Equity Research DAILY COMMENT

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01 COMMUNIQUE LABORATORY

ONE-V, $0.26

October 24, 2014

Rating:

STRONG BUY

Target Price:

$1.25

Market Capitalization:

$17.1M

Risk Profile:

SPECULATIVE

TECHNOLOGY– IP LICENSING

Ralph Garcea, P.Eng, MBA – Analyst 647.776.1763 • [email protected]

Chris Thompson – Associate

647.776.1762 • [email protected]

ONE PROVIDES UPDATE ON CTXS PATENT LITIGATION

 EVENTS ONE announced that it has reached an agreement with Citrix Systems (CTXS-US, Not Rated) whereby each party will withdraw their claims against each other with respect to Citrix’s GoToMeeting product and 01 Communique’s I’m InTouch Meeting product.

 IMPLICATIONS Positive. The agreement should streamline the

upcoming proceedings, as they will now be focused on one product – GoToMyPC – which is ~25% of CTXS’ SaaS revenue. By removing the CTXS case in California, ONE will also save on litigation costs. ONE is now preparing for the upcoming claim construction and tutorial scheduled for November 12-13 in Ohio, and the completion of expert discovery shortly thereafter on January 16, 2015. We estimate that this case could go to trial in the spring 2015 timeframe. ONE ended FQ314 with $1.6M in cash. Cash burn is now about $350K/qtr – ONE has enough cash to pursue the CTXS case and defend its IP until FQ415 without the need to raise additional capital. CTXS has no other avenues to challenge the patent (estoppel), and US$1.8B+ in cash – we believe the odds of a settlement increase as a trial date moves closer.

 CATALYSTS The upcoming catalysts for ONE include the impending claim construction and tutorial scheduled for mid-November; the expert discovery in early January 2015; and other potential litigations initiated through partnerships.

 VALUATION ONE is currently trading at a F2016E EV/Sales of 1.7x versus industry comparables at 3.3x on C2015E.

Thesis: 01 Communique’s key patents related to Remote Access and Remote Support provide revenue opportunities from a licensing and royalties perspective. Though the LOGM verdict/appeal went against ONE, we believe that ONE can build on its Bomgar settlement to license its IP. ONE is also in the midst of litigation proceedings with CTXS.

Forecasts F2011 F2012 F2013 F2014E F2015E F2016E

Revenue ($M) $0.48 $0.93 $1.26 $0.29 $0.32 $10.21 EBITDA ($M) ($3.23) ($2.54) ($3.21) ($1.87) ($1.88) $6.75 EPS (FD) ($0.05) ($0.04) ($0.05) ($0.03) ($0.02) $0.11 EPS (basic) ($0.05) ($0.04) ($0.05) ($0.03) ($0.02) $0.12 CFPS ($0.04) ($0.03) ($0.03) ($0.04) ($0.02) $0.11 P/E NM NM NM NM NM 2.4x FINANCIAL SUMMARY Last Price $0.260 Price Target $1.25, (+380.8%) Div/ Yield $0.00/0.0% 52-week Range $0.16 - $0.60 S/O Basic (M) 65.7 S/O F/D (M) 68.0 Market Float (%) 84.5 Market Cap (M) $17.1 Net Debt (M) ($1.6) Enterprise Value (M) $15.5 Avg. Weekly Vol. (M) 0.22

REVISIONS

Rating/Target Revised Prior Rating Unchanged Strong Buy Target Unchanged $1.25 Revenue (F14E) Unchanged $0.29 EBITDA (F14E) Unchanged ($1.87) EPS (F14E) Unchanged ($0.03)

PRICE CHART

Source: BigCharts.com COMPANY PROFILE

01 Communique is a technology-based company that develops and markets products and services in the remote access, web conferencing, and online collaboration markets. The Company protects its intellectual property through a number of patents, which it enforces through licensing and royalty payments. ONE’s suite of products includes its remote access offering I'm InTouch,

its online meeting offering I'm InTouchMeeting, and its remote

support offering I'm OnCall. The Company was established in

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ONE PROVIDES UPDATE ON CTXS PATENT LITIGATION

FOCUS ON GOTOMYPC| ONE announced that it has reached an agreement with Citrix Systems

whereby each party will withdraw their claims against each other with respect to Citrix’s GoToMeeting product and 01 Communique’s I’m InTouch Meeting product.

The agreement should streamline the upcoming proceedings as they will now be focused on one product – GoToMyPC – which is ~25% of CTXS’ SaaS revenue. ONE is seeking past damages going back to August 9, 2005 (when the ‘479 Patent was issued), as well as a permanent injunction prohibiting infringement.

