IN-LINE Q3, SETTING UP FOR 2013

Investment recommendation:

We reiterate our BUY recommendation following WiLAN’s in-line
Q3/F12 results. Guidance was again below the Street forecasts.

However, we believe the company has the potential to meet or beat
expectations based on current opportunities in the pipeline and
management’s practice of providing bare-minimum guidance. For us,
the story is setting up nicely as we head into 2013, with a number of
catalysts expected over the next six months, including:

1) WiLAN will attempt to get the LG case appealed and send it back to
the lower court (scheduled for early December);

2) the Markman hearing related to the HTC/Apple case is scheduled in

late February; and more importantly

3) the trial for the 3GPP case is scheduled in early April. We continue to
believe that WiLAN should be able to secure early settlements in the
3GPP case which would potentially be a major catalyst for the stock and
the financial outlook in 2013. Management noted that the decision to
initiate additional litigations against some of these parties has yielded
better quality discussions which could speed this up. In addition, we
view any partnership with an OEM as a bonus for shareholders.

Investment highlights

WiLAN reported Q3 results in line with our and the Street
expectations, with revenue of US$21.3 million and adjusted EPS at
US$0.08. Q4 guidance was provided at least at US$20.7 million,
versus consensus of US$22.5 million.

Management stressed their belief that its 600+ 4G patent portfolio is
extremely strong, stating that no LTE vendors will be able to avoid.

Valuation

Our target price is based on DCF and an 18.3x multiple to our FTM
adjusted EPS.

TAKEAWAYS FROM THE CONFERENCE CALL

We believe the following are important takeaways from the call:

Pipeline: Management noted that the company continues to be in very active
discussions and also highlighted that the recent slew of litigation announcements
against companies that WiLAN was already in litigation with has helped the quality of
dialogue between WiLAN and its potential licensees. In our opinion, WiLAN is setting
up for a strong start in the New Year.

Gladios Partnerships: WiLAN management noted that discussions with OEMs are
continuing. While it has taken longer than initially expected to get one of these closed,
the potential for the company’s incremental future revenue opportunity would be in
the $100s of million if a large OEM deal is struck. Management did not rule out the
possibility of making an upfront royalty payment to attain the partnership agreement.
Thus far, WiLAN has signed up 8 Gladios partners. During the quarter the company
initiated additional litigations, this time in the online gaming sector. The company is
using contingency lawyers for this initiative and hence it will not impact litigation
expenses in coming quarters. Furthermore, in regard to recent events at Poynt, the
company believes it is protected and has the rights to monetize Poynt’s IP if the
company continues down the path of bankruptcy.

DTV licensing program: The company discussed the DTV licensing program and
recent related litigations. Management noted that related program revenue was ahead
of internal expectations in the quarter. In addition, the company clarified that it had
not recognized any revenue from Hon Hai since 2010 and has initiated litigation
against them in early October in Florida for breach of contract. In addition, WiLAN
launched two litigations in respect to these technologies, one against LG (in addition to
the one being appealed in New York) and the other against Toshiba, both of which
were initiated in the Southern District of Florida. In both cases, WiLAN is claiming
patent infringement and is using the same firm to represent them.

Alvarion Patent acquisition: WiLAN recently acquired a portfolio of over 150 patents
and applications related to 4G technologies from Alvarion. On the call, management
noted their belief that this addition further strengthens the company’s positioning in
4G as it now has a portfolio of more than 600 patents and applications related to this
technology. Management believes that no LTE handset or infrastructure vendor will be
able to avoid paying royalties on these patents and hence believes this portfolio will be
a major factor to help the company reach its goal of doubling its revenue base in the
next five years. The company did not rule out acquiring additional 4G patents.

HTC /Apple case– On the conference call, management noted that the court
consolidated the HTC case with the Apple case. This litigation is related to the original
‘802 and ‘222 patents (CDMA and WiFi technologies). The consolidation is significant
in that it will accelerate the trial date but also provides the benefit of lowering the
overall cost for WiLAN. The Markman hearing has been scheduled on February 21,
2013, and jury selection is expected in October 2013. A trial should follow shortly
thereafter.