma non-GAAP information, along with GAAP information, in evaluating its historical operating performance. WIN and Virtua also take no responsibility for third party pricing data provided for informational purposes and certain ratio results formulated from the provided third party pricing data.

The non-GAAP information is not prepared in accordance with GAAP and may not be comparable to non-GAAP information used by other companies. The non-GAAP information should not be viewed as a substitute for, or superior to, other data prepared in accordance with GAAP.

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