Implantica Annual Report 2014

Plain-text annual report

2014 ANNUAL REPORT Intermap Technologies Corporation THIS PAGE INTENTIONALLY LEFT BLANK. President’s Message Financial information as discussed herein is in U.S. dollars unless otherwise noted. 1 During 2014, our focus was on the continued development of the Orion Platform®, coupled with operational preparation to support anticipated Spatial Data Infrastructure (“SDI”) contract(s). The Orion Platform and its SDI capabilities were designed to derive geospatial related answers for our customers. The year 2014 was a year of investment in Intermap’s future. We continued to make major advancements in our platform software capabilities, our NEXTMap® database, and in our professional services competencies. This investment positions us well for the coming year to deliver on the Orion Platform promise we made to our customers. We are currently pursuing large SDI projects which have initial delivery periods of at least two years, and are designed to generate recurring revenue streams for years to follow. Our internal investment during 2014 was necessary to position us for success in these areas. Our InsitePro™ software application was introduced during the year. InsitePro is a SaaS based application that uses our Orion Platform and is focused on the property insurance market. During the year, our InsitePro product team talked to over 40 primary insurers, resulting in significant insight into both the needs of property insurers and the industries competitive landscape. The combination of our software, high- quality terrain data, and European insurance experience, provides a compelling basis to help drive further development of our InsitePro application. No competitor has a geospatial analytical platform and access to comparable data assets for flood insurance underwriters. The ongoing development of Intermap’s Orion Platform presents a method for InsitePro to become a complete underwriting solution for large insurance carriers, including some of the world’s largest multi-nationals. As an example, InsitePro’s first customer was Swiss Re, delivering flood underwriting software for use in the Brazil property insurance market. As InsitePro enters 2015, we remain confident in the business potential as we continue to add new functionality and integrate new datasets into the software. The Orion Platform was developed to provide an integrated platform, delivering customized and scalable geospatial solutions, powered from five layers of products and services as follows: 1. 3DBI: Software applications designed to help professionals make better location-based decisions without the need for expensive and complicated GIS software. 2. Infrastructure: Network-based software delivered in both platform as a service (“PaaS”) and traditional licenses. 3. Foundation Data Layer: Seamless, off-the-shelf, high resolution elevation and image data. 4. Fusion Services: Integration of geospatial and location-based content into one homogeneous, consistent database using Intermap’s proprietary fusion processes and tools. 5. Geospatial Services: Helps a customer define their overall geospatial enterprise problem. The services also include custom data collections using a variety of sensor types (i.e. radar, LiDAR, satellite, aerial photography, etc.). An SDI is the combination of several components, all working together, to allow people across governments, organizations, and the general public to analyze and share spatial data solutions. The key components of an SDI include technology, policies, people, processes, and resources – collectively working together in acquiring, processing and delivering location-based intelligence answers. When designed and implemented well, an SDI can facilitate economic development, infrastructure growth, security, and safety to a nation. Further to this, an SDI can drive the creation of a comprehensive national base map and an integrated geospatial data operating environment. We believe that an SDI can be essential to the successful completion of major infrastructure projects and economic growth in developing nations, and can enable projects such as fiber optic telecommunications lines; expansion of hydroelectric power and build out of the power grid; planning and building of new roads and railroads; expansion of mining and hydrocarbon exploration; national security; tax revenue growth; and protection of the environment. 2 An SDI project can support governments with the creation of a comprehensive, three dimensional (3D) digital infrastructure that can be used to model and plan for a number of infrastructure, economic, and catastrophic circumstances. An SDI can enable multiple government and commercial uses, and can provide actionable economic related decisions in the areas of natural resources exploration (agriculture, forestry, hydroelectricity, mining, oil and gas), environment, education, transportation, communications, health, and security. An SDI can also provide the analysis and dissemination of information for government agencies to proactively respond to identified needs of major development projects. A strong SDI originates with a foundation of accurate digital geospatial layers, real-time analytics, and location-based answers. Our adjusted EBITDA for the year was negative $12.0 million compared with positive $1.2 million for 2013. For the year 2014, our net loss was $12.8 million, or ($0.14) per share, compared with a net loss of $13.5 million (includes a $9.2 million asset impairment charge), or ($0.16) per share, last year. In summary, during 2014 we were in between major governmental contracts, which is the primary reason for our decreased operational performance during the year. However, our identified sales opportunities continued to grow throughout the year, driven primarily by the risk management needs of our customers, as well as several SDI opportunities internationally. It is important to remember that our SDI business carries with it significant revenue and operational variations on a quarter-to-quarter, and annual basis, as we saw during this past year. We are working diligently to close new Orion Platform based SDI contracts during 2015 from our growing list of identified opportunities, which are expected to improve our future financial results. During 2014 we invested heavily in our software platform strategy so that we can bring to market a leading geospatial analytical product that can be easily customized for our customers. This strategy should result in recurring revenues and profitability in future periods. We have also had some success in the Risk markets and we continue to pursue the larger SDI opportunities, which will change the entire dynamics of the business. It’s clear that we are breaking new ground and our opportunities continue to grow. It is our challenge to capture new opportunities as fast as possible and to drive success for Intermap and its investors. The merit of creating our platform-as-a-service is just starting to be experienced and is at the center of our SDI and Risk opportunities. Today, it represents a small portion of our revenue and we have talked about the value of this approach for the last few years. In the future, this approach will allow us to remove the dependency on the project-based revenue that we currently rely on so heavily. In the quarters to come, you will hear more about where this platform is being used and the new personalities that have been created for new markets. And finally, on behalf of myself and all of our employees, I’d like to thank our investors for their continued support during the year and for sharing our vision. We look forward to a successful and profitable 2015. (Signed) Todd A. Oseth Todd A. Oseth, President and Chief Executive Officer Intermap Technologies Management’s Discussion and Analysis 3 For the year ended December 31, 2014 For purposes of this discussion, “Intermap®” or the “Company” refers to Intermap Technologies® Corporation and its subsidiaries. This management’s discussion and analysis (MD&A) is provided as of March 26, 2015, and should be read together with the Company’s audited Consolidated Financial Statements and the accompanying notes for the years ended December 31, 2014 and 2013. The results reported herein have been prepared in accordance with International Financial Reporting Standards (IFRS) and, unless otherwise noted, are expressed in United States dollars. Additional information relating to the Company, including the Company’s Annual Information Form (AIF), can be found on the Company’s Web site at www.intermap.com and on SEDAR at www.sedar.com. FORWARD-LOOKING STATEMENTS In the interest of providing the shareholders and potential investors of Intermap Technologies® Corporation (“Intermap” or the “Company”) with information about the Company and its subsidiaries, including management’s assessment of Intermap’s® and its subsidiaries’ future plans and operations, certain information provided in this MD&A constitutes forward-looking statements or information (collectively, “forward-looking statements”). Forward-looking statements are typically identified by words such as “may”, “will”, “should”, “could”, “anticipate”, “expect”, “project”, “estimate”, “forecast”, “plan”, “intend”, “target”, “believe”, and similar words suggesting future outcomes or statements regarding an outlook. Although these forward-looking statements are based on assumptions that Intermap considers to be reasonable based on the information available on the date such statements are made, such statements are not guarantees of future performance and readers are cautioned against placing undue reliance on forward-looking statements. By their nature, these statements involve a variety of assumptions, known and unknown risks and uncertainties, and other factors which may cause actual results, levels of activity, and achievements to differ materially from those expressed or implied by such statements. The forward- looking information contained in this MD&A is based on certain assumptions and analysis by management of the Company in light of its experience and perception of historical trends, current conditions and expected future development and other factors that it believes are appropriate. The material factors and assumptions used to develop the forward-looking statements herein include, but are not limited to, the following: (i) there will be adequate liquidity available to the Company to carry out its operations; (ii) the continued sales success of Intermap’s products and services; (iii) the continued success of business development activities; (iv) there will be no significant delays in the development and commercialization of the Company’s products; (v) the Company will continue to maintain sufficient and effective production and software development capabilities to compete on the attributes and cost of its products; (vi) there will be no significant reduction in the availability of qualified and cost-effective human resources; (vii) the continued existence and productivity of subsidiary operations; (viii) new products and services will continue to be added to the Company’s portfolio; (ix) demand for geospatial related products and services will continue to grow in the foreseeable future; (x) there will be no significant barriers to the integration of the Company’s products and services into customers’ applications; (xi) the Company will be able to maintain compliance with applicable contractual and regulatory obligations and requirements, and (xii) superior technologies/products do not develop that would render the Company’s current product offerings obsolete. Intermap’s forward-looking statements are subject to risks and uncertainties pertaining to, among other things, cash available to fund operations, availability of capital, nature of government contracts, revenue fluctuations, economic conditions, loss of key customers, retention and availability of executive talent, competing technologies, common share price volatility, loss of proprietary information, software functionality, internet and system infrastructure functionality, information technology security, breakdown 4 of strategic alliances, and international and political considerations, including but not limited to those risks and uncertainties discussed under the heading “Risk Factors” in this MD&A and the Company’s other filings with securities regulators. The impact of any one risk, uncertainty, or factor on a particular forward-looking statement is not determinable with certainty as these are interdependent, and the Company’s future course of action depends on Management’s assessment of all information available at the relevant time. Except to the extent required by law, the Company assumes no obligation to publicly update or revise any forward- looking statements made in this MD&A, whether as a result of new information, future events, or otherwise. