2010 ANNUAL REPORT - Webtech Wireless

More documents

Recommendations

Info

Notes To The Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the twelve months ended December 31, 2010 and December 31, 2009and the five-month period ended December 31, 2008Note 1Basis of presentationWebtech Wireless Inc. (the “Company”) is a global provider ofTelematics and Location Based Services (“LBS”) delivering servicesand hardware to both government and commercial fleets.WebTech is a British Columbia corporation having first beenincorporated under the laws of the Yukon Territory on May 12,1999. The Company was continued to Alberta on July 24, 2000before its continuance to British Columbia on August 1, 2006.The Company’s shares are listed for trading on the Toronto StockExchanges (“TSX”) under the symbol WEW.These consolidated financial statements have been prepared bymanagement in accordance with Canadian generally acceptedaccounting principles (“Canadian GAAP”). The significantaccounting policies used in the preparation of these consolidatedfinancial statements are summarized below.Note 2Summary of significant accounting policiesBasis of consolidationThe consolidated financial statements include the accounts of theCompany and its wholly owned subsidiaries. All inter-companybalances and transactions have been eliminated upon consolidation.Use of estimatesIn conformity with Canadian GAAP, the preparation of thesefinancial statements requires management to make estimatesand assumptions which affect the reported amounts of assets andliabilities and the disclosure of contingent assets and liabilities atthe date of the financial statements and the reported amounts ofrevenues and expenses during the reported periods. The underlyingassumptions are based on historical experience and otherfactors that management believes to be reasonable under thecircumstances, and are subject to change as new events occur, asmore industry experience is acquired, as additional information isobtained and as the Company’s operating environment changes.Significant areas where management’s judgment is applied are:purchase price allocations in business combinations, valuation ofintangible assets, assessment of asset impairment, net realizablevalue of accounts receivable, net realizable value of inventory,useful economic life of capital assets, revenue recognition, stockbased compensation, contingencies and future income tax valuationreserves. Actual results could differ materially from theseestimates.Foreign currency translationMonetary assets and liabilities denominated in foreign currenciesare translated into Canadian dollars at exchange rates prevailingat the balance sheet dates and non-monetary assets andliabilities are translated at historical exchange rates prevailing atthe transaction dates. Foreign currency denominated revenuesand expenses are translated at exchange rates that approximateexchange rates prevailing at the transaction dates. Gains orlosses arising from the translations are recognized in the currentperiod in the statement of operations. Foreign currency amountsheld and reported by the Company’s US, UK and Brazilian subsidiariesare translated according to the temporal method as theyare integrated operations.Cash and cash equivalentsCash and cash equivalents consist of cash on deposit and callableshort-term interest bearing investments, with original maturities ofthree months or less.Restricted cash represents cash that has been pledged as collateralfor a foreign exchange facility and a credit card facility.InventoryInventory is comprised primarily of parts, work in progress andfinished goods, and is valued at the lower of cost and net realizablevalue. Work in progress includes the cost of parts, labourand third party services. Parts and finished goods cost is determinedusing the weighted average method. Inventory is regularlyreviewed for obsolescence and is recorded net of any obsolescenceprovisions. When there is a significant change in economiccircumstances, inventory that had been previously written downbelow cost may be written back up provided the reversal doesnot exceed the original write down.Property and equipmentProperty and equipment are recorded at cost when acquired.Amortization is charged on a straight line using the followingterms:Computer equipmentFurniture and fixturesLeasehold improvementsOffice and other equipmentVehicles4 years4 yearsLease term4 years4 yearsIntangible assetsIntangible assets are initially measured at cost which is comprisedof its purchase price, including duties, taxes, legal costs, professionalfees and any directly attributable cost of preparing theasset for its intended use. Intangible assets acquired in a businesscombination that meet the specified criteria for recognition,apart from goodwill, are initially recognized and measured at fairvalue. Intangible assets with finite useful lives, including computersoftware and acquired technology and customer relationships, areamortized as described below:Computer software Straight line 2 yearsNon-compete agreements Straight line 3 yearsAcquired technology Declining balance 15% or 25%Acquired customer relationships Declining balance 10% or 15%36 (Dollar amounts in 000’s except number of shares and per share amounts)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the twelve months ended December 31, 2010 and December 31, 2009and the five-month period ended December 31, 2008GoodwillGoodwill represents the excess of the purchase price of acquiredbusinesses over the estimated fair value of net identifiable assetsacquired. Goodwill is not subject to amortization but is tested forimpairment on an annual basis, or more frequently, if events orcircumstances indicate that it