WEBTECH WIRELESS INC.
ANNUAL INFORMATION FORM
YEAR ENDED DECEMBER 31, 2014
(All amounts shown in Canadian dollars unless otherwise stated)Table of Contents
SECTION PAGE
1 GENERAL ... 4
1.1
E
FFECTIVED
ATEO
FI
NFORMATION... 5
1.2
I
NCORPORATION OFO
THERI
NFORMATION... 5
1.3
B
USINESST
ERMS... 5
1.4
I
NTELLECTUALP
ROPERTY... 6
2 CORPORATE STRUCTURE ... 6
2.1
N
AME,
A
DDRESS ANDI
NCORPORATION... 6
2.2
I
NTER-
CORPORATER
ELATIONSHIPS... 6
3 GENERAL DEVELOPMENT OF THE BUSINESS ... 7
3.1
T
HREE-Y
EARH
ISTORY... 7
3.2
R
ECENTD
EVELOPMENTS... 11
4 DESCRIPTION OF THE BUSINESS ...11
4.1
G
ENERAL... 11
4.2
W
IRELESSE
NVIRONMENT ANDT
RENDS... 13
4.3
P
RODUCTS ANDS
ERVICES... 14
4.4
B
USINESSO
PERATIONS... 17
4.5
R
ISKF
ACTORS... 21
5 DIVIDENDS ...25
6 DESCRIPTION OF CAPITAL STRUCTURE ...26
6.1
A
UTHORIZED ANDI
SSUEDS
HAREC
APITAL... 26
7 MARKET FOR SECURITIES ...26
7.1
T
RADINGP
RICE ANDV
OLUME... 26
7.2
P
RIORS
ALES... 27
S
TOCKO
PTIONS... 28
8 DIRECTORS AND OFFICERS ...28
8.1
N
AME,
O
CCUPATION ANDS
ECURITYH
OLDING... 28
8.2
C
EASET
RADEO
RDERS,
B
ANKRUPTCIES,
P
ENALTIES ORS
ANCTIONS... 31
8.3
C
ONFLICTS OFI
NTEREST... 32
9 LEGAL PROCEEDINGS ...32
10 INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS ...32
11 REGISTRAR AND TRANSFER AGENT...32
12 MATERIAL CONTRACTS ...32
14 ADDITIONAL INFORMATION ...33
14.1
A
DDITIONALI
NFORMATION... 33
14.2
A
UDITC
OMMITTEE... 33
SCHEDULE "A" BUSINESS TERMS ...35
WEBTECH WIRELESS INC.
ANNUAL INFORMATION FORM
1
GENERAL
Forward Looking Statements
Certain statements and information in this Annual Information Form (“AIF”) and documents incorporated by reference herein are not based on historical facts and constitute forward-looking information within the meaning of Canadian securities laws, including statements and
information relating to, among other things, the Company’s plans with respect to its products and services, including timing, content and pricing; market and industry expectations; the wireless communications, mobile fleet and telematics industries; general economic, business and political conditions; loss or addition of key employees; stock market volatility; changes in laws and regulations; and the Company's ability to compete successfully, adapt to technological advances, the defence of ongoing litigation, changing industry standards and other matters. Forward-looking statements are provided to help investors understand the Company’s views of its short and longer term prospects. Forward-looking information can typically be identified by words and phrases about the future such as “outlook”, “may”, “estimates”, “intends”, “believes”, “plans”, “anticipates” and “expects”. Forward-looking statements are not promises or guarantees of future performance; they represent the Company’s current views and may change
significantly. The Company cautions investors that forward-looking statements may not be appropriate for other purposes. The Company assumes no obligation to update or revise its forward-looking statements unless required to do so by securities laws.
Forward-looking statements are based on a number of material assumptions which could prove to be significantly incorrect. Such assumptions include: the Company’s ability to develop, manufacture and sell new products and services that meet the needs of its customers and gain commercial acceptance; the Company’s ability to continue to sell its products and services in the expected quantities at the expected prices and expected times; the Company’s ability to handle future growth, which is impacted by retention of employees, financing and generation of cash from operations; the Company’s ability to protect its intellectual property; expected
component supply constraints; the Company’s ability to “win” new business; the Company’s operations are not adversely disrupted by component shortages or other development, operating or regulatory risks; and expected tax rates and foreign exchange rates.
Forward-looking statements are subject to substantial known and unknown material risks and uncertainties. As a result, the Company’s actual results, achievements and developments in its business may differ significantly from its current expectations. Certain of these material risks include:
• the Company’s inability to respond to technological changes or develop products in a timely and cost-effective manner;
• slow market growth and the Company’s inability to develop and expand the market for its products and services;
• competition from companies with substantially greater financial resources, more aggressive pricing policies, established customer relationships and better name recognition;
• the Company’s inability to obtain and enforce its intellectual property rights, as well as the risk of claims by others that intellectual property rights have been infringed by the Company; • fluctuation in the revenues and earnings of the Company, as well as plans to not pay
• litigation with an adverse outcome;
• volatility in the price of the Company’s Common Shares;
• risks encountered in the acquisition of companies, including exposure to unknown liabilities of acquired companies, high acquisition and integration costs, diversion of management’s time and attention, failure to retain key personnel, entry into unfamiliar markets, possible dilution to shareholders and failure to achieve the anticipated benefits of the acquisition; • substantial product liability and warranty claims;
• inadequacy of insurance;
• fluctuations in the exchange rate between the Canadian and US dollars; • termination of business relationships with distributors and resellers; • non-payment of amounts due by customers and counterparties; • loss of key personnel;
• natural disasters or other unanticipated problems at the Company’s network facilities resulting in interruption of the services provided;
• termination of relationships with key suppliers, manufacturers and other service providers, as well as the risk of entering into committed purchase orders resulting in significant volumes of obsolete inventory; and
• costs of compliance with local regulations governing the Company’s devices, content, privacy, taxation, and other considerations.
These risk factors and others are discussed below under “Risk Factors” and in the Company’s other regulatory filings with the securities regulatory authorities in Canada available on SEDAR at www.sedar.com.
1.1 Effective Date Of Information
The information contained herein is stated as of December 31, 2014 unless otherwise stated. 1.2 Incorporation of Other Information
The following documents are incorporated by reference into this AIF: (i) the Company's annual consolidated financial statements for the fiscal year ended December 31, 2014, together with the auditor’s report thereon, and; (ii) the Company's Management’s Discussion and Analysis for the fiscal year ended December 31, 2014 dated March 19, 2015. See Section 14 of this AIF for particulars for obtaining copies of these documents from the Company. These documents are also available for viewing on SEDAR at www.sedar.com.
All financial information in this AIF is prepared in accordance with International Financial Reporting Standards. All dollar amounts are expressed in Canadian dollars unless otherwise stated.
1.3 Business Terms
The definitions for all capitalized terms used herein and not otherwise defined are in Schedule "A" to this AIF.