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on the Company’s behalf, are expressly qualified in their entirety by these cautionary statements. BUSINESS OVERVIEW Intermap is a global location-based information company, creating a wide variety of geospatial solutions and analytics from its NEXTMap® database. The Company uses its NEXTMap 3D digital models, together with aggregated third party data, to create geospatial solutions for its customers. These geospatial solutions can be used in a wide range of applications including, but not limited to, location-based information, geographic information systems (GIS), engineering, utilities, global positioning systems (GPS) maps, geospatial risk assessment, oil and gas, renewable energy, hydrology, environmental planning, wireless communications, transportation, advertising, and 3D visualization. The NEXTMap data can also be used to improve the positional accuracy of airborne and satellite images. Intermap has the ability to create its own digital 3D geospatial data using its proprietary IFSAR radar technology mounted in a Learjet aircraft. The Company has two IFSAR-equipped aircraft, which provide operational flexibility related to geographical location of data collection. Intermap’s radar-based technology allows it to collect data at any time of the day, including under conditions such as cloud cover or darkness, which are conditions that limit most competitive technologies. The IFSAR radar technology also enables data to be collected over larger areas, at higher collection speeds, and at accuracy levels that are difficult to achieve with competitive systems. Once the raw digital data is collected, it is then processed to create three different geospatial datasets: digital surface models, digital terrain models, and orthorectified radar images. These datasets can then be further processed and/or augmented with additional data to create value- added products. The Company has been actively transitioning its NEXTMap program from primarily an internally created IFSAR radar-only dataset to an aggregated dataset of IFSAR-derived data and third-party data collected by multiple sensor technologies, including light detection and ranging (LiDAR), photogrammetry, satellite, and other available sources. The NEXTMap database also includes information such as 3D city models, census data, real-time traffic, outdoor advertising assets, weather related hazards, points of interest, cellular towers, flood models and wildfire models. The Company has many years of experience aggregating data derived from a number of different sensor technologies and data sources. In addition, the Company is combining its mapping services capability and NEXTMap database, together with its software application development capability and system integration expertise, to create entire spatial data infrastructure (SDI) environments for its customers. The Company believes the value of its NEXTMap data lies primarily in web-based application solutions for specific vertical markets, and not solely in the data as a standalone product. These web services offer a suite of hosted tools that gives even those unfamiliar with GIS the ability to quickly and easily perform terrain analysis based on an area of interest such as a land development site, county, or an entire state. Subscribers to the Company’s web-services can access NEXTMap information using their current web browsers and through popular desktop GIS software applications. 2014 Annual Report | Management’s Discussion and Analysis5 Unlike other geospatial companies, Intermap typically retains ownership of its data and licenses the use of its products and services to its customers. Intermap currently has 5- meter 3D geospatial data commercially available for 17 countries in Western Europe, the contiguous United States and Hawaii, portions of Alaska, and significant areas in Southeast Asia. Intermap also has a 10-meter product of the entire world, called NEXTMap World 10™. FINANCIAL INFORMATION FINANCIAL INFORMATION The following table sets forth selected financial information for the periods indicated. The following table sets forth selected financial information for the periods indicated. Selected Annual Information Selected Annual Information U.S. $ millions, except per share data 2014 2013(1) 2012(1) Revenue: Mapping services Professional services Data licenses 3DBI software applications Total revenue $ 2.9 0.9 3.3 1.2 $ 18.0 1.0 3.9 1.5 $ 11.0 0.9 14.1 1.8 $ 8.3 $ 24.4 $ 27.8 Net loss before data library impairment $ (12.8) $ (4.3) $ (3.1) Data library impairment Net loss EPS basic and diluted Adjusted EBITDA Assets: - (9.2) - $ (12.8) $ (13.5) $ (3.1) $ (0.14) $ (0.16) $ (0.04) $ (12.0) $ 1.2 $ 5.0 Cash, amounts receivable, and unbilled revenue $ 2.1 $ 9.0 $ 10.5 Data library Total assets Total long-term liabilities (including finance lease obligations) $ - $ - $ 13.8 $ 5.3 $ 12.9 $ 28.9 $ 0.5 $ 0.4 $ 1.3 restated. See Note 5 to the Consolidated Annual Financial Statements. (1) Net loss before data library impairment, net loss, and EPS basic and diluted amounts have been (1) Net loss before data library impairment, net loss, and EPS basic and diluted amounts have been restated. See Note 5 to the Consolidated Annual Financial Statements. Revenue Revenue Consolidated revenue for the year ended December 31, 2014 totaled $8.3 million, Consolidated revenue for the year ended December 31, 2014 totaled $8.3 million, compared to $24.4 million compared to $24.4 million for the same period in 2013, representing a 66% decrease. As of for the same period in 2013, representing a 66% decrease. As of December 31, 2014, there remained $0.5 December 31, 2014, there remained $0.5 million in 3DBI software applications revenue million in 3DBI software applications revenue from existing contracts to be recognized in future periods. from existing contracts to be recognized in future periods. Mapping services revenue for the year ended December 31, 2014 totaled $2.9 million, compared to $18.0 Mapping services revenue for the year ended December 31, 2014 totaled $2.9 million, million for the same period in 2013. During the year ended December 31, 2014, the company recognized compared to $18.0 million for the same period in 2013. During the year ended December revenue on a percentage of completion basis on a single contract in North America totaling $2.3 million. 31, 2014, the company recognized revenue on a percentage of completion basis on a single For the same period in 2013, revenue was recognized on a percentage of completion basis on two contracts contract in North America totaling $2.3 million. For the same period in 2013, revenue was consisting of (i) a $13.4 million contract in Southeast Asia, and (ii) a $3.5 million contract in North America. recognized on a percentage of completion basis on two contracts consisting of (i) a $13.4 Revenue generated from the Company’s mapping services work is typically contracted with government million contract in Southeast Asia, and (ii) a $3.5 million contract in North America. entities and includes long sales cycles measured in years. The timing of these contracts is sporadic and the Revenue generated from the Company’s mapping services work is typically contracted contracted amounts vary significantly. The decrease in mapping services revenue recorded during 2014 was with government entities and includes long sales cycles measured in years. The timing of the primary reason for the year-over-year decrease in total revenue during 2014. these contracts is sporadic and the contracted amounts vary significantly. The decrease in mapping services revenue recorded during 2014 was the primary reason for the year-over- Professional services revenue was $0.9 million for the year ended December 31, 2014, a slight decrease from year decrease in total revenue during 2014. $1.0 million for the same period in 2013. Professional services revenue was $0.9 million for the year ended December 31, 2014, a slight decrease from $1.0 million for the same period in 2013. Data licensing revenue for the years ended December 31, 2014 and 2013 totaled $3.3 million and $3.9 million, respectively. The small decrease was primarily the result of 4 2014 Annual Report | Management’s Discussion and Analysis 6 Data licensing revenue for the years ended December 31, 2014 and 2013 totaled $3.3 million and $3.9 million, respectively. The small decrease was primarily the result of increased sales from the Company’s increased sales from the Company’s NEXTMap Asia dataset, offset by decreased sales in NEXTMap Asia dataset, offset by decreased sales in the U.S. and Europe. the U.S. and Europe. 3DBI software applications revenue decreased for the year ended December 31, 2014 to $1.2 million from 3DBI software applications revenue decreased for the year ended December 31, 2014 to $1.5 million for the same period in 2013. The decrease was primarily the result of revenue recognized on $1.2 million from $1.5 million for the same period in 2013. The decrease was primarily the one LinkPro 3DBI software application contract in the amount of $0.5 million during 2013, with no similar result of revenue recognized on one LinkPro 3DBI software application contract in the amount of $0.5 million during 2013, with no similar size contract recognized during the size contract recognized during the same period in 2014. The decrease in LinkPro revenue was partially same period in 2014. The decrease in LinkPro revenue was partially offset by increases in offset by increases in GeoPro and InsitePro software application revenue during 2014. GeoPro and InsitePro software application revenue during 2014. Classification of Operating Costs Classification of Operating Costs The composition of the operating costs classification on the Consolidated Statements of Profit and Loss and The composition of the operating costs classification on the Consolidated Statements of Other Comprehensive Income is as follows: Profit and Loss and Other Comprehensive Income is as follows: U.S. $ thousands 2013 2014 Personnel Purchased services & materials Travel Facilities and other expenses $ $ 12,096 5,532 1,025 2,065 20,718 12,430 7,784 1,577 1,306 23,097 $ $ Personnel Personnel Personnel expense includes direct labor, employee compensation, employee benefits, and Personnel expense includes direct labor, employee compensation, employee benefits, and commissions. commissions. Personnel expense for the years ended December 31, 2014 and 2013, totaled $12.1 million Personnel expense for the years ended December 31, 2014 and 2013, totaled $12.1 million and $12.4 and $12.4 million, respectively. The 3% year-over-year decrease in personnel expense is million, respectively. The 3% year-over-year decrease in personnel expense is primarily due to a decrease in primarily due to a decrease in sales commission expense consistent with the decrease in sales commission expense consistent with the decrease in revenue recognized on a year-over-year basis. revenue recognized on a year-over-year basis. Consolidated active employee headcount was 180 (including 73 in Jakarta, Indonesia) at December 31, Consolidated active employee headcount was 180 (including 73 in Jakarta, Indonesia) at 2014, an 11% decrease from 202 (including 97 in Jakarta, Indonesia) at December 31, 2013. The decrease December 31, 2014, an 11% decrease from 202 (including 97 in Jakarta, Indonesia) at in personnel on a year-over-year basis was the result of reductions in (i) sales and marketing 27%, or 8 December 31, 2013. The decrease in personnel on a year-over-year basis was the result of personnel; (ii) engineering 47%, or 8 personnel; (iii) operations 14%, or 17 personnel; and (iv) general and reductions in (i) sales and marketing 27%, or 8 personnel; (ii) engineering 47%, or 8 administrative 5%, or 1 person. These reductions were offset by increases in (i) professional services 100%, personnel; (iii) operations 14%, or 17 personnel; and (iv) general and administrative 5%, or 3 personnel; and (ii) software development 64%, or 9 personnel. or 1 person. These reductions were offset by increases in (i) professional services 100%, or 3 personnel; and (ii) software development 64%, or 9 personnel. Non-cash compensation expense is included in operating costs and relates to the Company’s long-term incentive plan, share options, and shares granted to employees and non-employees. Non-cash share-based Non-cash compensation expense is included in operating costs and relates to the compensation for the years ended December 31, 2014 and 2013, totaled $0.5 million in each period. Company’s long-term incentive plan, share options, and shares granted to employees and non-employees. Non-cash share-based compensation for the years ended December 31, Purchased Services and Materials 2014 and 2013, totaled $0.5 million in each period. Purchased services and materials (PS&M) includes (i) aircraft and radar related costs, including jet fuel; (ii) Purchased Services and Materials professional and consulting costs; (iii) third-party support services related to the collection, processing and Purchased services and materials (PS&M) includes (i) aircraft and radar related costs, editing of the Company’s airborne radar data collection activities; (iv) third party data collection activities including jet fuel; (ii) professional and consulting costs; (iii) third-party support services (i.e. LiDAR, satellite imagery, air photo, etc.); and (v) third party software expenses (including maintenance related to the collection, processing and editing of the Company’s airborne radar data and support). collection activities; (iv) third party data collection activities (i.e. LiDAR, satellite imagery, air photo, etc.); and (v) third party software expenses (including maintenance and For the years ended December 31, 2014 and 2013, PS&M expense was $5.5 million and $7.8 million, support). respectively. The year-over-year decrease is primarily due to decreases in jet fuel and subcontractor costs associated with the airborne radar collection portion of a project in Southeast Asia during 2013, with no similar size project in place during 2014. The decreases in airborne radar collection costs were offset by 5 increases in costs associated with (i) contracted personnel used in software development activities, and (ii) third-party data collection activities for a professional services contract during the first quarter of 2014. U.S. $ millions Net loss Interest expense Depreciation of property and equipment Amortization of data library Amortization of intangible assets Income tax recovery EBITDA Change in value of derivative instruments Share-based compensation Gain on disposal of equipment Loss on foreign currency translation Restructuring costs recovery Impairment of data library Adjusted EBITDA 2014 2013(1) $ (12.8) $ (13.5) $ (10.0) $ (6.4) 2.0 1.1 - 0.1 (0.4) (2.0) 0.5 (0.5) - - - 1.0 1.4 4.6 0.1 - (1.8) 0.5 (0.1) 0.5 (0.7) 9.2 $ (12.0) $ 1.2 (1) Net loss has been restated. See Note 5 to the Consolidated Annual Financial Statements. Adjusted EBITDA for the year ended December 31, 2014 was negative $12.0 million, compared to positive $1.2 million for the same period in 2013. The difference in the adjusted EBITDA loss on a year-over-year basis is primarily attributable to a decrease in revenue of $16.1 million, offset by a decrease in operating costs of $3.4 million. Depreciation of Property and Equipment Depreciation expense for the year ended December 31, 2014 totaled $1.1 million, compared to $1.4 million for the same period in 2013. The decrease in depreciation expense is primarily the result of certain assets dedicated to the Company’s NEXTMap database development reaching the end of their useful lives, without the addition of comparable replacement assets. Amortization of Data Library current year. Impairment of Data Library For the years ended December 31, 2014 and 2013, amortization expense relating to the data library was $Nil and $4.6 million, respectively. During the fourth quarter of 2013, the data library asset balance was reduced to $Nil, resulting in no amortization during the In December 2013, an impairment review was performed to determine if the carrying value of the Company’s NEXTMap USA and NEXTMap Europe dataset assets were recoverable. It was determined that the recoverable amount of the datasets was insufficient to recover the carrying value of the assets, resulting in a pre-tax impairment charge of $9.2 million. Financing Costs Financing costs for the year ended December 31, 2014 totaled $2.0 million, compared to $1.0 million for the same period in 2013. The increase in year-over-year financing costs is attributable to interest incurred and accretion on outstanding convertible notes issued in February 2014 for $5.0 million, and December 2014 for $1.0 million, compared to interest on a $2.5 million outstanding convertible note that converted during August 2013. 