2010 ANNUAL REPORT - Webtech Wireless

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MANAGEMENT’S DISCUSSION & ANALYSISFor the year ended December 31, 2010This document is dated March 23, 2011SUMMARY OF QUARTERLY RESULTSSelected Quarterly Financial Information (unaudited)(in thousands exceptshare amounts)Threemonthsended Mar31, 2009Threemonthsended Jun30, 2009Threemonthsended Sep30, 2009Threemonthsended Dec31, 2009Threemonthsended Mar31, 2010Threemonthsended Jun30, 2010Threemonthsended Sep30, 2010Threemonthsended Dec31, 2010Revenue $6,669 $7,249 $4,965 $8,334 $10,462 $9,607 $10,334 $10,974Gross Profit $3,731 $4,516 $2,929 $2,984 $5,632 $4,888 $6,368 $3,725Gross Margin % 56% 62% 59% 36% 54% 51% 62% 34%Expenses $4,108 $4,340 $4,152 $9,719 $7,371 $6,957 $7,664 $7,069Other Items $(492) $345 $987 $1,886 $133 $(535) $(15) $6,258Net earnings (loss) $115 $(169) $(2,210) $(8,619) $(1,872) $(1,534) $(1,281) $(9,602)EPS (Basic) $ – $ – $(0.04) $(0.13) $(0.02) $(0.02) $(0.01) $(0.16)EPS (Diluted) $ – $ – $(0.04) $(0.13) $(0.02) $(0.02) $(0.02) $(0.11)Total Assets $27,982 $26,772 $22,495 $57,570 $56,092 $55,093 $53,029 $45,314Total Long Term Liabilities $2,541 $2,792 $1,043 $3,264 $2,783 $2,557 $3,711 $1,601This information was prepared in accordance with Canadian GAAP and all amounts are in Canadian dollars.The Company’s sales cycle to customers depends upon the complexityof the products and services provided and can vary from afew weeks to many months. In addition, the Company continues toseed the market by providing product to large potential customersfor use on a trial basis. Some of these trials may last for overone year. Consequently, results may vary from quarter to quarteras sales cycles or trials may close in a particular quarter or slipinto a later quarter. Quarterly results are also affected by factorssuch as the seasonality of the buying patterns of customers whoramp up operations for winter (snow removal) and to meet budgetedspending levels (government) prior to fiscal year ends andfluctuations in the US-Canadian dollar and GBP-Canadian dollarexchange rates. To mitigate the impact of these long lead timesales efforts, the Company has developed relationships with largedistributors who generate both small and medium sized leads aswell as larger sales leads. The Company has also recently developedan inside sales and sales support group to assist in developingand closing small and medium sized opportunities in aneffort to accelerate revenue growth and smooth out some of theCompany’s hardware sales revenues quarter over quarter and yearover year. The Company has also modified its sales compensationplans and its sales team focus to seek out and to encourage continuouslyrepeated sales to customers rather than large one timesales, in part to improve customer satisfaction, but also to smoothrevenue capture.During the year, sales revenues continued to grow throughincreased direct sales to small and medium sized customers aswell as larger government and commercial clients. To furtherextend its reach, the Company also has distribution agreementswith wireless carriers such as AT&T in the US, Rogers Wireless inCanada and Cable & Wireless in Panama, to distribute and sellits products through the carriers’ networks of sales agents anddistributors. The Company also maintains a network of distributorsaround the world, which contribute a significant portion of theCompany’s sales, primarily in the UK. Additionally, the Companyestablished a base for more substantial future growth, through theacquisition of Interfleet Inc. in 2009.20 (Dollar amounts in 000’s except number of shares and per share amounts)