1.4 Intellectual Property
This AIF may refer to registered trademarks, trademarks, trade names and service marks of companies other than Webtech Wireless, which names and marks belong to their respective owners.
2
CORPORATE STRUCTURE
2.1 Name, Address and Incorporation
Webtech Wireless Inc. (“Webtech Wireless” or the "Company") was incorporated on May 12, 1999 under the name of "18606 Yukon Inc." under the Business Corporations Act (Yukon). On August 10, 1999, the Company filed Articles of Amendment changing its name to "Get Telecom Inc." On May 19, 2000, the Company filed Articles of Amendment changing its name to
"Webtech Wireless Inc.", renaming its common shares Class A common shares, creating a class of Class B common shares and splitting the existing 100 Class A common shares into 12,500,000 Class A common shares. On July 24, 2000, Webtech Wireless continued into the Province of Alberta and filed Articles of Continuance under the Business Corporations Act (Alberta) ("ABCA"). On March 1, 2002, Webtech Wireless filed Articles of Amendment that created a class of Preferred Shares, issuable in series. On March 13, 2003, Webtech Wireless amalgamated with Caliente Capital Corp. and filed Articles of Amalgamation under the ABCA. The Class A and B common shares and Class C preferred shares of Webtech Wireless, pre-amalgamation, were exchanged for common shares in the capital of the amalgamated
corporation ("Common Shares"). On August 1, 2006 the Company filed Articles of Continuance under the Business Corporations Act (British Columbia) and was continued into the Province of British Columbia. On May 9, 2014, the Company approved an alteration to its capital to effect a consolidation of the authorized Common Shares of the Company, which consolidation became effective on July 24, 2014 on the basis of five Common Shares being consolidated into one Common Share without par value.
The Company’s head office is located at 215-4299 Canada Way, Burnaby, BC, V5G 1H3. The Company’s registered and records office is located at 2600-595 Burrard Street, Vancouver, BC, V7X 1L3.
2.2 Inter-corporate Relationships
As of the date of this AIF, the Company has four direct subsidiaries: InterFleet Inc., a New York corporation, Webtech Wireless (USA) Inc., a Nevada corporation, Webtech Wireless Europe Limited (inactive), a United Kingdom company, and Webtech Wireless Processamento de Dados S.A. (inactive), a Brazil company. Webtech Wireless Europe Limited and Webtech Wireless Processamento de Dados S.A. are in the process of being wound up.
The chart below illustrates the Company’s inter-corporate relationships.
Webtech Wireless Inc.
(British Columbia) Webtech Wireless Processamento de Dados S.A. (Brazil) InterFleet Inc. (New York) Webtech Wireless Europe Ltd. (UK) Webtech Wireless (USA) Inc. (Nevada) 100% 100% 100%100% 100%100% 100%100% inactive inactive
All of the Company’s subsidiaries are 100% owned and controlled by the Company.
3
GENERAL DEVELOPMENT OF THE BUSINESS
Webtech Wireless, founded in 1999, develops and sells vehicle fleet location-based services and telematics solutions designed to improve the productivity, security, emissions and
profitability of vehicle fleets, including long-haul transportation, heavy duty construction, winter operations, mobile assets, refrigerated trailers, and service fleets. The Company’s solution integrates Global Positioning Systems (“GPS”), wireless technologies and the Internet to
connect back office data and fleet operational data (location, performance, communications and activity) in what has become known as the automatic vehicle location and location based
services (“AVL/LBS”) industry, or collectively, “Telematics”.
Webtech Wireless products include software services and wireless hardware running primarily on cellular networks, and include AVL, mapping, reporting, vehicle maintenance data, driver status, in-vehicle telemetry, messaging, in-vehicle navigation, other wireless applications and Internet connectivity. In 2014, Webtech Wireless launched its new fleet management software, Webtech Fleet CenterTM, which combines and enhances the functionality of the two legacy brands: InterFleet® and Quadrant®. With Webtech Fleet Center, fleet managers can track and communicate with their fleets and receive localized services such as navigation. While hardware sales are a critical part of the Webtech Wireless business model, the customer values the hardware for the services that are provided using the information gleaned from locators, and other hardware such as user interface devices and software/ firmware installed in customer vehicles. This overall solution is generally provided using a Software as a Service (“SaaS”) model through an online services portal. A majority of the Company’s revenue comes from the SaaS portal.
The Company has sold its software, hardware, add-on products and services to over a thousand customers worldwide. The Company targets commercial and government fleet operations in transportation, construction, oil and gas, winter operations, public works, and waste management. The Company has a diverse revenue base both across several vertical markets and geographies served by its offices in Canada and by distributors and a field sales force in the United States. By working with qualified local partners and distributors, the
Company has been able to penetrate a wider market than would be the case in selling only directly to customers.
3.1 Three-Year History 2014
In the first quarter of 2014, the Company announced the District of North Vancouver selected Webtech Wireless’ InterFleet solution for deployment in over 140 vehicles across several departments, including solid waste, streets, engineering, parks, and utilities. The Company also announced acceptance by the TSX of its Notice of Intention to Make a Normal Course Issuer Bid to purchase outstanding common shares of the Company. The Company may purchase up to 1,794,400 common shares pursuant to the bid, representing approximately 8.5% of the 21,115,854 common shares outstanding on March 21, 2014. Subject to any block purchases made in accordance with the rules of the TSX, the bid is subject to a daily repurchase maximum of 3,436 common shares. Common shares are purchased at the market price of the common shares at the time of purchase and are purchased on behalf of the Company by a registered investment dealer through the facilities of the TSX or alternative Canadian marketplaces. In the second quarter of 2014, the Company announced the MDT 3200 In-Cab device which is a mounted in-cab device with Webtech Driver CenterTM, and also announced the availability of
Webtech Driver Center on the Samsung GALAXY Tab 3 7” and the Samsung GALAXY Note 8.0. The Company announced enhancements to its reporting capabilities with new Advanced Reports and Dashboards which provide intelligent data which enables fleet managers to focus on key performance indicators (“KPIs”) and identify critical issues that impact their fleet
operations. The Company announced that its board of directors adopted an advance notice policy regarding the nomination of directors effective April 4, 2014. The purpose of the Advance Notice Policy is to provide shareholders, directors and management of the Company with direction on the procedure for shareholder nomination of directors. The Company announced Port Metro Vancouver would be deploying an additional 1,000 Locators as part of the Port Metro Vancouver’s Smart Fleet Trucking Strategy which is the Port Metro Vancouver’s three-year action plan to improve the efficiency and reliability of the container truck sector. The Company announced that the City of Mississauga has implemented the Webtech 511® solution which allows residents to view the latest weather forecast, receive updates from City Hall, and follow relevant twitter feeds to keep up to date on any road related issues.
On May 9, 2014, the shareholders of the Company approved, by a special resolution at the Company’s annual and special meeting, a consolidation of its common shares on a basis of five existing common shares in the capital of the Company for one new common share in the capital of the Company. The legal effective date of the consolidation was July 24, 2014, and the
Company’s common shares began trading on the TSX on a post-consolidation basis on July 29, 2014.