7 2014 Annual Report | Management’s Discussion and Analysis 7 Travel For the years ended December 31, 2014 and 2013, travel expense was $1.0 million and $1.6 million, respectively. The decrease during the year ended December 31, 2014 compared to the same period in 2013 is primarily due to project related travel associated with a significant mapping services contract in Southeast Asia during 2013 where there were no similar size projects in place during the current year. This decrease was partially offset by increases in sales and marketing related travel during the current year for training of channel partners on the Company’s software products. Facilities and Other Expenses For the years ended December 31, 2014 and 2013, facilities and other expenses were $2.1 and $1.3 million, respectively. The increase for the year ended December 31, 2014, compared to the same period in 2013 is primarily due to the reversal of a facility provision of $0.7 million (net of deposits) during 2013 with no similar offset during 2014. During the second quarter of 2014, the Company secured a new office facility lease in Calgary, Canada. The lease agreement included reimbursement for leasehold improvement costs of $208 thousand and six months of free rent that is included in deferred lease inducements and will be amortized over the term of the 78 month lease. Adjusted EBITDA Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) is not a recognized performance measure under IFRS. The term EBITDA consists of net income (loss) and excludes interest, taxes, depreciation and amortization. Adjusted EBITDA also excludes share-based compensation, change in value of derivative instruments, gain or loss on the disposal of equipment, impairment losses or reversals, and gain or loss on foreign currency translation. Adjusted EBITDA is included as a supplemental disclosure because Management believes that such measurement provides a better assessment of the Company’s operations on a continuing basis by eliminating certain non-cash charges and charges or gains that are nonrecurring. The most directly comparable measure to adjusted EBITDA calculated in accordance with IFRS is net income (loss). The following is a reconciliation of the Company’s net loss to adjusted EBITDA. U.S. $ millions Net loss Interest expense Depreciation of property and equipment Amortization of data library Amortization of intangible assets Income tax recovery EBITDA Change in value of derivative instruments Share-based compensation Gain on disposal of equipment Loss on foreign currency translation Restructuring costs recovery Impairment of data library Adjusted EBITDA 2014 2013(1) $ (12.8) 2.0 1.1 - 0.1 (0.4) $ (13.5) 1.0 1.4 4.6 0.1 - $ (10.0) $ (6.4) (2.0) 0.5 (0.5) - - - (1.8) 0.5 (0.1) 0.5 (0.7) 9.2 $ (12.0) $ 1.2 (1) Net loss has been restated. See Note 5 to the Consolidated Annual Financial Statements. (1) Net loss has been restated. See Note 5 to the Consolidated Annual Financial Statements. Adjusted EBITDA for the year ended December 31, 2014 was negative $12.0 million, Adjusted EBITDA for the year ended December 31, 2014 was negative $12.0 million, compared to positive compared to positive $1.2 million for the same period in 2013. The difference in the $1.2 million for the same period in 2013. The difference in the adjusted EBITDA loss on a year-over-year basis adjusted EBITDA loss on a year-over-year basis is primarily attributable to a decrease in is primarily attributable to a decrease in revenue of $16.1 million, offset by a decrease in operating costs of revenue of $16.1 million, offset by a decrease in operating costs of $3.4 million. $3.4 million. Depreciation of Property and Equipment Depreciation expense for the year ended December 31, 2014 totaled $1.1 million, compared to $1.4 million for the same period in 2013. The decrease in depreciation expense is primarily the result of certain assets dedicated to the Company’s NEXTMap database development reaching the end of their useful lives, without the addition of comparable replacement assets. Amortization of Data Library current year. Impairment of Data Library For the years ended December 31, 2014 and 2013, amortization expense relating to the data library was $Nil and $4.6 million, respectively. During the fourth quarter of 2013, the data library asset balance was reduced to $Nil, resulting in no amortization during the In December 2013, an impairment review was performed to determine if the carrying value of the Company’s NEXTMap USA and NEXTMap Europe dataset assets were recoverable. It was determined that the recoverable amount of the datasets was insufficient to recover the carrying value of the assets, resulting in a pre-tax impairment charge of $9.2 million. Financing Costs Financing costs for the year ended December 31, 2014 totaled $2.0 million, compared to $1.0 million for the same period in 2013. The increase in year-over-year financing costs is attributable to interest incurred and accretion on outstanding convertible notes issued in February 2014 for $5.0 million, and December 2014 for $1.0 million, compared to interest on a $2.5 million outstanding convertible note that converted during August 2013. 7 2014 Annual Report | Management’s Discussion and Analysis 8 Depreciation of Property and Equipment Depreciation expense for the year ended December 31, 2014 totaled $1.1 million, compared to $1.4 million for the same period in 2013. The decrease in depreciation expense is primarily the result of certain assets dedicated to the Company’s NEXTMap database development reaching the end of their useful lives, without the addition of comparable replacement assets. Amortization of Data Library For the years ended December 31, 2014 and 2013, amortization expense relating to the data library was $Nil and $4.6 million, respectively. During the fourth quarter of 2013, the data library asset balance was reduced to $Nil, resulting in no amortization during the current year. Impairment of Data Library In December 2013, an impairment review was performed to determine if the carrying value of the Company’s NEXTMap USA and NEXTMap Europe dataset assets were recoverable. It was determined that the recoverable amount of the datasets was insufficient to recover the carrying value of the assets, resulting in a pre-tax impairment charge of $9.2 million. Financing Costs Financing costs for the year ended December 31, 2014 totaled $2.0 million, compared to $1.0 million for the same period in 2013. The increase in year-over-year financing costs is attributable to interest incurred and accretion on outstanding convertible notes issued in February 2014 for $5.0 million, and December 2014 for $1.0 million, compared to interest on a $2.5 million outstanding convertible note that converted during August 2013. Derivative Instruments The Company has issued non-broker warrants that are considered to be derivative liabilities due to the warrants being exercisable in a currency (Canadian dollar) other than the Company’s functional currency (United States dollar). Accordingly, the warrants are measured at fair value at each reporting date, with changes in fair value included in the consolidated statement of profit and loss and other comprehensive income for the applicable reporting period. During the year ended December 31, 2014 and 2013, the change in the fair value of derivative instruments was a gain of $2.0 million and $1.8 million, respectively. Gain on Disposal of Equipment During 2014, the Company (i) sold fully depreciated spare radar parts, a transmitter, and miscellaneous computer equipment and recognized a gain of $128 thousand; (ii) exited a leased facility in Calgary and recognized a loss on the disposal of leasehold improvements with a net book value of $64 thousand, and recognized a gain of $76 thousand on the disposal of the remaining deferred leasehold improvements; and (iii) recognized a gain of $316 thousand on proceeds from an insurance claim for water damaged computer and storage related equipment. During 2013, the Company sold fully depreciated assets and recognized a gain of $163 thousand on the sale of the assets. The assets sold consisted of spare radar parts, a transmitter, spare aircraft parts, and miscellaneous IT equipment. 2014 Annual Report | Management’s Discussion and Analysis9 Gain (Loss) on Foreign Currency Translation The Company continuously monitors the level of foreign currency assets and liabilities carried on its consolidated balance sheet in an effort to minimize as much of the foreign currency translation exposure as possible. The difference between any amounts incurred in one currency and settled in a different currency is recognized as a gain or loss in the period it is settled. During the year ended December 31, 2014, a foreign currency translation gain of $7 thousand was recorded, compared to a loss of $506 thousand for the same period in 2013. The decrease in losses from the comparative period are primarily the result of the collection of receivable balances denominated in a foreign currency. Income Tax Current income tax expense of $Nil was incurred during the year ended December 31, 2014, compared to an expense of $28 thousand during the same period in 2013. The expense for the year ended December 31, 2013 relates to taxable income generated from the Company’s Czech Republic subsidiary. During the year ended December 31, 2014, a deferred income tax recovery of $383 thousand, compared to $Nil for the same period in 2013 was recorded. The recovery was due to the deferred tax effect of the difference in the accounting and tax balances of the convertible notes issued in February and December 2014. Amounts Receivable and Unbilled Revenue Work is performed on contracts that provide invoicing upon the completion of identified contract milestones. Revenue on certain of these contracts is recognized using the percentage-of-completion date over the estimated total costs to complete the contract. While an effort is made to method of accounting based on the ratio of costs incurred to date over the estimated total costs to schedule payments on contracts in accordance with work performed, the completion of complete the contract. While an effort is made to schedule payments on contracts in accordance with work milestones does not always coincide with the costs incurred on a contract, resulting in performed, the completion of milestones does not always coincide with the costs incurred on a contract, revenue being recognized in excess of billings. These amounts are recorded in the resulting in revenue being recognized in excess of billings. These amounts are recorded in the consolidated consolidated balance sheet as unbilled revenue. balance sheet as unbilled revenue. Amounts receivable and unbilled revenue decreased from $6.6 million at December 31, 2013, to $1.5 million at December 31, 2014. These amounts represent 112 days’ sales at Amounts receivable and unbilled revenue decreased from $6.6 million at December 31, 2013, to $1.5 December 31, 2014, compared to 142 days’ sales at December 31, 2013, and reflect specific million at December 31, 2014. These amounts represent 112 days’ sales at December 31, 2014, compared project billing milestones on current contracts that were in progress on those dates. There to 142 days’ sales at December 31, 2013, and reflect specific project billing milestones on current contracts continues to be an amounts receivable balance greater than 90 days primarily from that were in progress on those dates. There continues to be an amounts receivable balance greater historically slow paying, but reliable customers. The Company reviews the amounts than 90 days primarily from historically slow paying, but reliable customers. The Company reviews the receivable aging monthly and monitors the payment status of each invoice. The Company amounts receivable aging monthly and monitors the payment status of each invoice. The Company also also communicates with slow paying or delinquent customers on a regular basis regarding communicates with slow paying or delinquent customers on a regular basis regarding the schedule of the schedule of future payments. At the balance sheet date, all amounts receivable future payments. At the balance sheet date, all amounts receivable balances greater than 90 days are balances greater than 90 days are considered to be collectible. considered to be collectible. Accounts Payable and Accrued Liabilities Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities generally include trade payables, project-related accruals, personnel-related costs, and interest on outstanding debt obligations. Accounts Accounts payable and accrued liabilities generally include trade payables, project-related accruals, payable and accrued liabilities decreased to $3.8 million at December 31, 2014, from $4.0 personnel-related costs, and interest on outstanding debt obligations. Accounts payable and accrued million at December 31, 2013. liabilities decreased to $3.8 million at December 31, 2014, from $4.0 million at December 31, 2013. U.S. $ thousands Accounts payable Accrued liablities Other taxes payable December 31, 2014 December 31, 2013 $ $ 1,513 2,259 13 3,785 1,997 1,936 20 3,953 $ $ The accounts payable balance decreased from $2.0 million at December 31, 2013 to $1.5 million at December 31, 2014. The decrease is due primarily to lower costs associated with mapping services contracts and the timing of payments on trade payables. The accrued liabilities balance increased from $1.9 million at December 31, 2013 to $2.3 million at December 31, 2014. The increase is primarily due to $0.7 million of interest accrued on a convertible note, offset by decreased personnel related accruals. Accrued interest related to the convertible notes totaled $0.7 million and nil at December 31, 2014 and 2013, respectively. Notes Payable The notes payable balance at December 31, 2014 increased to $1.3 million from $1.2 million from December 31, 2013. The increase was due to $0.1 million in reimbursable project development funds provided by a corporation designed to enable the development and