might be impaired. If the carryingamount exceeds the fair value of the goodwill, an impairment lossis recognized equal to that excess through a charge to the consolidatedstatement of operations.Impairment of long-lived assetsLong-lived assets are assessed for future recoverability whenevents or circumstances indicate that they might be impaired.When the net carrying amount of a capital asset exceeds its estimatednet recoverable amount determined using undiscountedcash flows, the asset is written down to its fair value with a chargeto the consolidated statement of operations.Warranty provisionGenerally, a one-year warranty on hardware sales is providedby the Company. A warranty provision equal to 1% of 12-monthtrailing hardware sales is provided in the financial statements.The Company periodically reviews the adequacy of this warrantyprovision.LeasesLeases entered into are classified as either capital or operatingleases. Leases that transfer substantially all of the benefits andrisks of ownership of property to the Company are accountedfor as capital leases. Assets acquired under capital leases arerecorded as an asset on the balance sheet with a correspondingincrease to the capital lease obligation and amortized over thelife of the lease.Leases in which a significant portion of the risk and rewards ofownership are retained by the lessor are classified as operatingleases. Payments made under operating leases are charged tooperations on a straight-line basis over the term of the lease. Thebenefits of lease inducements provided to the Company are recognizedon a straight-line basis over the term of the lease agreement.Income taxesThe Company accounts for income taxes using the asset andliability method. Under this method, current income taxes are recognizedfor the estimated income taxes payable for the currentyear. Future income taxes and liabilities are recognized for temporarydifferences between the tax and accounting basis of assetsand liabilities as well as for the benefit of losses available to becarried forward to future years for tax purposes. Future incometax assets and liabilities are measured using substantively enactedtax rates expected to apply to taxable income in the year in whichthose temporary differences are expected to be recovered orsettled. The effect on future income tax assets and liabilities of achange in tax rates is recognized in operations in the period thatsuch rates are substantively enacted. Any future income tax assetis reduced by a valuation allowance to the extent that it is morelikely than not that some portion or all of the asset will not berealized.Revenue recognitionThe Company derives revenue from the sale of telematics hardwareand software, as well as professional services associated with customizingits product. License, maintenance and subscription revenueis derived from location-based software and software services.Revenue from hardware and software license sales is recognizedwhen persuasive evidence of an arrangement exists, the fee isfixed or determinable, the hardware is shipped or the softwareis delivered and when management has determined that therevenue is collectible. Revenue from professional services isrecognized as earned, based on performance according to specificterms of the contract or on the basis of the percentage ofcompletion method where the revenue is reconcilable to workcompleted as a proportion of total work to be completed, whenthe fee is fixed and determinable, and management has determinedthat the revenue is collectible. All foreseeable losses areincluded in earnings when it is determined that such foreseeablelosses are estimated to be likely to occur. Revenue from subscriptionservices is invoiced in advance and deferred and recognizedon a monthly basis as the services are provided.Revenue arrangements with multiple elements are reviewed inorder to determine whether the multiple elements can be dividedinto separate units of accounting. If separable, the considerationreceived is allocated among the separate units of accountingbased on their respective fair values, and the applicable revenuerecognition criteria are applied to each of the separate units.Otherwise, the applicable revenue recognition criteria are appliedto the revenue arrangement as a single unit.Research and developmentResearch expenditures are expensed when incurred.Development costs are capitalized in the event they meet capitalizationcriteria under Canadian GAAP, otherwise they areexpensed as incurred. To date, no development costs have beencapitalized.Government assistanceScientific research tax credits are accrued at the time the relatedcosts are incurred provided that their recovery is reasonablyassured. Scientific research tax credits arising from capital expendituresare applied to the cost of the assets and refundable creditsarising from other expenditures are applied as a reduction ofsuch expenses.Stock-based compensationThe fair value of employee share purchase option grants is calculatedat the grant date and amortized over the vesting period ofthe grant with a corresponding increase to contributed surplus.The fair value of stock-based payments to non-employees is remeasuredat each balance sheet date until the earlier of the com-37
Page 5 and 6: CORPORATE OVERVIEWNextBus ®NextBus
Page 9: MANAGEMENT’S DISCUSSION & ANALYSI
Page 13 and 14: MANAGEMENT’S DISCUSSION & ANALYSI
Page 29 and 30: AUTIDOR’S REPORT(Dollar amounts i
Page 31 and 32: CONSOLIDATED BALANCE SHEETDecember
Page 33: CONSOLIDATED STATEMENT OF CASH FLOW
Page 37 and 38: NOTES TO THE CONSOLIDATED FINANCIAL
Page 49: CORPORATE HEADQUARTERSWebtech Wirel

2010 ANNUAL REPORT - Webtech Wireless

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?