In the third quarter of 2014, the Company announced the launch of its next generation fleet management solution, Webtech Fleet Center. Webtech Fleet Center combines and enhances the features and functionality of the Company’s industry leading Quadrant and InterFleet software. A comprehensive set of management tools, Webtech Fleet Center is Webtech Wireless’ latest SaaS platform and delivers high-value fleet information, essential for running a fully optimized fleet operation. The Company also announced a United States based White Label Distribution Agreement for Webtech Fleet Center and Webtech Driver Center. Webtech Fleet Center, and its in-cab Webtech Driver Center fleet management solution will be rebranded as White Label solutions by its long time Fortune 100 US wireless carrier distribution partner. Webtech Wireless has had a distribution arrangement in place with this carrier since 2007 and this new White Label initiative is being rolled out as an extension of that relationship.
Also in the third quarter of 2014, the Company obtained the release of 100% of the $2.1 million USD in restricted cash related to the holdback from the sale on January 24, 2013 of Webtech Wireless’ NextBus division to Cubic Transportation Systems, Inc., a division of Cubic
Corporation.
In the fourth quarter of 2014, the Company announced a $2.1 million contract extension with the City of Mississauga to deploy the Webtech Fleet Center GPS/AVL fleet management solution. The mobile app provides residents with status updates of winter operations within each
neighbourhood and displays the location of snow plows as they travel their routes. The Company announced the appointment of Mr. Andrew Gutman, Chairman of the Company as interim Chief Executive Officer following the resignation of Mr. Scott Edmonds as President and Chief Executive Officer. Mr. Gutman has served on the Board since March 2011. The Company also announced the appointment of Peter Callaghan as Senior Vice President, Sales and Marketing.
In 2014, the Company restructured several aspects of its operations, including the centralization of the Company’s research and development team in Vancouver. The Company will maintain sales and support functions in Toronto and have moved to a more appropriate facility for those roles.
2013
In the first quarter of 2013, the Company announced the release of Quadrant Manager version 9.8 which included enhanced speeding reports in partnership with INRIX, new SAP engine identification, new integration with FleetCor, temperature monitoring enhancements, and enhancement to Quadrant Manager Mobile providing an improved customer experience when using seven-inch tablet devices. The Company also announced Coach Canada had achieved a variety of internal targets to monitor vehicle speeds and to improve overall safety and
performance using the Quadrant Manager solution in conjunction with real-time road speed and posted speed limit data from INRIX.
On January 24, 2013, the Company announced that it had closed the sale of its NextBus division to Cubic Transportation Systems, Inc., a division of Cubic Corporation for total cash proceeds of $20,750,000, subject to a working capital adjustment and a holdback of 10% of the purchase price. Under the terms of the agreement, Cubic acquired all contracts, assets and rights related to the NextBus division, including the shares of NextBus Inc. The agreement includes a provision under which Webtech Wireless will provide ongoing hardware and ASP services to NextBus. The sale of the NextBus business was the result of the strategic review process initiated in the first quarter of 2012.
As part of the closing process of the sale of NextBus, US $1.8 million of the proceeds were paid directly to NextBus Information Systems, Inc. (“NBIS”), the former owner of NextBus. Under the terms of an agreement between NextBus Inc. and NBIS, NextBus Inc. acquired all of the rights under a Franchise Agreement between NBIS and Webtech Wireless (the “Franchise
Agreement”) as well as certain related assets; in exchange the Company paid NBIS US
$900,000 upon execution of the agreement in 2012 and this further payment of US $1.8 million on January 24, 2013.
In the second quarter of 2013, the Company announced it partnered with the City of Buffalo to launch the telematics industry’s first fully integrated mobile application for road status – Buffalo Roads which is based on the Webtech 511 solution. The application was made available for Apple, Android and Windows platforms and provides citizens with instant real time information on road conditions including when the street was last plowed, and other valuable traffic and news information. The Company also announced the release of its MDT 3100 In-Cab mobile data terminal, version 2.5 with enhanced truck navigation. In partnership with ALK
Technologies, the Company announced it is offering ALK Technologies’ CoPilot® Truck™ in-cab navigation solution as part of the MDT 3100 and Quadrant Manager. This release provided an alternative for trucking companies other than purchasing off-the-shelf consumer GPS navigation systems, as it provided truck-specific on‑board navigation. The Company announced the
release of updates to its Quadrant software and hardware in compliance with new Hours of Service (“HOS”) rules for transport carriers operating in the United States. This version ensured compliance with important changes in “The Federal Motor Carrier Safety Administration
(FMCSA) Hours of Service of Drivers Final Rule” which was scheduled to be implemented July 1, 2013.
In the third quarter of 2013, the Company announced an expanded lineup of 3G devices for its Quadrant solution. These devices with the Quadrant solution were designed both for large fleets that want to track non-powered assets (such as roll-off bins), non-fixed assets (such as trailers) and light-duty vehicles, and small fleets that want to deploy GPS/AVL fleet tracking simply and cost effectively. Three 3G enabled locators (WT4500 ODBII Locator, WR2250 Trailer Tracker, and the WT2200 Asset Watcher) were announced. The Company announced that it had signed a service contract renewal with California Vanpool Authority, a vanpool transportation provider for commuters, students, and agricultural workers in central California. The Company
on 27 snowplows of the Grand Traverse County Road Commission (Michigan) fleet. This is the first InterFleet sale through an existing partnership with its major US mobility reseller.
In the fourth quarter of 2013, the Company announced launch of the Webtech Driver Center software application. Webtech Driver Center is a software platform, designed for Android devices, that offers a fully electronic implementation of both US and Canadian Hours of Service (HOS/ eLogs). Webtech Driver Center also offers two-way messaging, forms, eDVIR, and numerous features that have made Webtech Wireless’ award winning in-cab solutions so successful for customers. The Company also announced the launch of the new MDT 3500 In-Cab devices. Based on Micronet’s A-300 rugged tablet, the MDT 3500 is a ruggedized portable device that offers an updated user experience in the form factor suitable for our customers’ demanding driving conditions. Running Webtech Driver Center, the MDT 3500 is the hub for all driver activity. It offers critical information that allows organizations to remain compliant, run more efficiently and reduce costs.
On September 20, 2013, the Company announced a judgment was issued by a lower Brazilian Court in a lawsuit originally brought in 2008 by a former distributor, Crown Telecom (“Crown”). In the decision, the lower court found the Company liable for damages to Crown for what the Court found to be improper interference with Crown`s contractual relations. The amount of the damages has not been determined. Crown has sought damages in the amount of BBR109 million (approximately CDN$48 million). The Company believed and continues to believe that the lawsuit is without merit. Webtech Wireless has appealed the decision of the lower court. On October 9, 2013, the Company announced that Mr. Trevor Greene had been appointed as Chief Financial Officer of the Company. Mr. Greene was promoted from the position of Director of Finance following the departure of Mr. Andrew Morden, who resigned.