commercialization of geomatics solutions in Canada. Convertible Notes The convertible notes balance of $5.3 million at December 31, 2014 is due to three private placement convertible debt financings that closed during 2014. The first was issued on February 7, 2014 for $5.0 million; simple interest is payable at maturity at an annual rate 9 2014 Annual Report | Management’s Discussion and Analysis 10 The accounts payable balance decreased from $2.0 million at December 31, 2013 to $1.5 million at December 31, 2014. The decrease is due primarily to lower costs associated with mapping services contracts and the timing of payments on trade payables. The accrued liabilities balance increased from $1.9 million at December 31, 2013 to $2.3 million at December 31, 2014. The increase is primarily due to $0.7 million of interest accrued on a convertible note, offset by decreased personnel related accruals. Accrued interest related to the convertible notes totaled $0.7 million and nil at December 31, 2014 and 2013, respectively. Notes Payable The notes payable balance at December 31, 2014 increased to $1.3 million from $1.2 million from December 31, 2013. The increase was due to $0.1 million in reimbursable project development funds provided by a corporation designed to enable the development and commercialization of geomatics solutions in Canada. Convertible Notes The convertible notes balance of $5.3 million at December 31, 2014 is due to three private placement convertible debt financings that closed during 2014. The first was issued on February 7, 2014 for $5.0 million; simple interest is payable at maturity at an annual rate of 16%; convertible into 12,367,054 common shares of the Company, at any time, at the option of the holder. The second was issued on December 12, 2014 for $0.5 million; simple interest is payable at maturity at an annual rate of 16%; convertible into 5,741,187 common shares of the Company, at any time, at the option of the holder. The third was issued on December 26, 2014 for $0.5 million; simple interest is payable at maturity at an annual rate of 18%; convertible into 8,333,333 common shares of the Company, at any time, at the option of the holder. See “Note 8” to the Consolidated Financial Statements for further discussion of the terms of the notes. Unearned Revenue and Deposits The unearned revenue balance at December 31, 2014 increased to $451 thousand from $110 thousand at December 31, 2013. This balance consists of payments received from customers on revenue contracts for which the Company has not yet fulfilled its obligations, or which the necessary revenue recognition criteria has not been met. Finance Lease Obligations Finance lease obligations at December 31, 2014 decreased to $0.2 million from $0.3 million at December 31, 2013 due to recurring payments on an outstanding finance lease obligation. 2014 Annual Report | Management’s Discussion and Analysis11 of 16%; convertible into 12,367,054 common shares of the Company, at any time, at the option of the holder. The second was issued on December 12, 2014 for $0.5 million; simple interest is payable at maturity at an annual rate of 16%; convertible into 5,741,187 common shares of the Company, at any time, at the option of the holder. The third was issued on December 26, 2014 for $0.5 million; simple interest is payable at maturity at an annual rate of 18%; convertible into 8,333,333 common shares of the Company, at any time, at the option of the holder. See “Note 8” to the Consolidated Financial Statements for further discussion of the terms of the notes. Unearned Revenue and Deposits The unearned revenue balance at December 31, 2014 increased to $451 thousand from $110 thousand at December 31, 2013. This balance consists of payments received from customers on revenue contracts for which the Company has not yet fulfilled its obligations, or which the necessary revenue recognition criteria has not been met. Finance Lease Obligations Finance lease obligations at December 31, 2014 decreased to $0.2 million from $0.3 million at December 31, 2013 due to recurring payments on an outstanding finance lease obligation. QUARTERLY FINANCIAL INFORMATION QUARTERLY FINANCIAL INFORMATION Selected Quarterly Information Selected Quarterly Information The following table sets forth selected quarterly financial information for Intermap’s eight most recent fiscal quarters. This information is unaudited, but reflects all adjustments of a The following table sets forth selected quarterly financial information for Intermap’s eight most recent fiscal normal, recurring nature that are, in the opinion of Management, necessary to present a quarters. This information is unaudited, but reflects all adjustments of a normal, recurring nature that are, fair statement of Intermap’s consolidated results of operations for the periods presented. in the opinion of Management, necessary to present a fair statement of Intermap’s consolidated results of Quarter-to-quarter comparisons of Intermap’s financial results are not necessarily operations for the periods presented. Quarter-to-quarter comparisons of Intermap’s financial results are not meaningful and should not be relied on as an indication of future performance. necessarily meaningful and should not be relied on as an indication of future performance. U.S. $ millions, except per share data Q1 2013 (1) Q2 2013 (1) Q3 2013 (1) Q4 2013 (1) Q1 2014 (1) Q2 2014 (1) Q3 2014 (1) Q4 2014 Total revenue $ 5.1 $ 8.9 $ 6.3 $ 4.1 $ 2.1 $ 2.4 $ 2.7 $ 1.1 Depreciation and amortization $ 1.6 $ 1.5 $ 1.5 $ 1.4 $ 0.3 $ 0.3 $ 0.3 $ 0.2 Interest expense Change in fair value of derivative intruments Net income (loss) before data library impairment $ 0.3 $ 0.6 $ - $ 0.1 $ 0.2 $ 0.3 $ 0.5 $ 1.0 $ 1.0 $ (0.1) $ (2.0) $ (0.7) $ (1.2) $ (0.2) $ (0.4) $ (0.2) $ (3.1) $ - $ 1.5 $ (2.7) $ (2.3) $ (3.4) $ (2.5) $ (4.6) Data library impairment $ - $ - $ - $ (9.2) $ - $ - $ - $ - Net income (loss) $ (3.1) $ - $ 1.5 $ (11.9) $ (2.3) $ (3.4) $ (2.5) $ (4.6) Net income (loss) per share - basic and diluted $ (0.04) $ - $ 0.01 $ (0.13) $ (0.02) $ (0.04) $ (0.03) $ (0.05) Adjusted EBITDA $ (0.1) $ 2.2 $ 0.6 $ (1.5) $ (3.6) $ (2.8) $ (2.1) $ (3.5) (1) Net income (loss) before data library impairment, net income (loss), and net income (loss) per share amounts have (1) Net income (loss) before data library impairment, net income (loss), and net income (loss) per share amounts have been restated. See Note 5 to the Consolidated Annual Financial Statements. been restated. See Note 5 to the Consolidated Annual Financial Statements Revenue Consolidated revenue for the fourth quarter of 2014 totaled $1.1 million, compared to $4.1 million for the same period in 2013, representing a 73% decrease. 10 Mapping services revenue for the quarter ended December 31, 2014 totaled $0.6 thousand, compared to $1.0 million for the same period in 2013. The Company had no mapping services contracts during the quarter ended December 31, 2014, compared to two contracts where revenue was recognized in the amounts of (i) $0.6 million for a contract in Southeast Asia, and (ii) $0.4 million for a contract in North America. Professional services revenue was $0.1 million for the quarter ended December 31, 2014, a decrease from $0.8 million for the same period in 2013. The majority of the decrease was the result of a project management contract for LiDAR and digital ortho-photo work performed during 2013, with no similar contract in place during the current year. Data licensing revenue for the quarters ended December 31, 2014 and 2013 totaled $0.5 million and $1.7 million, respectively. The decrease was primarily the result of two NEXTMap World 30™ sales totaling $0.8 million during the fourth quarter of 2013 with no similar size sales in the current year. There was also decreased revenue from the U.S. and Europe datasets during 2014. 3DBI software applications revenue decreased slightly for the quarter ended December 31, 2014 to $0.5 million from $0.6 million for the same period in 2013. The decrease was primarily the result of revenue recognized on one LinkPro 3DBI software application contract in the amount of $0.3 million during the fourth quarter of 2013, with no similar size contract recognized during the same period in 2014, offset by increased in GeoPro revenue of $0.2 million during the fourth quarter of 2014. 2014 Annual Report | Management’s Discussion and Analysis 12 Personnel Personnel expense for the three-month periods ended December 31, 2014 and 2013, totaled $3.0 million and $2.9 million, respectively. Headcount decreased on a year-over-year basis, but was offset by a change in the mix of wage earners. Non-cash compensation expense for the quarters ended December 31, 2014 and 2013, totaled $0.1 million and $0.2 million, respectively. The decrease was due to the expense incurred from options issued to the Board of Directors during the fourth quarter of 2013 with no similar issuance during the fourth quarter of 2014. Purchased Services and Materials For the three-month periods ended December 31, 2014 and 2013, PS&M expense was $1.0 million and $2.1 million, respectively. The decrease is primarily due to decreases in jet fuel and subcontractor costs associated with the airborne radar collection portion of a project in Southeast Asia during 2013, with no similar size contract in place during the same periods in 2014. These decreases are offset by increases in contracted personnel used in software development activities. Travel Travel expense for the three-month periods ended December 31, 2014 and 2013 totaled $0.2 million for each period. Project related travel associated with a significant mapping services contract in Southeast Asia during 2013 were offset by increases in sales and marketing related travel during the current year related to marketing related travel during the current year related to the Company’s new 3DBI the Company’s new 3DBI software applications products. software applications products. Facilities and Other Expenses Facilities and Other Expenses For the three-month periods ended December 31, 2014 and 2013, facilities and other For the three-month periods ended December 31, 2014 and 2013, facilities and other expenses were $0.5 expenses were $0.5 million for each period. million for each period. CONTRACTUAL OBLIGATIONS CONTRACTUAL OBLIGATIONS Contractual obligations include (i) operating leases on office locations; (ii) notes payable; Contractual obligations include (i) operating leases on office locations; (ii) notes payable; and (iii) finance and (iii) finance leases on computer equipment and software. Principal and interest leases on computer equipment and software. Principal and interest repayments of these obligations are as repayments of these obligations are as follows: follows: Payments due by Period (US $ thousands) Contractual obligations Operating leases Notes payable Finance leases Total Total $ 1,672 1,290 256 3,218 $ Less than 1 year 747 $ 1,168 151 2,066 $ 1 - 3 years 706 122 105 933 $ $ $ $ 219 - - 219 - $ - - $ - 4 - 5 years After 5 years LIQUIDITY AND CAPITAL RESOURCES LIQUIDITY AND CAPITAL RESOURCES Management continually assesses liquidity in terms of the ability to generate sufficient cash flow to fund Management continually assesses liquidity in terms of the ability to generate sufficient the business. Net cash flow is affected by the following items: (i) operating activities, including the level cash flow to fund the business. Net cash flow is affected by the following items: (i) of amounts receivable, unbilled receivables, accounts payable, accrued liabilities and unearned revenue operating activities, including the level of amounts receivable, unbilled receivables, and deposits; (ii) investing activities, including the purchase of property and equipment; and (iii) financing accounts payable, accrued liabilities and unearned revenue and deposits; (ii) investing activities, including debt financing and the issuance of capital stock. activities, including the purchase of property and equipment; and (iii) financing activities, including debt financing and the issuance of capital stock. Cash used in operations during the year ended December 31, 2014 totaled $7.4 million, compared to cash generated from operations of $1.9 million during the same period in 2013. The year-over-year decrease of $9.3 million is due primarily to decreased revenue and changes in working capital balances. Net cash used in investing activities totaled $0.2 million for the year ended December 31, 2014, compared to $0.6 million during the same period in 2013. Net cash used in investing activities for the year ended December 31, 2014 was primarily for the purchase of computer related equipment of $0.6 million, offset by proceeds from the sale of property and equipment of $0.4 million. Cash used in investing activities during the year ended December 31, 2013, was primarily for the purchase of computer related equipment of $0.8 million, offset by proceeds from the sale of property and equipment of $0.2 million. Net cash generated from financing activities totaled $5.8 million for the year ended December 31, 2014, compared to net cash used in financing activities of $0.9 million during the same period in 2013. The net cash generated from financing activities during the year ended December 31, 2014 resulted from the closing of convertible note debt financings totaling $6.0 million, and $0.1 million funding received on a long-term note payable. These amounts were offset by $0.1 million of issuance costs and repayment of 12 2014 Annual Report | Management’s Discussion and Analysis 13 Cash used in operations during the year ended December 31, 2014 totaled $7.4 million, compared to cash generated from operations of $1.9 million during the same period in 2013. The year-over-year decrease of $9.3 million is due primarily to decreased revenue and changes in working capital balances. Net cash used in investing activities totaled $0.2 million for the year ended December 31, 2014, compared to $0.6 million during the same period in 2013. Net cash used in investing activities for the year ended December 31, 2014 was primarily for the purchase of computer related equipment of $0.6 million, offset by proceeds from the sale of property and equipment of $0.4 million. Cash used in investing activities during the year ended December 31, 2013, was primarily for the purchase of computer related equipment of $0.8 million, offset by proceeds from the sale of property and equipment of $0.2 million. Net cash generated from financing activities totaled $5.8 million for the year ended December 31, 2014, compared to net cash used in financing