By removing the CTXS case in California, ONE will also save on litigation costs. ONE is now preparing for the upcoming claim construction and tutorial scheduled for November 12-13 in Ohio, and the completion of expert discovery shortly thereafter on January 16, 2015. We estimate that this case could go to trial in the spring 2015 timeframe.

RECENT DEVELOPMENTS IN CITRIX CASE| With regards to CTXS’ inter partes re-examination

of the ‘479 Patent, the US Court of Appeals for the Federal Circuit (CAFC) recently issued a Rule 36 Judgment affirming the US Patent and Trademark Office (PTO) Patent Trial and Appeal Board’s (PTAB) decision that ONE’s ‘479 Patent is valid. On May 30, 2014, CTXS filed a complaint in the US District Court Central District of California that ONE’s I'm InTouch Meeting product allegedly infringes CTXS’ US Patent #7,219,233 which is core to the GoToMeeting product. CTXS also requested a declaratory judgment (DJ) against ONE alleging that its GoToMeeting product offering does not infringe the “479 Patent”. An amended complaint was filed on July 31, 2014, dropping the request for a DJ and alleging infringement of two additional CTXS patents (#8,127,019 and #8,325,896). As part of the agreement these claims are being withdrawn by CTXS.

CITRIX POTENTIAL REVENUE| We estimate that ~70% of CTXS’ Online Services (SaaS)

revenue, which is on a US$600-700M/yr run-rate (CTXS just reported Q314 SaaS revs of US$165M), could infringe ONE’s patents. This includes products such as GoToMeeting and GoToMyPC. We attribute $15-30M/yr in revenue to these infringements, depending on the royalty rate, for the next nine years. For past damages, we estimate that CTXS has generated ~$1.7B in SaaS-related revenue since mid-2005, which could result in a minimum lump sum payment to ONE of $50-150M.

EXHIBIT 1 – CITRIX SAAS REVENUE

2005 1 ₂₀₀₆1 ₂₀₀₇1 ₂₀₀₈1 ₂₀₀₉1 ₂₀₁₀1 ₂₀₁₁ ₂₀₁₂ ₂₀₁₃ ₂₀₁₄

Citrix (CTXS-US) (9-months)

SaaS Revenue $99.1 $148.8 $213.7 $260.1 $308.2 $360.6 $430.2 $511.3 $582.9 $483.2

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CASH| As at July 31, 2014, ONE ended the quarter with $1.6M in cash and cash equivalents. Cash burn

this quarter was ~$405K but the Company plans cost savings of $75K/qtr over the next year to help conserve cash. As part of the cost-cutting focus, directors and management have agreed to a reduction in the cash component of their compensation. Cash burn is now about $350K/qtr – ONE has enough cash to pursue the CTXS case and defend its IP until FQ415 without the need to raise additional capital.

RATING AND TARGET| We reiterate our Strong Buy rating and maintain our target price of $1.25. EXHIBIT 2 – GLOBAL IP LICENSING COMPARABLES

Source: Thomson One, Price Targets are consensus except for SIO-V, WIN-T and ONE-T

Div. Mkt. Cap.

GLOBAL IP LICENSING COMPS Ticker 23-Oct Target Yield (US$M) C14E C15E C14E C15E C14E C15E C14E C15E

01 Communique Laboratory Inc ONE-V 0.26 1.25 - 15 0 2 NMF NMF NMF 7.9 NMF NMF

Sensio Technologies Inc SIO-V 0.24 0.75 - 22 1 4 NMF 13.9 14.2 4.9 NMF 11.4

Wilan Inc WILN-US 3.21 7.00 5.6% 386 96 102 6.4 6.4 3.3 3.1 5.2 5.0

Qualcomm Inc QCOM-US 75.14 84.13 2.3% 125,936 27,326 29,526 14.0 13.2 3.9 3.7 9.9 9.1

Dolby Laboratories Inc DLB-N 40.42 39.50 - 4,128 953 980 21.7 21.0 3.5 3.4 8.9 9.0

Rovi Corp ROVI-US 20.16 26.09 - 1,913 542 560 11.7 10.6 4.8 4.7 11.4 10.9

Interdigital Inc IDCC-US 43.38 47.19 1.9% 1,728 401 359 19.1 26.0 3.2 3.5 6.1 8.4

Tessera Technologies Inc TSRA-US 26.57 34.00 1.6% 1,395 262 199 12.9 22.3 4.1 5.4 9.6 16.9

Acacia Research Corp ACTG-US 15.43 21.58 3.3% 773 133 193 56.7 12.9 4.2 2.9 NMF 19.7