On November 14, 2013, the Company announced that the board of directors along with management had been actively considering options to maximize the value of the company, including determining the use of its excess cash on hand. The Company reported that it was focused on growing and improving the profitability of its current telematics operations and considering the best use of its available cash, with the results of those deliberations to be reported to shareholders as soon as they were completed.
2012
In the first quarter of 2012, the Company announced that it was considering strategic
alternatives with respect to its NextBus operations. Webtech Wireless undertook a process to consider the various options to realize value from its NextBus operations, including a possible sale of the NextBus business.
In the second quarter of 2012, the Company was recognized in the category of Adoption of
Technology by the British Columbia Technology Industry Association (“BCTIA”) for its
implementation of a Quadrant solution for Troyer Ventures, an oil and gas service provider based in northeastern British Columbia.
In the third quarter of 2012, the Company announced that a major customer, Cascade Sierra Solutions, achieved a significant milestone in its drive to reduce emissions and idling as part of the Port of LA and the Port of Long Beach Clean Air Initiative. The Company’s InterFleet division released its new Asset Watcher, to meet the need for a monitoring solution to track low-use mobile assets (such as trailers and generators), and secure them from theft and
unauthorized use.
In October 2012, the Company also completed the process of closing its UK branch. The UK office’s operations, which primarily relate to OEM hardware sales into the UK market, will be managed from the Vancouver headquarters.
On December 3, 2012, the Company announced that it has entered into an agreement to re-acquire all of the NextBus Inc. related intellectual property and technology rights previously granted to NBIS. Under the terms of the settlement agreement, NextBus Inc. acquired all of the rights held by NBIS under the Franchise Agreement as well as certain related assets; in
exchange the Company paid NBIS US $900,000 upon execution of the agreement and made a further payment of US $1.8 million on January 24, 2013 as part of Cubic Transportation
Systems, Inc.’s acquisition of the NextBus business.
In addition, in the fourth quarter, the Company announced, the release of its next-generation WT7000 Locators with 3G connectivity . Also, in the fourth quarter the Company announced the immediate availability of Quadrant Manager 9.7 with support for Android smart phones and tablets. Building on the success of earlier iPhone and iPad releases, Quadrant Manager 9.7 extended the availability of Quadrant Manager Mobile for Apple iPhones and iPads to
customers using Android phones and tablets. Also, the Company announced that it now offers Hours of Service Oil Well Waiting capability that enables fleets in the Oil and Gas sector greater flexibility tracking HOS. This latest Oil and Gas feature is available on the Company’s MDT 3100 In-Cab solution.
3.2 Recent Developments
On March 20, 2015, Webtech Wireless announced acceptance by the Toronto Stock Exchange (the “TSX”) of Webtech Wireless’ Notice of Intention to Make a Normal Course Issuer Bid
(“NCIB”). Pursuant to the NCIB, Webtech Wireless proposes to purchase through the facilities of the TSX, from time to time over the next 12 months up to an aggregate of 1,704,355 common shares, being approximately 8.5% of its Common Shares, as of March 19, 2015. Purchases may commence through the TSX on March 30, 2015 and will conclude on the earlier of the date on which purchases under the bid have been completed and March 29, 2016. Daily purchases under the NCIB will be limited to a maximum of 2,119 Common Shares, other than purchases made in compliance with the provisions of the block purchase exemption of the TSX rules. PI Financial Corp. (“PI”) will continue as the broker firm responsible for making purchases of Common Shares under the NCIB on behalf of Webtech Wireless pursuant to an automatic purchase plan agreement between PI and Webtech Wireless that Webtech Wireless intends to enter into.
4
DESCRIPTION OF THE BUSINESS
4.1 GeneralWebtech Wireless develops, manufactures, and sells turnkey wireless GPS solutions designed to improve the productivity, security, emissions and profitability of vehicle fleets, including long-haul transportation, heavy duty construction, winter operations, mobile assets, refrigerated trailers, and service fleets. The Company has developed fully integrated end-to-end systems consisting of reporting software, hardware, and Internet or enterprise based tracking that provide real time, actionable fleet intelligence to a variety of industry and government vertical markets around the world. The Company historically provided these solutions to government and commercial customers under the brand names InterFleet and Quadrant. In 2014, the Company launched its next generation fleet management software, Webtech Fleet Center, combining and enhancing the functionality of the two legacy brands.
The Webtech Fleet Center solution offering for government is aimed at municipal, state, provincial and other governments. At the most basic level it is used by customers to monitor fleets, and in more sophisticated implementations and more complex applications it can, for
example, interface to on-board equipment to more efficiently deploy municipal vehicles such as snowplows, street sweepers and waste management vehicles.
The Webtech Fleet Center solution offering for commercial industries is aimed at improving the management, risk, and real-time operations of vehicle fleets.
Webtech Fleet Center sales include the Company’s fleet management reporting SaaS offering, combined with the Company’s on board permanently connected GPS hardware device most commonly interfaced to a user interface device such as a tablet, phone or “ruggedized” display installed across disparate fleets. The Company’s solutions include SaaS, software licenses, professional services, maintenance and hardware. Each element may be sold as part of a solution or separately. Solutions, products and services are generally sold directly by the Company’s own inside and field sales teams, and by leveraging distribution partners
cooperative selling efforts. While the Company is focused on direct solution sales, at times the Company acts as an “original equipment manufacturer” and sells its GPS hardware or locator to various third party telematics solution providers.
Software as a Service
Webtech Wireless earns ongoing subscription fees through its online Webtech Fleet Center SaaS services. These services are summarized as follows:
• Fleet Management: Mobile computing, digital forms/reporting, invoicing, city search, and data collection;
• Winter Maintenance: Detailed tracking of de-ice and traction materials road application for government fleet expense and material management, environmental compliance, and contractor management;
• LBS: Navigation, AVL / tracking, "localized" Internet, traffic reporting, proximity advertising, Geofencing and vehicle monitoring;
• Telematics for the Planet: A measurement and reporting system which enables users and enterprises to measure, monitor and report carbon emissions to develop and achieve carbon reduction strategies;
• Safety & Security: Monitoring the transport of hazardous material, anti-theft, vehicle recovery, air-bag deployment notification, remote door lock/unlock, and remote vehicle diagnostics. Speeding reports allow management to work with drivers to reduce speeding, improving safety while reducing fuel consumption;
• Connectivity: Dispatch, voice/cellular, data and messaging, peripherals including tablets, laptops and PDA’s providing access to corporate applications; and
• Regulatory Compliance: Driver logs and other measures required for HOS regulations, automated reporting in regulatory formats, driver and other alerts, trip recorder (detailed record of telemetry inputs and location information).
Software Licenses
The Company will from time to time sell the above mentioned software products in whole or in part on an enterprise license basis - that is, to be installed and run on client hosted servers, rather than on the Company’s servers. This license model appeals to very large clients with sophisticated IT departments and with a large installed base of the Company’s hardware. Professional Services
Webtech Wireless earns revenue from professional services, which are sold along with hardware and Webtech Fleet Center SaaS access. Professional services include: installation
services, project management; customization of reporting; support and maintenance for enterprise licenses, mapping licenses, and other advisory work.