activities of $0.9 million during the same period in 2013. The net cash generated from financing activities during the year ended December 31, 2014 resulted from the closing of convertible note debt financings totaling $6.0 million, and $0.1 million funding received on a long-term note payable. These amounts were offset by $0.1 million of issuance costs and repayment of long-term debt and capital leases of $0.2 million. The net cash used in financing activities during the same period in 2013 was due to the payments on long-term debt and capital leases of $0.9 million. The cash position of the Company at December 31, 2014 (cash and cash equivalents) was $0.5 million, compared to $2.4 million at December 31, 2013. Working capital decreased to negative $8.7 million as of December 31, 2014 from positive $2.6 million as of December 31, 2013 due primarily to an increase in short- term liabilities from the convertible notes entered into during the year totaling $6.0 million, and a decrease in cash and amounts receivable of $1.9 million and $5.0 million, respectively. At December 31, 2014 and 2013, working capital includes $0.2 million and $1.3 million, respectively, of warrant liabilities that are non- cash and will be settled in equity of the Company, if exercised. During the year ended December 31, 2014, the Company generated a net loss of $12.8 million, incurred negative adjusted EBITDA of $12.0 million, and negative cash flow from operations of $7.4 million. Revenue for the year ended December 31, 2014 was $8.3 million, which represents a $16.2 million decline from revenue for the year ended December 31, 2013. In addition, the Company has a deficit of $212.1 million and a working capital deficiency of $8.7 million. Although the Company has made significant progress in the development of new product offerings during the year, its continuing operations are dependent on its ability to produce future profitable operations and generate positive cash flows from operations. If these activities are not adequate to fund the Company’s ongoing operations, the Company may be required to explore additional financing alternatives, if available. Failure to achieve one or more of these requirements could have a material adverse effect on the Company’s financial condition and / or results of operations in future periods. The above factors in the aggregate raise significant doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on management’s ability to successfully generate a profit from operations, sell assets, or obtain further financing. Management has taken actions to address these issues including a shift in organizational wide focus from the historical approach of licensing raw data, to providing customers with complete geospatial solutions with a focus on software applications. In addition, the Company obtained financing during the year and during the first quarter of 2015 to help further the development of new product offerings. Failure to achieve one or more of these requirements could have a material adverse effect on the Company’s financial condition and / or results of operations. 2014 Annual Report | Management’s Discussion and Analysis14 CRITICAL ACCOUNTING POLICIES AND ESTIMATES Revenue Recognition Revenue is recognized when (i) persuasive evidence of an arrangement exists; (ii) the significant risks and rewards of ownership, including managerial involvement, have been transferred to the buyer; (iii) the amount of revenue can be measured reliably; and (iv) costs incurred or to be incurred can be measured reliably. Billings in excess of revenue are recorded as unearned revenue. Revenue recognized in excess of billings is recorded as unbilled revenue. Goods Sold Revenue from the sale of data licenses in the ordinary course of business is measured at the fair value of the consideration received or receivable. Software Subscriptions Revenue from software sold on a subscription basis is recognized straight-line over the term of the agreement. Fixed-Price Contracts Revenue from fixed-price contracts is recognized using the percentage-of-completion method, based on the ratio of costs incurred to estimated final contract costs. The use of the percentage of completion method requires estimates to determine the cost to complete each contract. These estimates are reviewed monthly and adjusted as necessary. Provisions for estimated losses, if any, are recognized in the period in which the loss is determined. Contract losses are measured in the amount by which the estimated costs of the related project exceed the estimated total revenue for the project. Multiple Component Arrangements When a single sales transaction requires the delivery of more than one product or service (multiple components), the revenue recognition criteria are applied separately to identifiable components. A component is considered to be separately identifiable if the product or service delivered has stand-alone value to that customer and the fair value associated with the product or service can be measured reliably. The amount recognized as revenue for each component is the fair value of the element in relation to the fair value of the arrangement as a whole. Data Library (NEXTMap) The Company maintains a data library, which is the result of the acquisition and processing of digital map data. Ownership rights to this data are typically retained by the Company and the data is licensed to customers. Historically, the direct costs of acquiring and processing certain areas of data collected were capitalized as an investment in the data library when it could be shown that such costs create material future value to the Company. Capitalized costs included direct overhead associated with the acquisition and processing of the data and the depreciation of the property and equipment used in the production of the data. Data library capitalized costs were amortized on a straight-line basis over five years. The carrying value of the data library was reviewed for impairment whenever events or changes in circumstances indicated that the carrying amount of the asset may not be recoverable. At December 31, 2013, the Company determined that the recoverable amount of the data library was insufficient to recover the carrying value of the asset, resulting in a total impairment of the asset. It was determined that the historical approach of licensing raw data from datasets was no longer a priority for the Company as the focus for future periods will be primarily on the licensing of the Company’s 3DBI software applications. These 3DBI software applications deliver specific answers to the end user, rather than raw data. In accordance with IFRS, the Company will review each reporting period for indications that a reversal of the impairment losses may be necessary. 2014 Annual Report | Management’s Discussion and Analysis15 Use of Estimates Preparing financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the period. Actual results could differ from these estimates. Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year include the following: Impairment of Data Library The carrying values of all property and equipment, data library and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Depreciation and Amortization Rates In calculating the depreciation and amortization expense, management is required to make estimates of the expected useful lives of property and equipment and intangible assets. Amounts Receivable The Company uses historical trends and performs specific account assessments when determining the allowance for doubtful accounts. These accounting estimates are in respect to the amounts receivable line item in the Company’s consolidated balance sheet. At December 31, 2014, amounts receivable represented 27% of total assets. The estimate of the Company’s allowance for doubtful accounts could change from period to period due to the allowance being a function of the balance and composition of amounts receivable. Share-Based Compensation The Company uses the Black-Scholes option-pricing model to determine the grant date fair value of share- based compensation. The following assumptions are used in the model: dividend yield; expected volatility; risk-free interest rate; expected option life; and fair value. Changes to assumptions used to determine the grant date fair value of share-based compensation awards can affect the amounts recognized in the consolidated financial statements. Derivative Financial Instruments The Company has determined that its functional currency is the United States dollar and has issued (i) non- broker warrants, and (ii) debt with a conversion option denominated in a currency other than its functional currency. The Company measures the cost of the derivative financial instruments by reference to the fair value of the instruments at the date at which they are granted and revalues them at each reporting date. In determining the fair value of the non-broker warrants, the Company used the Black-Scholes option pricing model with the following assumptions: average volatility rate; market price at the reporting date; risk-free interest rate; the remaining expected life of the warrant; and an exchange rate at the reporting date. The inputs used in the Black-Scholes model are taken from observable markets. In particular, changes in estimates of the fair value of the warrants can have a material impact on the reported loss and comprehensive loss for a given period. Any impact reported has no net effect on cash flows or the operating results of the Company. 2014 Annual Report | Management’s Discussion and Analysis16 Provisions A provision is recognized, if as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the future settlement were to adversely differ from management’s expectations, the Company could incur either an additional expense or reversal of the expense previously recorded. Other Long-Term Liabilities The Company uses a Monte Carlo simulation model to estimate the grant date and balance sheet date fair value of share awards allocated under the Company’s long-term incentive plan (LTIP). The following assumptions are used in the model: dividend yield; expected volatility; risk-free interest rate; grant date of August 8, 2014; expiration date of December 31, 2015; discount rate. Compound Financial Instruments The Company has issued compound financial instruments which comprise convertible notes denominated in United States dollars that can be converted to share capital at the option of the holder. The valuation and accounting for the notes is complex and requires the application of management estimates and judgments with respect to the determination of appropriate valuation models, certain assumptions applied within such valuation models, and certain aspects of the accounting method applied on initial recognition. The assumptions and models used for estimating fair value of convertible note transactions are disclosed in Note 8 to the Consolidated Annual Financial Statements. Revenue Changes to the assumptions used to measure revenue could impact the amount of revenue recognized in the consolidated financial statements. FUTURE CHANGES IN ACCOUNTING POLICIES Financial Instruments In July 2014, the IASB issued the final version of IFRS 9, bringing together the classification and measurement, impairment and hedge accounting phases of the project to replace IAS 39, Financial Instruments: Recognition and Measurement. This standard simplifies the classification of a financial asset as either at amortized cost or at fair value as opposed to the multiple classifications which were permitted under IAS 39. This standard also requires the use of a single impairment method as opposed to the multiple methods in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. The standard also adds guidance on the classification and measurement of financial liabilities. IFRS 9 is to be applied retrospectively for annual periods beginning on or after January 1, 2018. Early application is permitted. The Company does not intend to adopt this standard early and is currently evaluating the impact of adopting this standard on the consolidated financial statements. Revenue from Contracts with Customers In May 2014, the International Standards Board issued IFRS 15, Revenue from Contracts with Customers, which provides a single, principles-based five-step model for revenue recognition to be applied to all customer contracts, and requires enhanced disclosures. This standard is effective January 1, 2017 and allows early adoption. The Company does not intend to adopt this standard early and is currently evaluating the impact of adopting this standard on the consolidated financial statements. 