Rpx Corp RPXC-US 14.49 20.17 - 778 259 285 14.9 12.8 1.8 1.6 2.3 2.1

Reald Inc RLD-N 11.04 14.38 - 552 186 208 NMF NMF 3.0 2.7 9.9 7.9

Dts Inc DTSI-US 27.90 26.67 - 477 140 149 19.0 16.7 3.1 2.9 9.9 9.0

Virnetx Holding Corp VHC-A 5.46 42.33 - 282 197 40 3.5 15.6 1.3 6.4 4.0 2.1

Vringo Inc VRNG-US 0.96 5.13 - 89 2 125,234 NMF NMF NMF 0.0 NMF NMF

D-box Technologies Inc DBO-T 0.25 0.63 - 37 18 21 NMF NMF 1.8 1.5 28.0 12.6

Deq Systems Corp DEQ-V 0.22 2.70 - 14 N/A N/A NMF NMF NMF NMF NMF NMF

Mean (excluding ONE-V) 18.0x 15.6x 4.0x 3.3x 9.6x 9.5x

Mean 18.0x 15.6x 4.0x 3.6x 9.6x 9.5x

Median 14.5x 13.9x 3.3x 3.4x 9.6x 9.0x

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RESEARCH DISCLOSURES

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The rating system is based on the stock’s expected absolute total return over the next 6 to 12 months. STRONG BUY is expected to produce a total return of 25% or more, BUY a total return of 10% to 25%, HOLD a total return of 0% to 10%, and SELL a negative total return.

The risk rating is a summary measure of the authoring analyst's subjective assessment of the underlying fundamental risks of the issuer and the business environment in which it operates. In general, we regard large capitalization stocks with a consistent dividend history as being at the low end of the risk continuum and small capitalization early

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Applicable Disclosures for Issuer (01 Communique) (Yes ● / No ○):

ONE-V

1) As of the end of the month immediately preceding the date of issuance of this research report or the end of the second most recent month if the issue date is less than 10 calendar days after the end of the most recent month, GMCI and its affiliates collectively beneficially own 1% or more of any class of the issuer's equity securities.

○

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through derivative. ○

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4) GMCI has provided investment banking services for the issuer during the 12 months preceding the date of

issuance of the report. ○

5) List name(s) of any partner, director, officer, employee or agent of GMCI, who is also an officer, director or

employee of the issuer. ○

6) The authoring analyst has visited the material operations of the issuer. ● 7) The authoring analyst received reimbursement for travel expenses. ○

Distribution of Recommendations

The particulars contained herein were obtained from sources, which we believe to be reliable, but are not guaranteed by us and may be incomplete or inaccurate. The opinions expressed are based upon our analysis and interpretation of these particulars and are not to be construed as a solicitation or an offer to buy or sell the securities mentioned herein. GMCI may act as financial advisor, fiscal agent or underwriter for certain of the companies mentioned herein, and may receive remuneration for its services. GMCI and/or its principals, officers, directors, representatives, associates may have a position in the securities

20 6 3 0 0 1 0 5 10 15 20 25

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CORPORATE DIRECTORY

Equity Research

Institutional Sales & Trading

Ralph Garcea, P. Eng, MBA

Managing Director, Head of Equity Research Tel: (647) 776-1763

Email: [email protected]

D. Joseph Mackay, CA, CFA

Senior Vice President, Equity Research Analyst Tel: (647) 776-1750

Chris Thompson, CFA, P. Eng, MBA

Equity Research Associate Tel: (647) 776-1762 Email: [email protected]

Fabiene Evans, CPA, CA

Managing Director, Head of Institutional Sales Tel: (416) 304-7790

Steve Duenkler, CFA

Managing Director, Head of Institutional Trading Tel: (416) 642-3540

Peter Byrne

Senior Vice President, Institutional Trading Tel: (647) 776-1756

Nick Savona

Senior Vice President, Institutional Trading Tel: (416) 306-2535

Jonathan Samahin, CFA, CMT

Senior Vice President, Institutional Sales and Trading Tel: (647) 776-1766

Investment Banking

Electronic Trading

Dean McPherson, MBA, CFA

Managing Director, Head of Investment Banking Tel: (647) 776-1765

Lily Tran

Analyst, Investment Banking Tel: (647) 776-1770 Email: [email protected] Jennifer Russell Syndication Tel: (647) 776-1745 Steve Burns

Vice President, Electronic Trading Tel: (647) 776-1742

Kent Learoyd

Vice President, Electronic Trading Tel: (647) 776-1744