Hardware Sales
The Company designs, develops and manufactures (both directly and via contract
manufacturers), its own GPS hardware. In addition, the Company resells third party hardware that the Company has certified to work with its SaaS platform. Hardware is sold as part of a solution and as a stand-alone product. Discrete hardware sales are made to other telematics companies around the world. This high volume, lower gross margin business does not offer the opportunity for subscription or professional services revenue, but does offer a steady stream of alternative revenue for the Company.
Distribution Channels
The Company achieves its sales by a combination of various methods:
• Direct Sales: The Company has a network of inside and field sales representatives in the United States and Canada who specialize by vertical – government and commercial fleets; and
• Wireless Carriers and Fleet Management Companies: Webtech Wireless has co-sale and carrier resale arrangements with wireless carriers and large fleet management
companies in North America. Under such arrangements, Webtech Wireless gains access to the sales forces of the carrier or fleet management company and the wide reach of their marketing and distribution arms. Webtech Wireless earns revenue through hardware sales and by sharing the monthly subscription fees earned under the related contracts.
Webtech Wireless’ distribution channels and methods are further segmented into the following categories:
• Inside sales teams that deal directly with small to medium commercial fleets; • Direct sales through regional sales representatives;
• Resellers or distributors that provide fleet management solutions and technical support to commercial fleets;
• Sales and marketing arrangements with wireless carriers; and
• Strategic channels with industry partners to offer combined solutions to end users. 4.2 Wireless Environment and Trends
3G networks and 4G LTE network build-out
Wireless connectivity has become essential to the way people live and do business today. Wireless devices are used by all socio-economic groups and are found everywhere in the world. The International Telecommunication Union (“ITU”) estimates that cellular subscribers
worldwide reached 7 billion in 2014. The commercial and consumer use of cellular voice and data services is driving technology advancements, often due to the cost of spectrum in industrialized countries around the world. Wireless network coverage from 3G and LTE
networks continue to expand coverage of North American highways making vehicle telematics solutions increasingly cost effective.
Webtech Wireless is committed to remaining on the leading edge of wireless communications, and as such has developed and continues to develop a range of hardware products supporting both 3rd Generation (“3G”) and High-Speed Packet Access (“HSPA”) mobile applications protocols. 3G and HSPA are the generation of wireless data services, providing a higher
bandwidth for data transmission, which offer an excellent balance of cost, performance and reliability for Webtech Wireless’ telematics products and services. HSPA is steadily expanding to become the data network technology platform of choice for many carriers in Canada, the United States, Europe and beyond. Webtech Wireless Locators are available for major wireless carriers in Canada and the United States.
Webtech Wireless has offered 3G solutions within its product portfolio since 2012 and will continue to release 3G and 4G LTE capable devices as the market grows.
M2M – Machine to Machine Communication
Webtech Wireless’ telematics solutions are classified as Machine to Machine (“M2M”). There are M2M connections linking together practically every device not already connected to the Internet. M2M connections are largely cellular based and are commonly used for remote
monitoring and control. Wi-Fi is also used for these connections, as are other wireless and wired technologies.
Juniper Research predicts that the installed base of cellular M2M devices will approach 500 million modules by 2018, driven primarily by Telematics and in-vehicle applications.
Wireless Vehicle Services
HSPA is well suited for wireless vehicle services applications due to the network's accelerated speed, "always-on" connection to the Internet and data packet pricing capability.
As consumer awareness of GPS tracking applications has increased, so has product innovation and market size. Approximately half of the market today consists of sales of automotive and asset-tracking equipment, and the demand for these applications is still expected to grow quickly. In addition to the strength of these markets, new segments are constantly emerging for GPS applications, driving demand for products as diverse as people-tracking devices and GPS golf systems.
4.3 Products and Services
The Company operates in a rapidly evolving technology market. Its continued success depends on its ability to keep pace with these technology changes. In particular, its future growth
depends on the development, enhancement and protection of intellectual property related to its software and hardware solutions, as well as keeping pace with the deployment of next
generation wireless data and voice networks by its technology partners.
In August 2014, the company launched Webtech Fleet Center, a single unified telematics platform. With this, the company is able to leverage an all-in-one platform to provide a wide array of fleet management solutions for mixed fleets used in both commercial and government verticals.
The Company has deployed the following enhancements and new products: Webtech Fleet Center
Webtech Fleet Center is a full suite of management tools, mapping capabilities and business intelligence that help fleet managers to monitor and maximize fleet performance, increase productivity, safety and compliance by accurately and dependably delivering location driven knowledge.
In 2014, the company released the following capabilities in Webtech Fleet Center:
• Webtech Fleet Center supports all of the Company’s GPS based locators using a single delivery platform from which fleet operators can monitor and analyze mission critical information;
• A number of new vehicle and driver administration capabilities were introduced to enable users to self-manage settings and configurations for winter operations and target based dashboards;
• A new interactive Fleet Vehicle Summary Report was released to allow fleet operators to monitor trips taken in the selected time frame, including distance, stop and idle times, Landmark visits, and last known location;
• The new Vehicle Status pane automatically provides a snapshot of key fleet performance indicators and locator issues using visual clues that are triggered in real time;
• Polygon based landmarks were added to allow users draw custom boundaries on the map to track with higher accuracy the arrivals and departures of vehicles to points of interest such as depots and customer sites;
• A new Search Vehicle History tool was released to allow fleet managers and operators to retrieve records for selected vehicles based on multiple parameters such as vehicle speed, direction and status of telemetry sensors. Historical queries can also be reconstructed and played back as vehicle icons moving between points on the map;
• A new Geographic based search tool was released to allow fleet operators and dispatchers to respond to claims and reconstruct driving events based on map selection. By drawing a rectangle on the map, users can narrow past activity in that area and re-enact trip events on-screen. Corresponding historical data is reported in the grid under the map, including vehicle speed, direction, status of sensors and outputs;
• The vehicle history tool was enhanced to allow fleet operators to easily retrieve a vehicle’s historical details including speed, direction, status of sensors and outputs and visualize a playback of the records as the vehicle icon moves between points on the map; and
• Several user improvements and workflows were introduced in Webtech Fleet Center, among the best received are the new vehicle breadcrumb trails, playback workflows, expansion of the information provided in vehicle balloon and configurable vehicle status icons.
Business Intelligence Tools
During 2014, the company released a series of new interactive reports to help fleet managers and operators to extract historical information for as long as 15 months in the past. The new reporting capabilities allow users to maneuver, sort, filter and extract data to view important KPIs for their entire fleet in one easy to read format. Data is presented in an intelligent,
organized manner, and can be viewed directly on the web browser, printed in pdf or exported in excel and other formats.