2014 Annual Report | Management’s Discussion and Analysis17 NEW ACCOUNTING STANDARDS AND INTERPRETATIONS The Company adopted the following new accounting standards and amendments which are effective for the Company’s interim and annual consolidated financial statements commencing January 1, 2014. The standards and amendments did not have a significant impact on the financial statements of the Company. IAS 32, Financial Instruments: Presentation In December 2011, the International Accounting Standards Board amended International Accounting Standard 32 to clarify the meaning of when an entity has a current legally enforceable right of set-off. The amendments are effective for annual periods beginning on or after January 1, 2014 and are required to be applied retrospectively. The adoption of IAS 32 did not have a material impact on the consolidated financial statements. IFRIC 21, Levies In May 2013, the International Accounting Standards Board issued IFRIC 21 which provides guidance on accounting for levies in accordance with the requirements of International Accounting Standard 37: Provisions, Contingent Liabilities and Contingent Assets. The interpretation defines a levy as an outflow from an entity imposed by a government in accordance with legislation. It also notes that levies do not arise from executor contracts of other contractual arrangements. The interpretation also confirms that an entity recognizes a liability for a levy only when the triggering event specified in the legislation occurs. This IFRIC is effective for annual reporting periods beginning on or after January 1, 2014 and is required to be applied retrospectively. The adoption of IFRIC 21 did not have a material impact on the consolidated financial statements. OUTSTANDING SHARE DATA The Company’s authorized capital consists of an unlimited number of Class A common shares without par value and an unlimited number of Class A participating preferred shares without par value. At the close of business on March 26, 2015, 91,782,665 Class A common shares were issued and outstanding. There are no preferred shares currently issued and outstanding. As of March 26, 2014, potential dilutive securities include (i) 7,367,400 outstanding share options in the Company’s share option plan with a weighted average exercise price of C$0.46; (ii) 13,662,718 warrants outstanding with a weighted average exercise price of C$0.08 and each warrant entitles the holder to purchase one Class A common share, and (iii) 14,074,520 conversion shares associated with convertible debt financing transactions completed in December 2014. INTERNAL CONTROLS AND DISCLOSURE CONTROLS AND PROCEDURES Internal Control over Financial Reporting The Company’s President and Chief Executive Officer and the Company’s Senior Vice President and Chief Financial Officer have designed, or have caused to be designed under their supervision, internal control over financial reporting as defined under National Instrument 52-109 – Certification of Disclosure in Issuer’s Annual and Interim Filings, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. The Company’s President and Chief Executive Officer and the Company’s Senior Vice President and Chief Financial Officer have evaluated, or caused to be evaluated under their supervision, the effectiveness of the Company’s internal control over financial reporting and have determined, based on the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (2013) and on this evaluation, that such internal controls over financial reporting were ineffective at the financial year-end. 2014 Annual Report | Management’s Discussion and Analysis18 The Company has identified a material weakness in internal controls over financial reporting. During the year-end audit procedures, the Company corrected the accounting for certain financial instruments that were denominated in a foreign currency or included as foreign currency embedded derivatives - these include all non-broker warrants. Previously, the Company accounted for the warrants as a component of equity; however, in accordance with IAS 39, Financial Instruments: Recognition and Measurement, warrants denominated in a foreign currency and foreign currency embedded derivatives are required to be classified as liabilities under IFRS and marked to fair value through profit and loss each reporting period. A correction to the accounting was made and the impact of the correction is detailed in Note 5 to the Consolidated Financial Statements. There is no impact on total assets, revenue, costs of sales, operating loss, or total cash flows from operating activities, as a result of the correction. As of March 26, 2015, the weakness has been remediated. Management has updated the internal control procedures related to complex financial instruments to ensure they are appropriately accounted for in accordance with IFRS on a quarterly basis. Changes in Internal Control over Financial Reporting There have been no significant changes in the design of internal control over financial reporting, other than as disclosed above, that occurred during the year ended December 31, 2014, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Disclosure Controls and Procedures The Company’s President and Chief Executive Officer and the Company’s Senior Vice President and Chief Financial Officer have designed, or have caused to be designed under their supervision, disclosure controls and procedures to provide reasonable assurance that material information relating to the Company has been made known to them and that information required to be disclosed in the Company’s annual filings, interim filings or other reports filed by it or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified by applicable securities legislation. The Company’s President and Chief Executive Officer and the Company’s Senior Vice President and Chief Financial Officer have evaluated, or caused to be evaluated under their supervision, the effectiveness of the Company’s disclosure controls and procedures. In light of on the material weakness in internal control over financial reporting discussed above, it has been determined that such disclosure controls and procedures were ineffective at the financial year-end. As a result, the Company performed additional post-closing procedures including, but not limited to, a detailed review of complex financial instruments, a review of the Company’s compliance with its critical accounting policies and discussions with independent auditors of the Company’s complex financial instruments to ensure the consolidated financial statements were prepared in accordance with IFRS. Accordingly, management concluded that the consolidated financial statements present fairly, in all material respects, the Company’s financial results, in accordance with IFRS. RISKS AND UNCERTAINTIES The risks and uncertainties described below are not exhaustive. Additional risks not presently known currently deemed immaterial may also impair the Company’s business operation. If any of the events described in the following business risks actually occur, overall business, operating results, and the financial condition of the Company could be materially adversely affected. Availability of Capital The Company cannot be certain that cash generated from its operations will be sufficient to satisfy its liquidity requirements and it may need to raise capital by selling additional equity and/or by securing credit facilities. The Company’s future capital requirements will depend on many factors, including, but not limited to, the market acceptance of its products and services. No assurance can be given that any such additional funding will be available or that, if available, it can be obtained on terms favorable to the Company. 2014 Annual Report | Management’s Discussion and Analysis19 The Company currently has no commitments for additional working capital funding and therefore its ability to meet any unexpected liquidity needs is uncertain. If additional funds are raised through the issuance of equity securities, the Company’s shareholders may experience significant dilution. Furthermore, if additional financing is not available when required, or is not available on acceptable terms, the Company may be unable to develop or market its products, take advantage of business opportunities, or may be required to significantly curtail its business operations. Revenue Fluctuations Intermap’s revenue has fluctuated over the years. Mapping services projects, the purchase of archived data, and the purchase of geospatial solutions by the Company’s customers are all scheduled according to customer requirements and the timing of regulatory and/or budgetary decisions. The commencement or completion of mapping projects within a particular quarter or year, the timing of regulatory approvals, operating decisions of clients, and the fixed-cost nature of Intermap’s business, among other factors, may cause the Company’s results to vary significantly between fiscal years and between quarters in the same fiscal year. Nature of Government Contracts Intermap conducts a significant portion of its business either directly or in cooperation with the United States government, other governments around the world, and international funding agencies. In many cases, the terms of these contracts provide for cancellation at the option of the government or agency at any time. In addition, many of Intermap’s products and services require government appropriations and regulatory licenses, permits, and approvals, the timing and receipt of which are not within Intermap’s control. Any of these factors could have an effect on Intermap’s revenue, earnings, and cash flow. General Economic Trends The worldwide economic slowdown and tightening of credit in the financial markets may impact the business of our customers, which could have an adverse effect on Intermap’s business, financial condition, or results of operations. Adverse changes in general economic or political conditions in any of the major countries in which the Company does business could also adversely affect Intermap’s operating results. Key Customers During 2014, the Company had one key customer that accounted for 35% of total revenue. During 2013, the Company had two key customers that accounted for 74% of total revenue. To the extent that significant customers cancel or delay orders, Intermap’s revenue, earnings, and cash flow could be materially and adversely affected. Executive Talent Intermap is in a repositioning phase in its markets. This repositioning, coupled with the development of new product lines, Web services, and developing software applications, requires the retention of executive talent. The Company will continue to invest in training and leadership development in response to the changes within the Company to retain talent. Although Intermap has a talented team of experienced executives, it may not be able to further develop executive talent internally or attract and retain enough executive talent to effectively manage the anticipated growth and changes within the Company. New Competing Technologies It is possible that commercially available satellite images could, in the future, match or come close to the image resolution offered by the Company’s radar technology. Intermap continues to evaluate its data collection capabilities and look for improvements to the performance of its radar technology. 2014 Annual Report | Management’s Discussion and Analysis20 Although there are only a few direct Intermap competitors currently, the industry is characterized by rapid technological progress. Intermap’s ability to continue to develop and introduce new products and services, or incorporate enhancements to existing products and services, may require significant additional research and development expenditures and investments in support infrastructure. Another approach to production of digital elevation models is the use of auto correlation software to analyze common points in two or more optical images of the same area taken from different viewing angles. Essentially this is the same principle that is used by technicians as they extract elevation points using stereo photogrammetric techniques, but in this case it is automated using computer software image matching algorithms. This process is well known and has been used with limited success over small areas. Advances in computing power, coupled with massive storage solutions, may make this technology useful over larger areas in the future, and if so, could represent a significant competing technology. Any required additional financing needed by the Company to remain competitive with these other technologies may not be available or, if available, may not be on terms satisfactory to the Company. Common Share Price Volatility The market price of the Company’s common shares has fluctuated widely in recent periods and is likely to continue to be volatile. A number of factors can affect the market price of Intermap’s common stock including (i) actual or anticipated variations in operating results, (ii) the strength of the Company’s balance sheet, (iii) the announcement of material contract(s), (iv) the low daily trading volume of the Company’s stock, (v) announcement of technological innovations or new products by the Company or its competitors, (vi) competition, including pricing pressures and the potential impact of competitors products on sales, (vii) changing conditions in the digital mapping and related industries, (viii) unexpected production difficulties, (ix) changes in financial estimates or recommendations by stock market analysts regarding Intermap or its competitors, (x) announcements by Intermap or its competitors of acquisitions, strategic partnerships, or joint ventures, (xi) additions or departures of senior management, and (xii) changes in economic or political conditions. Additionally, in recent years, the stock market in general and shares of technology companies in particular, have experienced extreme price and volume fluctuations. These fluctuations have often been unrelated or disproportionate to the operating performance of these technology companies. These broad market and industry fluctuations may harm the market price of Intermap’s common stock, regardless of its operating results. Loss of Proprietary Information Intermap does not currently hold patents on the technology used in its operations and relies principally on trade secrets, know-how, expertise, experience, and the marketing ability of its personnel to remain competitive. Although Intermap requires all employees, consultants, and third parties to agree to keep its proprietary information confidential, no assurance can be given that the steps taken by Intermap will be effective in deterring misappropriation of its technologies. Additionally, no assurance can be given that employees or consultants will not challenge the legitimacy or scope of their confidentiality obligations, or that third parties, in time, could not independently develop and deploy equivalent or superior technologies. 