MANAGEMENT’S DISCUSSION & ANALYSISFor the year ended December 31, 2010This document is dated March 23, 2011LIQUIDITY AND CAPITAL RESOURCESDecember 31, 2010 December 31, 2009 Variance$Variance%Cash and cash equivalents 4,020 7,212 (3,192) -44%Accounts receivable, net of allowance 9,302 9,260 42 0%Inventory, net of allowance 7,154 9,362 (2,208) -24%Prepaid expenses and deposits 475 533 (58) -11%Total current assets 20,951 26,367 (5,416) -21%Bank indebtedness 1,370 - 1,370 100%Accounts payable and accrued liabilities 5,969 7,384 (1,415) -19%Capital lease obligation 108 124 (16) -13%Current portion of deferred revenue 1,744 2,152 (408) -19%Other current liabilities 1,500 - 1,500 100%Total current liabilities 10,691 9,660 1,031 11%Working Capital 10,260 16,707 (6,447) -39%Working capitalAt December 31, 2010, the Company had working capital of$10,260. In addition to the impact of operating results, workingcapital decreased as the retention bonus of $1,500 discussedabove became current and increased accounts receivable due toseveral large sales were recorded in December but not collecteduntil 2011 (City of Chicago Enterprise License, OEM and Insurancelocator sales). Inventory was also reduced due to a large OEMsale and a large Insurance sale in December as well as the increasein the obsolescence provision mentioned elsewhere. In additionto operating results, the net cash position deteriorated due todeferred revenue recognition, and pay down of accounts payable.In addition, the strengthening Canadian dollar impacted the USdollar denominated accounts receivable balances from December31, 2009 that were collected subsequent to 2009.The Company has historically invested in product and marketdevelopment and carries significant inventory to meet customerrequirements. As a result, the Company has historically had negativecash flows. However, it has taken steps to improve its abilityto generate cash from operations in the future as previouslydiscussed. The March 1, 2011 financing substantially improvedthe Company’s working capital position, which will assist in thisprocess. The Company also has a revolving demand credit facilitywith a Canadian Chartered Bank of up to $3 million. At December31, 2010 the Company had an available balance on this facility of$1,630. The Company has historically grown organically and morerecently through the acquisition of Interfleet Inc. At December31, 2010, the Company had accounts payable and accruals totaling$5,969, of which $2,758 or 46% had been paid as of March 21,2011. The Company completed a $6,000 financing on March 1,2011. The proceeds are used for working capital and general corporateneeds. The Company does not anticipate any large capitalor other cash outlays in the near term which would require it toseek financing.Subject to the factors set out elsewhere in this document, includingunder the header “Risks and Uncertainties” and under theheading “Risk Factors” in the Company’s AIF, the Companydoes not currently foresee any working capital deficiencies.Notwithstanding the Company’s positive working capital position,the Company may require future financing in order to satisfy futuregrowth activities. The Company may also need additional capitalto fund specific growth projects or acquisitions in the future, andwhile no such projects are planned at this time, a change in circumstancescould result in the need for additional capital.Current assetsThe Company’s current assets at December 31, 2010 totaled$20,951. The decrease in current assets was primarily driven bythe use of cash to pay for costs associated with the managementrestructuring planned in 2009 and executed in 2010, an increase inthe inventory obsolescence provision and one-time costs relatedto a consolidation of the Company’s sales force and certain otherpositions, and to fund operating activities.Cash and cash equivalentsAt December 31, 2010, the Company had cash and cash equivalentsof $4,020.(Dollar amounts in 000’s except number of shares and per share amounts)21
Page 5 and 6: CORPORATE OVERVIEWNextBus ®NextBus
Page 9: MANAGEMENT’S DISCUSSION & ANALYSI
Page 13 and 14: MANAGEMENT’S DISCUSSION & ANALYSI
Page 17: MANAGEMENT’S DISCUSSION & ANALYSI
Page 29 and 30: AUTIDOR’S REPORT(Dollar amounts i
Page 31 and 32: CONSOLIDATED BALANCE SHEETDecember
Page 33 and 34: CONSOLIDATED STATEMENT OF CASH FLOW
Page 35 and 36: NOTES TO THE CONSOLIDATED FINANCIAL
Page 49: CORPORATE HEADQUARTERSWebtech Wirel

2010 ANNUAL REPORT - Webtech Wireless

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