In 2014, the company released the following business intelligence capabilities:
• Fleet Dashboard provides fleet managers with a single-view interface into their fleet performance and allows them to easily set goals and track KPIs to focus their attention on under-performing vehicles or drivers;
• Interactive Speeding Duration and Speeding Against Profile Limits Reports that provide historical records based on vehicle-specific speed and tolerance settings and allow fleet managers and operators to monitor drivers’ conformance of internal speeding policies; • Interactive Speeding Against Posted Limits Report that allows fleet managers to analyze
• Interactive Performance Report and Scorecard that allows fleet managers to gather and visualize detailed driver performance information and help them compare driver KPIs among each other; and
• The new interactive Landmark and Geofence Reports allow fleet managers and operators to track fleet arrivals and departures as well as time spent in points of interest such as
customer sites, distribution centers and warehouses. New mapping and GIS Capabilities
In 2014 the company built the infrastructure to quickly deploy and support custom maps using GIS data and dynamic map layers that access real-time weather and traffic information.
The new mapping capabilities allow fleet operators to track vehicle and asset location in remote areas or urban locations in real-time providing visibility of fleet activity in customized landmarks (preferred fuel stops, service locations, customer delivery points) and routes segments.
In 2014, the company released the following mapping and GIS capabilities:
• Dynamic map layers that provide visual updates such as the latest traffic and weather (radar) conditions;
• Live Service Map that provides fleet managers and operators with real-time updates of the level of service provided by winter maintenance fleets;
• Route Completion Report helps fleet managers and operators to monitor and analyze service delivery for fleets assigned or contracted to complete route schedules and service level agreements such as snow removal, street sweeping, waste pickup, or route patrol; • Vehicle Service Groups were introduced to allow fleet managers to better handle multiple
services across their fleets and monitor and analyze performance on scheduled routes by type of service, such as waste pickup, snow removal, street salting, sweeping, or route patrol; and
• Route, Day and Trip Based Winter Operations Reports that capture vehicle, material, and equipment usage data, including the amount of time and distance a plow has operated throughout the day. These reports were built to help fleet managers to determine winter equipment usage, confirm billing for contractual services, and provide records for winter service level agreements.
Webtech Driver Center
In 2014 the Company continued with the expansion of its leading Android based software platform that enables fleet managers to remain compliant with Hours of Service regulations, improve efficiency, and increase safety.
In 2014, the company released the following capabilities in Webtech Driver Center:
• The Webtech Driver Center Inspection Mode helps drivers and compliancy officers simply and easily run through an inspection, providing only relevant information to the officer and saving both parties time;
• Yard Mode allows fleet managers to optimize HOS by enabling drivers to conserve their available driving hours within specified circumstances; for example within the boundaries of a company’s home terminal or other defined areas;
• New server side configuration capabilities helps fleet managers to add information into the system to be provisioned on the compliancy device such as the Hour of Service rule the
driver will operate under, the driver’s home terminal, and carrier information. Manual entry could lead to inconstancies in data across the company’s devices;
• Webtech Driver Center available in French allows French speaking drivers the option of operating the system in their native tongue. All labels are displayed in the French language and the device supports the sending and receiving of French text;
• Webtech Driver Center’s eDVIR forms allow drivers to save time, improve accuracy and expedite inspection information to headquarters quickly; and
• CoPilot Truck Navigation is an industry-leading truck-specific GPS routing solution designed to provide reliable navigation on truck-legal roads while keeping drivers safe. Drivers can seamlessly switch between Hours of Service and navigation, making it easy for them to check they still have enough available duty time.
Hardware
The Company designs, builds, and in partnership with outsource providers, manufactures its own hardware as well as providing a variety of third party designed peripherals and “add-ons”. In 2014, the Company expanded its product offerings with the support of Webtech Driver Center into the MDT3200, MDT3500 and selected consumer tablets achieving the most comprehensive solution for automated Hours of Service in the market.
4.4 Business Operations Revenues
Overall revenue declined 14% in 2014 as compared to 2013. Recurring revenues for the year declined 5%, as the subscriber additions from commercial and government solutions sales for the year were not sufficient to replace subscriber churn for the period. Hardware revenues decreased 31% over the prior comparable period largely due to a decline in commercial sales, and lower hardware demand from the NextBus business sold in January 2013. Services and other revenues decreased for the year due to a one-time revenue transaction in 2013 not repeated in the current period.
Research and Development
Webtech Wireless conducts research and development activities related to its software, firmware and hardware. From time to time, Webtech Wireless introduces next generation products as part of a continuous product management program. There are currently several products in various stages of development and headed towards commercial release in the normal course.
The Company’s hardware and firmware form part of an embedded system that is installed in a vehicle or other mobile asset and interfaces to Webtech Wireless’ server infrastructure.
Research and development includes schematic capture, printed circuit board design and manufacture, firmware programming, compiling and deployment activities, software
Variance
$ % $ % %
Recurring revenue $ 17,459 68% $ 18,415 61% (5%) Hardware revenue 6,988 27% 10,107 34% (31%) Services and other revenue 1,392 5% 1,561 5% (11%)
25,839
$ 100% $ 30,083 100% (14%)
Year ended
programming and infrastructure deployment. By conducting its own research and development activities, Webtech Wireless has been able to retain complete ownership of the intellectual property that makes up its end-to-end solution.
Production and Services
Webtech Wireless provides fleet management services to its customers in the form of its online offering of Webtech Fleet Center. Utilizing data transmitted by the Webtech Wireless hardware installed in the customer vehicle, Webtech Fleet Center provides a rich interface for users to track, monitor and obtain reporting on their mobile assets.
Webtech Wireless’ hardware is primarily manufactured by contract manufacturing suppliers. The Company uses both local and offshore manufacturers. Webtech Wireless uses its subcontract manufacturers for printed circuit assemblies, primary assembly, and testing. Most components and parts are sourced by the Company’s manufacturers; however, Webtech Wireless itself sources some major components, some long lead-time parts, and some peripherals, such as MDTs.
In addition, Webtech Wireless sells professional services such as project management, training and installation. These services may be offered directly by Webtech Wireless with the services performed by a Webtech Wireless employee at the customer’s site or from the Company’s offices in Vancouver and Toronto. Services such as installations may be provided by Webtech Wireless authorized third-party installation companies located near the customer. Webtech Wireless may also sell enterprise licenses for its online offering and services related to the installation of a licensed product into the customers environment or may partner with a third party professional services organization to provide such installation services.
Webtech Wireless’ products require final assembly and configuration, testing, packaging and shipping, which is conducted at the Company’s facilities or by a reseller in other overseas markets.
Specialized Skill and Knowledge
Due to the technical nature of its business and the dynamic market in which the Company competes, continued success depends on attracting and retaining highly skilled engineering, managerial, consulting, marketing and sales personnel. In particular, the Company's future success depends in part on the continued services of each of its current executive officers and other key employees.
As the Company’s largest office is located in the Lower Mainland of British Columbia, an area with a strong legacy of wireless innovation and software development as well as a number of universities and colleges that offer technology degrees and programs, the Company has historically been able to find staff and executives with the necessary skills required for the Company to meet its goals. This is also true of its office in Toronto.