2014 Annual Report | Management’s Discussion and Analysis21 Information Technology Security The Company has accumulated a significant amount of data that is part of the NEXTMap database. While Intermap has invested in database management, information technology security, firewalls, and offsite duplicate storage, there is a risk of a loss of data through unauthorized access or a customer violating the terms of the Company’s end user licensing agreements and distributing unauthorized copies of its data. Intermap has, and will continue to invest, in both legal resources to strengthen its licensing agreements with its customers and in overall information technology protection. Breakdown of Strategic Alliances Intermap has fostered a number of key alliances over the past several years and intends to enter into new alliances in the future. The Company believes these new alliances will help enable access to significant scalable markets that would not otherwise be accessible in a timely manner. The breakdown or termination of some or all of those alliances could have a material impact on the Company. At this time, the Company is not aware of any material issues in its strategic relationships. Should any one of these companies be unable to continue its alliance with Intermap, or otherwise choose to dissolve the relationship, the Company would seek to replace the connection with other entities, but there is no guarantee such replacement would occur. Exporting Products – Political Considerations Intermap’s data collection systems contain technology that is classified as a defense article under the International Traffic and Arms Regulations. All mapping efforts undertaken outside the United States, therefore, constitute a temporary export of a defense article, requiring prior written approval by the United States Department of State for each country within which mapping operations are to be performed. The Company does not currently anticipate that requirements for export permits will have a material impact on the Company’s operations, although either government policy or government relations with select foreign countries may change to the point of affecting the Company’s operational opportunities. The data produced by Intermap’s airborne radar system falls under Department of Commerce regulations and is virtually unrestricted. Foreign Operations A significant portion of Intermap’s revenue is expected to come from customers outside of the United States and is therefore subject to additional risks, including foreign currency exchange rate fluctuations, agreements that may be difficult to enforce, receivables difficult to collect through a foreign country’s legal system, and the imposition of foreign-country-imposed withholding taxes or other foreign taxes. Intermap relies on contract prepayments or letters of credit to secure payment from certain of its customers when deemed necessary. The Company has in the past secured export credit insurance on certain of its international receivables, which greatly reduces the commercial and political risks of operating outside of North America. Political Instability Intermap understands that not every region enjoys the political stability that is taken for granted in North America. Developments in recent years in the Middle East and Asia illustrate this clearly. Political or significant instability in a region where Intermap is conducting data collection activities, or where Intermap has clients, could adversely impact Intermap’s business. Regulatory Approvals The development and application of certain of the Company’s products requires the approval of applicable regulatory authorities. A failure to obtain such approval on a timely basis, or material conditions imposed by such authority in connection with the approval, would materially affect the prospects of the Company. 2014 Annual Report | Management’s Discussion and Analysis22 Aircraft / Radar Lost or Damaged Although the Company believes that the probability of one of the Company’s aircraft or radar sustaining significant damage or being lost in its entirety is extremely low, such damage or loss could occur. The Company expects to have available to it, for data collection purposes, one additional aircraft at any given time. The risk to the Company of loss from the damage of an aircraft is therefore considered to be minimal. In the event that a radar mapping system is lost in its entirety through the destruction of the aircraft, it would take the Company approximately six to nine months to replace the lost equipment, if required. Global Positioning System (GPS) Failure GPS satellites have been available to the commercial market for many years. The continued unrestricted access to the signals produced by these GPS satellites is a requirement in the collection of the Company’s radar data. A loss of GPS would have such a global impact that it is believed that controlling authorities would almost certainly make another system available to GPS receivers in relatively short order. Information Openly Available to the Public The Company accesses information available to the public via the Internet and may incorporate portions of such information into its products. If a source of public information determined that the Company was profiting from free information, there is risk it could seek compensation. Force Majeure The Company’s projects may be adversely affected by risks outside the control of the Company including labor unrest, civil disorder, war, subversive activities or sabotage, fires, floods, explosions or other catastrophes, epidemics, or quarantine restrictions. Additional Information Additional risk factors may be detailed in the Company’s Annual Information Form, which can be found on the Company’s Web site at www.intermap.com and on SEDAR at www.sedar.com. Management’s Report 23 The accompanying financial statements of Intermap Technologies Corporation and all the information in this annual report are the responsibility of the Company‘s management. The consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board, using best estimates and judgments, where appropriate. Management has prepared the financial information presented elsewhere in this annual report and has ensured that it is consistent with the financial statements. Management maintains appropriate systems of internal control that provide reasonable assurance that assets are adequately safeguarded and that the financial reports are sufficiently well-maintained for the timely preparation of the consolidated financial statements. The Audit Committee members, all of whom are non-management directors, are appointed by the Board of Directors. The Committee has reviewed these statements with the Auditors and management. The Board of Directors has approved the financial statements of the Company, which are contained in this report. (Signed) Todd Oseth (Signed) Richard L. Mohr Todd A. Oseth President and Chief Executive Officer Richard L. Mohr Senior Vice President and Chief Financial Officer 24 Independent Auditors’ Report TO THE SHAREHOLDERS OF INTERMAP TECHNOLOGIES CORPORATION We have audited the accompanying consolidated financial statements of Intermap Technologies Corporation, which comprise the consolidated balance sheets as at December 31, 2014, December 31, 2013 and January 1, 2013, the consolidated statements of profit and loss and other comprehensive income, changes in equity and cash flows for the years ended December 31, 2014, and December 31, 2013, and notes, comprising a summary of significant accounting policies and other explanatory information. Management’s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Intermap Technologies Corporation as at December 31, 2014, December 31, 2013, and January 1, 2013, and its consolidated financial performance and its consolidated cash flows for the years ended December 31, 2014 and December 31, 2013 in accordance with International Financial Reporting Standards. Emphasis of Matter 25 Opinion Without modifying our opinion, we draw attention to Note 2(a) in the consolidated financial statements which indicates that Intermap Technologies Corporation incurred a net loss of $12,800,000 and negative cash flows from operations of $7,422,000 for the year ended December 31, 2014 and as at December 31, 2014 had a deficit of $212,152,000 and a working capital deficiency of $8,748,000. These conditions along with other matters as set forth in Note 2(a) in the consolidated financial statements, indicate the existence of a material uncertainty that may cast significant doubt about Intermap Technologies Corporation’s ability to continue as a going concern. In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Intermap Technologies Corporation as at December 31, 2010 and December 31, 2009, and its consolidated results of operations and its consolidated cash flows for the years then ended in accordance with Canadian generally accepted accounting principles. Emphasis of Matter Comparative Information Without qualifying our opinion, we draw attention to Note 1 to the consolidated financial statements which describes that for the year ended December 31, 2010 the Company incurred a net loss of $96,872,000, had negative cash flow from operations of $8,160,000 and as at December 31, 2010 has an accumulated deficit of $175,377,000. These conditions, along with other matters described in Note 1, indicate the existence of a material uncertainty which may cast significant doubt on the Company’s ability to continue as a going concern. Without modifying our opinion, we draw attention to Note 5 to the consolidated financial statements which indicates that the comparative information presented as at and for the year ended December 31, 2013, has been restated and that the comparative information presented as at January 1, 2013, has been derived from the consolidated financial statements as at and for the year ended December 31, 2012. Chartered Professional Accountants, Licensed Public Accountants Chartered Accountants, Licensed Public Accountants March 30, 2015 March 3, 2010 Ottawa, Canada Ottawa, Canada 26 THIS PAGE INTENTIONALLY LEFT BLANK. INTERMAP TECHNOLOGIES CORPORATION Consolidated Balance Sheets (In thousands of United States dollars) Accounts payable and accrued liabilities (Note 7) $ 3,785 $ 3,953 $ 4,747 Assets Current assets: Cash and cash equivalents Amounts receivable Unbilled revenue Prepaid expenses Work in process Property and equipment (Note 6) Data library Intangible assets Liabilities and Shareholders' Equity Current liabilities: Convertible notes (Note 8) Current portion of provisions Current portion of notes payable (Note 9) Current portion of deferred lease inducements Unearned revenue and deposits Warrant liability (Notes 8 and 14) Conversion option liability (Note 13) Income taxes payable Obligations under finance leases (Note 10) Long-term notes payable (Note 9) Deferred lease inducements Obligations under finance leases (Note 10) Other long-term liabilities (Note 13(g)) Shareholders' equity: Share capital (Note 13(a)) Accumulated other comprehensive income Contributed surplus (Note 13(b)) Deficit Going concern (Note 2(a)) Commitments (Note 16) Subsequent events (Note 21) December 31, 2013 January 1, 2013 (1) December 31, (as restated - (as restated - 2014 Note 5) Note 5) $ 537 $ 2,420 $ 2,055 $ 5,311 $ 12,939 $ 28,901 1,453 63 412 2,465 2,833 - - 13 5,313 - 1,168 137 451 226 - 2 131 122 311 96 6 11,213 6,434 151 407 33 9,445 3,378 - 116 - - - - - 1,188 188 110 1,286 12 115 6,852 202 192 5,735 2,709 625 10 11,134 3,703 13,829 235 1,918 720 892 97 145 3,083 1,994 10 262 13,868 923 390 - - 11,748 7,246 15,181 194,377 (57) 11,395 (212,152) (6,437) 194,337 37 10,671 (199,352) 5,693 189,263 58 10,222 (185,823) 13,720 $ 5,311 $ 12,939 $ 28,901 (1) Derived from December 31, 2012 (see Note 5) See accompanying notes to consolidated financial statements. On behalf of the Board: (Signed) Larry G. Garberding (Signed) Donald R. Gardner Larry G. Garberding Director Donald R. Gardner Director Consolidated Financial Statements 27 INTERMAP TECHNOLOGIES CORPORATION CONSOLIDATED BALANCE SHEETS Consolidated Balance Sheets (In thousands of United States dollars) (In thousands of United States dollars) Assets Current assets: Cash and cash equivalents Amounts receivable Unbilled revenue Prepaid expenses Work in process Property and equipment (Note 6) Data library Intangible assets Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities (Note 7) Convertible notes (Note 8) Current portion of provisions Current portion of notes payable (Note 9) Current portion of deferred lease inducements Unearned revenue and deposits Warrant liability (Notes 8 and 14) Conversion option liability (Note 13) Income taxes payable Obligations under finance leases (Note 10) Long-term notes payable (Note 9) Deferred lease inducements Obligations under finance leases (Note 10) Other long-term liabilities (Note 13(g)) Shareholders' equity: Share capital (Note 13(a)) Accumulated other comprehensive income Contributed surplus (Note 13(b)) Deficit Going concern (Note 2(a)) Commitments (Note 16) Subsequent events (Note 21) December 31, 2013 (as restated - Note 5) January 1, 2013 (1) (as restated - Note 5) December 31, 2014 $ 537 1,453 63 412 - 2,465 $ 2,420 6,434 151 407 33 9,445 $ 2,055 5,735 2,709 625 10 11,134 3,378 - 116 12,939 3,703 13,829 235 28,901 $ $ $ $ 2,833 - 13 5,311 3,785 5,313 - 1,168 137 451 226 - 2 131 11,213 122 311 96 6 11,748 $ 3,953 - - 1,188 188 110 1,286 - 12 115 6,852 - 202 192 - 7,246 $ 4,747 1,918 720 892 97 145 3,083 1,994 10 262 13,868 923 390 - - 15,181 189,263 58 10,222 (185,823) 13,720 194,377 (57) 11,395 (212,152) (6,437) 194,337 37 10,671 (199,352) 5,693 $ 5,311 $ 12,939 $ 28,901 (1) Derived from December 31, 2012 (see Note 5) See accompanying notes to consolidated financial statements. See accompanying notes to consolidated financial statements. On behalf of the Board: On behalf of the Board: (Signed) Larry G. Garberding (Signed) Donald R. Gardner Larry G. Garberding Director (Signed) Larry G. Garberding Larry G. Garberding Director Donald R. Gardner Director (Signed) Donald R. Gardner Donald R. Gardner Director 28 INTERMAP TECHNOLOGIES CORPORATION Consolidated Statements of Profit and Loss and Other Comprehensive Income CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands of United States dollars, except per share information) (In thousands of United States dollars, except per share information) For the years ended December 31, Revenue (Note 11) Expenses: Operating costs (Note 12) Depreciation of property and equipment Amortization of data library Impairment of data library Amortization of intangible assets (as restated - Note 5) 2013 2014 $ 8,254 $ 24,442 20,718 1,123 - - 103 21,944 23,097 1,421 4,610 9,219 119 38,466 Operating loss (13,690) (14,024) Gain on disposal of equipment Change in fair value of derivative instruments Financing costs (Note 12) Financing income Gain (loss) on foreign currency translation Loss before income taxes Income tax (expense) recovery: Current Deferred Net loss for the period Other comprehensive loss: 456 2,035 (2,006) 15 7 (13,183) - 383 383 163 1,817 (951) - (506) (13,501) (28) - (28) $ (12,800) $ (13,529) Items that are or may be reclassified subsequently to profit or loss: Foreign currency translation differences (94) (21) Comprehensive loss for the period $ (12,894) $ (13,550) Basic and diluted loss per share $ (0.14) $ (0.16) Weighted average number of Class A common shares - basic & diluted (Note 13(c)) 91,707,540 84,566,288 See accompanying notes to consolidated financial statements. See accompanying notes to consolidated financial statements. 