Competitive Conditions
The Company operates in a highly competitive environment. The Company’s key telematics competitors are: Telogis, Inc., Fleetmatics Group PLC, Trimble Navigation Limited, Verizon Telematics, Inc., BSM Wireless Inc. and CalAmp Corp. Telogis provides cloud based vehicle reporting services. Fleetmatics offers web-based tracking solutions to small and medium sized businesses. Trimble offers web-based vehicle tracking services, including PeopleNet Fleet Manager, which it acquired in 2011 and TMW Systems which it acquired in 2012. Verizon Telematics’s Networkfleet unit offers its on-board diagnostics and telematics solutions, primarily to large government fleets. BSM offers fleet management, diagnostics and vehicle security systems to commercial, government, and law enforcement fleets. CalAmp offers web based fleet management solutions through FleetOutlook.
Webtech Wireless has competitively positioned itself with an end-to-end Internet-based system that provides a variety of services as opposed to having a single service offering. Webtech Wireless has built an open platform that permits the addition of other mobility applications and allows for customization, which management believes is critical to penetrate various vertical market segments and provide fleet management reporting and services beyond vehicle tracking.
New Products
In the third quarter of 2014, the Company announced the launch of the Webtech Fleet Center, the Company’s next generation fleet management software and reporting solution. Combining the features and functionality of the Company’s legacy Quadrant and InterFleet software, Webtech Fleet Center also provides enhanced fleet management functionality through features, functions and mapping choices. Offered as a SaaS platform for both government and
commercial fleet operations, Webtech Fleet Center is a highly intuitive, easy-to-use interface that delivers location based data through advanced reporting and mapping capabilities, intelligent dashboard functionalities and integration with customer’s existing GIS maps. Component Pricing and Sourcing
Webtech Wireless has established supply relationships with a number of organizations including Cinterion Wireless Modules GmbH and Telit Communications PLC (modems), SIrf Technology Inc. (GPS chips), and Micronet (MDTs), which supply the critical components of the Company's products and services. Each of these suppliers is a large well established company offering secure supplies and ready availability of components. The Company’s components are largely generic and have become commoditized as the global telematics market has grown. This is a beneficial development for the Company as it reduces the price of the components and provides multiple vendors to choose from. As a result, Webtech Wireless believes that it will be
successful in developing further supply relationships if needed.
The Company primarily uses third-party contract manufacturers for the production and assembly of its products, benefiting from the large scale that such manufacturers are able to achieve at their facilities. For smaller scale orders and for testing of prototypes and engineering runs, the Company has an in-house production line capable of producing several hundred units per day. As sales volumes increase, the Company has benefited and believes it will continue to benefit from volume discounts. As the majority of the components that Webtech Wireless procures are denominated in US currency, the costs of these components are subject to foreign currency risk. See "Risk Factors".
Intellectual Property
Webtech Wireless currently protects its intellectual property (including but not limited to the design of its units, the embedded software/firmware and its proprietary services portal and enterprise software) through a mix of patents and the maintenance of a strict regime of trade secrecy. The trade secrets held by Webtech Wireless, with respect to the copyright attached to its software, firmware and the assembly of its hardware products, is critical to Webtech
Wireless. During the year, the Company made several new patent and trademark applications with the US Patent and Trademark Office. As of the date of this AIF, the portfolio now consists of twenty one issued patents, sixteen registered trademarks, thirty seven registered domain names, and a number of pending rights expected to issue or register in due course. In 2014, Webtech Wireless had a total of nine utility patent applications pending.
Sales Cycles
In addition to the acquisition of Grey Island Systems Ltd. in 2009, the Company has grown organically through direct sales to small and medium-sized customers, as well as larger
government clients, the establishment of “channel” relationships with major wireless carriers in Canada and the United States and through enterprise sales to global customers. The sales cycle to these customers can vary from weeks to many months. As well, the Company continues to seed the market by selling product to large customers to use for trials. Some of these trials may last for a year or more. In addition, the deployment of large sales orders through a customer’s fleet can take several months as the customer ramps up install and monitoring activity. As a result, predicting sales for a quarter is difficult as sales cycles or trials may close in the quarter or easily slip into the next quarter or later. Once a supply relationship is established with a customer, however, it is the Company’s experience that a predictable number of orders are generated over the term of the relationship with the customer— regularly over several years in most cases, as fleets are expanded and/or aging vehicles replaced.
In addition, the Company's sales are subject to seasonality with sales generally being lower in the summer months of each year.
Economic Dependence
The Company depends on a single contract manufacturer for a large portion of its
manufacturing production. However, the Company maintains sufficient inventories of long lead time parts and finished goods to avoid excessive dependence on this supplier and believes that it has appropriate relationships with a sufficient number of alternate suppliers and
manufacturers to avoid excessive dependence on this manufacturer. Employees
At December 31, 2014, the Company had an aggregate complement of 133 (December 31, 2013 – 144.5) full-time equivalent employees, all of whom were located in North America. As of the date of the AIF, the Company had an aggregate complement of 124 employees.
Credit and Lending
The Company has established a strong program to review the credit worthiness of all new and existing customers in order to prevent loss. The Company’s credit policies are overseen by staff with many years of experience in the credit and collections field and involve the review of a customer’s credit record, payment history and ongoing business results. In addition, the Company frequently requires that new customers make a whole or partial payment in advance of shipping any orders until such time as the customer has a proven payment history. Credit limits are established and adhered to, based upon payment and credit history and reviewed on a regular basis by senior management. Exceptions to such credit policies are documented and may only be authorized by a senior executive in writing.
Foreign Operations
In 2014, the majority of sales came from Canada and US with OEM sales in Europe and the rest of the world.
For the year ended December 31, 2014, the Company’s revenues generated from US customers decreased over the prior year due lower hardware demand from the NextBus
business sold in January 2013, and fewer commercial sales and implementations. Revenues in Canada for the year decreased over 2013 due to lower recurring revenues from a reduction in full service subscribers. Sales in Europe decreased for the year as a result of a decreased focus on the hardware-only OEM market. Revenues for the rest of the world decreased as the
Company focused its sales and marketing efforts in the US and Canada.
The Company currently has distribution agreements with third party distributors in the United States, the United Kingdom, Australia, Pakistan and other locations.
4.5 Risk Factors
This document contains forward-looking statements regarding our Company, business,
prospects and results of operations that involve risks and uncertainties. Our actual results could differ materially from the results that may be anticipated by such forward-looking statements and discussed elsewhere in this Annual Information Form.
The following risk factors, as well as risks not currently known to Webtech Wireless, could materially adversely affect Webtech Wireless’ future business, operations and financial condition and could cause them to differ materially from the estimates described in forward-looking statements relating to Webtech Wireless.
Investment in Webtech Wireless common shares is speculative and involves a high degree of risk, is subject to the following specific risks among others, and should be undertaken only by purchasers whose financial resources are sufficient to enable them to assume such risks. The common shares of the Company should not be purchased by persons who cannot afford the possibility of the less of their entire investment. Before making an investment decision consideration should be made of the principal risks and uncertainties described below: Technology
The Company operates in a highly competitive environment where its products and services are subject to rapid technological change and evolving industry standards. Webtech Wireless’ future success depends on its ability to design and produce new products and services, deliver
enhancements to its existing products and services, accurately predict and anticipate evolving technology and respond to technological advances in its industry, and respond to its customer’s increasingly sophisticated needs. Our products embody complex technology that may not meet those standards, changes and preferences. If the Company is unable to respond to
technological changes, fails or delays to develop products in a timely and cost‐effective manner, its products and services may become obsolete, which could negatively impact sales,
profitability and the continued viability of the business.
Industry Growth and Market Demand for the Product and Services
The overall market for wireless mobile data solutions has experienced significant growth in recent years. The Company's success is dependent on its ability to market its products and services. There can be no assurance that Webtech Wireless’ existing vertical and geographic markets will grow, or that we will be successful in establishing ourselves in new vertical and geographic markets. There is no guarantee the Company will be able to respond to market demands. If the Company is unable to effectively develop and expand the market for its
products and services, its growth may be adversely affected. If the various markets in which our products compete fail to grow, or grow more slowly than we currently anticipate, or if we are unable to establish ourselves in new markets, our growth plans could be materially adversely affected.
Competition
The telematics industry is very competitive. Numerous factors affect our competitive position, including price. A number of the Company's existing competitors have substantially greater financial, marketing and other resources. Several of these companies also have greater name recognition and well established relationships with some of the Company's target customers. Furthermore, these competitors may be able to adopt more aggressive pricing policies and offer more attractive terms to customers than the Company is able to offer. The Company may face increasing price pressure from its competitors and customers. In addition, current and potential competitors have established or may establish cooperative relationships amongst themselves or with third parties to compete more effectively. Existing and potential competitors may also develop enhancements to, or future generations of, competitive products and services that will have better performance features than the Company's system. If our competitors offer their products at prices and on terms that are more attractive than we are able to offer, our sales will decrease and our growth and profitability will be adversely affected.
Intellectual Property
The trade secrets and copyright held by Webtech Wireless with respect to its products and software is of extreme importance to Webtech Wireless’ success. Webtech Wireless protects its intellectual property through trade secrets and reliance upon both copyright legislation and patent registrations. Despite our best efforts, filing patent applications may not result in enforceable patent rights in all jurisdictions that the Company does, or may, operate. Further, any issued patents or third‐party patents to which the Company has licensed rights, may be of a restricted scope that do not cover possible foundational technologies and/or technologies practiced by others. Unauthorized parties may attempt to copy aspects of our products or to obtain information we regard as proprietary. Policing unauthorized use of proprietary
technology, if required, may be difficult, time‐consuming and costly. If a third party
misappropriates the Company’s intellectual property, Webtech Wireless may be unable to enforce its rights. Webtech Wireless has been and may be challenged by allegations of its infringement of the intellectual property of others; defending itself against such claims can be time consuming and expensive. There is no assurance the Company will be successful in defending such claims and, if the Company is unsuccessful, there is no assurance that the Company will be successful in obtaining a license for the intellectual property in question. Intellectual property claims are expensive and time consuming to defend and, even if they are without merit, may cause delay in the introduction of new products or services. In addition, our managerial resources could be diverted in order to defend our rights, which could disrupt our operations.
Variable Revenues/Earnings and Dividend Record
The revenues and earnings of the Company may fluctuate from quarter to quarter, which could affect the market price of the Company's Common Shares. Revenues and earnings may vary quarter to quarter as a result of a number of factors, including the timing of releases of new products or services, the timing of substantial sales orders or deliveries, activities of the Company's competitors, cyclical fluctuations related to the evolution of wireless technologies, cyclical fluctuations related to customer purchasing cycles, possible delays in the manufacture or shipment of current or new products, concentration in the Company's customer base, and possible delays or shortages in component supplies.
Since 2007 the Company has incurred net losses each year, other than the year ended
December 31, 2013 after reporting earnings for the previous three years following several years of no earnings since inception. The Company has paid no dividends on its Common Shares since incorporation and has no current plans to do so.
Litigation
The Company has been and may be subject to a variety of further claims and lawsuits from time to time. Adverse outcomes in some or all of these claims, including the ongoing litigation with Crown Telecom in Brazil, may result in significant monetary damages or injunctive relief that could adversely affect the Company’s ability to conduct its business. Litigation and other claims are subject to inherent uncertainties and management’s view of these matters may change in the future. Managing litigation is a drain on the Company’s management and financial resources which could adversely affect the Company’s results. If the Company is ultimately unsuccessful in any of its litigation it would likely have a significant adverse effect on the Company’s results and operations.
Stock Price Volatility
The securities markets in the United States and Canada have experienced a high level of price and volume volatility, and the market prices of securities of many companies have experienced wide fluctuations in price, which have not necessarily been related to the operating
performance, underlying asset values or prospects of such companies. There can be no assurance that continued fluctuations in price will not occur. It may be anticipated that any quoted market for the Common Shares will be subject to market trends generally,
notwithstanding any potential success of the Company in creating revenues, cash flows or earnings. The value of the Company's securities will be affected by such volatility. The Company's stock price may also experience significant fluctuations due to operating
performance, performance relative to analysts' estimates, disposition or acquisition by a large shareholder, a law suit against the Company, the loss or acquisition of a significant customer or distributor, industry-wide factors and factors other than the operating performance of the
Company. These factors among others may cause decreases in the value of the Company’s Common Shares.
Acquisitions and Divestitures
As part of the business strategy of the Company, the Company may acquire additional assets, businesses, products or technologies, principally relating to, or complementary to its current operations, or divest non‐core assets or business. Any acquisitions and/or mergers will be accompanied by the risks commonly encountered in acquisitions of companies.
These risks include, among other things: exposure to unknown liabilities of acquired companies, higher than anticipated acquisition and integration costs, diversion of management's time and attention during the integration process, failure to retain key personnel, entry into markets with which we have not been previously familiar, possible dilution to shareholders if the purchase price is paid in Common Shares or securities convertible into Common Shares, incurring debt and contingent liabilities, amortization of good will and the write‐off of restructuring costs, and acquired R&D costs. A failure to manage the acquisition of a company or technology may result in disruptions to our business or the acquisition may not achieve anticipated benefits. Similarly, divestitures expose the Company to common risks associated with the divestiture process. Warranty Claims and Product Liability
Webtech Wireless provides its customers with a limited warranty on its products. Despite quality control procedures, there is no assurance that the Company's provision for this warranty is adequate. If there is a malfunction or error that affects a significant number of the Company's products, the cost to repair, replace or recall these products or component parts could materially adversely affect the operations and financial position of the Company.
Webtech Wireless may be subject to claims arising from the use of its products and services. Our products are highly complex and sophisticated and, from time to time, may contain design