2014 Annual Report | Consolidated Financial Statements 29 INTERMAP TECHNOLOGIES CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Consolidated Statements of Changes in Equity (In thousands of United States dollars) (In thousands of United States dollars) Share Capital Contributed Surplus Cumulative Translation Adjustments Deficit Total Balance at January 1, 2013 (as restated - Note 5) $ 189,263 $ 10,222 $ 58 $ (185,823) $ 13,720 Comprehensive loss for the period Share-based compensation Convertible note conversion Conversion option of convertible note Issuance costs - 81 3,025 1,974 (6) - 449 - - - (21) - - - - (13,529) - - - - (13,550) 530 3,025 1,974 (6) Balance at December 31, 2013 (as restated - Note 5) $ 194,337 $ 10,671 $ 37 $ (199,352) $ 5,693 Comprehensive loss for the period Share-based compensation Conversion option of convertible note Issuance costs Deferred tax effect of convertible note 40 - - - - - 408 704 (5) (383) (94) - - - - (12,800) - - - - (12,894) 448 704 (5) (383) Balance at December 31, 2014 $ 194,377 $ 11,395 $ (57) $ (212,152) $ (6,437) See accompanying notes to consolidated financial statements. See accompanying notes to consolidated financial statements. 2014 Annual Report | Consolidated Financial Statements 30 INTERMAP TECHNOLOGIES CORPORATION Consolidated Statements of Cash Flows CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of United States dollars) (In thousands of United States dollars) For the years ended December 31, Cash flows provided by: Operating activities: Net loss for the period Adjusted for the following non-cash items: Depreciation of property and equipment Amortization of data library Impairment of data library Amortization of intangible assets Share-based compensation expense Gain on disposal of equipment Amortization of deferred lease inducements Extinguishment of facility closure provision Deferred taxes Change in fair value of derivative instruments Financing costs Current income tax expense Interest paid Income tax paid Changes in working capital: Amounts receivable Work in process and other assets Accounts payable Accrued liabilities Unearned revenue and deposits Gain on foreign currency translation Investing activities: Purchase of property and equipment Proceeds from sale of equipment Financing activities: Proceeds from issuance of convertible notes Financing costs of convertible notes Proceeds from reimbursable project funding Repayment of obligations under finance lease Repayment of long-term debt and notes payable Effect of foreign exchange on cash (Decrease) increase in cash and cash equivalents Cash and cash equivalents, beginning of period (as restated - Note 5) 2013 2014 $ (12,800) $ (13,529) 1,123 - - 103 454 (456) (41) - (383) (2,035) 2,006 - (22) (10) 5,008 116 (421) (363) 341 (42) (7,422) (609) 360 (249) 6,000 (158) 130 (115) (65) 5,792 (4) (1,883) 2,420 1,421 4,610 9,219 119 530 (163) (97) (720) - (1,817) 951 28 (72) (60) (699) 2,755 (114) (401) (35) (12) 1,914 (780) 162 (618) - (6) - (271) (636) (913) (18) 365 2,055 Cash and cash equivalents, end of period $ 537 $ 2,420 See accompanying notes to consolidated financial statements. See accompanying notes to consolidated financial statements. 2014 Annual Report | Consolidated Financial StatementsINTERMAP TECHNOLOGIES CORPORATION Consolidated Statements of Cash Flows (In thousands of United States dollars) (In thousands of United States dollars, except per share information) 1. Reporting entity: Notes to Consolidated Financial Statements 31 For the years ended December 31, Cash flows provided by: Operating activities: Net loss for the period Adjusted for the following non-cash items: Depreciation of property and equipment Amortization of data library Impairment of data library Amortization of intangible assets Share-based compensation expense Gain on disposal of equipment Amortization of deferred lease inducements Extinguishment of facility closure provision Deferred taxes Change in fair value of derivative instruments Financing costs Current income tax expense Interest paid Income tax paid Changes in working capital: Amounts receivable Work in process and other assets Accounts payable Accrued liabilities Unearned revenue and deposits Gain on foreign currency translation Investing activities: Purchase of property and equipment Proceeds from sale of equipment Financing activities: Proceeds from issuance of convertible notes Financing costs of convertible notes Proceeds from reimbursable project funding Repayment of obligations under finance lease Repayment of long-term debt and notes payable Effect of foreign exchange on cash (Decrease) increase in cash and cash equivalents Cash and cash equivalents, beginning of period (as restated - Note 5) 2013 2014 $ (12,800) $ (13,529) 1,123 - - - - 103 454 (456) (41) (383) (2,035) 2,006 (22) (10) 5,008 116 (421) (363) 341 (42) (7,422) (609) 360 (249) 6,000 (158) 130 (115) (65) 5,792 (4) (1,883) 2,420 1,421 4,610 9,219 119 530 (163) (97) (720) - 951 28 (72) (60) (1,817) (699) 2,755 (114) (401) (35) (12) 1,914 (780) 162 (618) - - (6) (271) (636) (913) (18) 365 2,055 Cash and cash equivalents, end of period $ 537 $ 2,420 See accompanying notes to consolidated financial statements. Intermap Technologies ® Corporation (the Company) is incorporated under the laws of Alberta, Canada. The head office of Intermap is located at 8310 South Valley Highway, Suite 400, Englewood, Colorado, USA 80112. Its registered office is located at Livingston Place, Suite 1000, 250 – 2nd Street Southwest, Calgary, Alberta, Canada, T2P 0C1. Intermap is a global location-based information company, creating a wide variety of geospatial solutions and analytics from its NEXTMap® database. The Company uses its NEXTMap 3D digital models, together with aggregated third party data, to create geospatial solutions for its customers. These geospatial solutions can be used in a wide range of applications including, but not limited to, location-based information, geographic information systems, engineering, utilities, global positioning systems maps, geospatial risk assessment, oil and gas, renewable energy, hydrology, environmental planning, wireless communications, transportation, advertising, and 3D visualization. 2. Basis of preparation: a. Going concern: These financial statements have been prepared assuming the Company will continue as a going concern. The going concern basis of presentation assumes the Company will continue in operation for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of business. During the year ended December 31, 2014, the Company incurred a net loss of $12,800 and negative cash flows from operating activities of $7,422. Revenue for the year ended December 31, 2014 was $8,254, which represents a $16,188 decline from revenue for the year ended December 31, 2013. In addition, the Company has a deficit of $212,152 and a working capital deficiency of $8,748. The above factors in the aggregate raise significant doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on management’s ability to successfully generate a profit from operations, sell assets, or obtain additional financing. Management has taken actions to address these issues including a shift in organization wide focus from the historical approach of licensing raw data, to providing customers with complete geospatial solutions with a focus on software applications. In addition, the Company obtained financing in 2015 (see Note 21) to help further the development and sales efforts of new product offerings. Failure to achieve one or more of these requirements could have a material adverse effect on the Company’s financial condition and / or results of operations. The Company’s future capital requirements will depend on many factors, including, but not limited to, the market acceptance of its products and services and the timing of working capital payments associated with such products and services. The Company cannot be certain that cash generated from its operations will be sufficient to satisfy its liquidity requirements, and it may need to continue to raise capital by selling additional equity and / or by securing credit facilities. No assurance can be given that any such additional funding will be available or that, if available, it can be obtained on terms favorable to the Company. The financial statements do not reflect adjustments that would be necessary if the going concern assumption was not appropriate. If the going concern basis was not appropriate for these financial statements, then adjustments would be necessary to the carrying value of assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used. b. Statement of compliance: These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The 32 significant accounting policies are summarized in Note 3. The policies applied in these consolidated financial statements are based on IFRS issued and effective as of March 26, 2015, the date the Board of Directors approved the consolidated financial statements. c. Measurement basis: The financial statements have been prepared mainly on the historical cost basis. Other measurement bases used are described in the applicable notes. d. Use of estimates: Preparing financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the period. Actual results could differ from these estimates. Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognized in the period in which the estimates are reviewed and in any future periods affected. Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is included in Note 3(g) – Leases, Note 3(k) – Impairment and Note 8 – Convertible Notes. Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year include the following: i. Impairment of Data Library: The carrying values of all property and equipment, data library and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. ii. Depreciation and amortization rates: In calculating the depreciation and amortization expense, management is required to make estimates of the expected useful lives of property and equipment and intangible assets. iii. Amounts receivable: The Company uses historical trends and performs specific account assessments when determining the allowance for doubtful accounts. These accounting estimates are in respect to the amounts receivable line item in the Company’s consolidated balance sheet. At December 31, 2014, amounts receivable represented 27% of total assets. The estimate of the Company’s allowance for doubtful accounts could change from period to period due to the allowance being a function of the balance and composition of amounts receivable. iv. Share-based compensation: The Company uses the Black-Scholes option-pricing model to determine the grant date fair value of share-based compensation. The following assumptions are used in the model: dividend yield; expected volatility; risk-free interest rate; expected option life; and fair value. Changes to assumptions used to determine the grant date fair value of share-based compensation 2014 Annual Report | Consolidated Financial Statements33 awards can affect the amounts recognized in the consolidated financial statements. v. Derivative financial instruments: The Company has determined that its functional currency is the United States dollar and has issued (i) non-broker warrants, and (ii) debt with a conversion option denominated in a currency other than its functional currency. The Company measures the cost of the derivative financial instruments by reference to the fair value of the instruments at the date at which they are granted and revalues them at each reporting date. In determining the fair value of the non- broker warrants, the Company used the Black-Scholes option pricing model with the following assumptions: average volatility rate; market price at the reporting date; risk-free interest rate; the remaining expected life of the warrant; and an exchange rate at the reporting date. The inputs used in the Black-Scholes model are taken from observable markets. In particular, changes in estimates of the fair value of the warrants can have a material impact on the reported loss and comprehensive loss for a given period. Any impact reported has no net effect on cash flows or the operating results of the Company. vi. Provisions: A provision is recognized, if as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the future settlement were to adversely differ from management’s expectations, the Company could incur either an additional expense or reversal of the expense previously recorded. (see Note 3(h)). vii. Other long-term liabilities: The Company uses a Monte Carlo simulation model to estimate the grant date and balance sheet date fair value of share awards allocated under its long-term incentive plan (LTIP). The following assumptions are used in the model: dividend yield; expected volatility; risk-free interest rate; grant date of August 8, 2014; expiration date of December 31, 2015; discount rate (see Note 13(h)). viii. Compound financial instruments: The Company has issued compound financial instruments which comprise convertible notes denominated in United States dollars that can be converted to share capital at the option of the holder. The valuation and accounting for the notes is complex and requires the application of management estimates and judgments with respect to the determination of appropriate valuation models, certain assumptions applied within such valuation models, and certain aspects of the accounting method applied on initial recognition. The assumptions and models used for estimating fair value of convertible note transactions are disclosed in Note 8. ix. Revenue: Changes to the assumptions used to measure revenue could impact the amount of revenue recognized in the consolidated financial statements. (see Note 3(l)). e. Functional and presentation currency: These consolidated financial statements are presented in United States dollars, which is the Company’s functional currency. All financial information presented in United States dollars has been rounded to the nearest thousand. f. Foreign currency translation: Items included in the financial statements of each of the Company’s subsidiaries are measured using the currency of the primary economic environment in which the entity operates (the functional 2014 Annual Report | Consolidated Financial Statements34 currency). Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities not denominated in the functional currency of an entity are recognized in net loss for the period. Assets and liabilities of entities with functional currencies other than United States dollars are translated at the period end rates of exchange, and the results of their operations are translated at exchange rates prevailing at the dates of transactions. The resulting translation adjustments are included in accumulated other comprehensive income in shareholders’ equity. 3. Summary of significant accounting policies: a. Consolidation: The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Intermap Technologies Inc. and Intermap Federal Services Inc. (both U.S. corporations); Intermap Technologies GmbH (a German corporation); Intermap Technologies UK Limited (a U.K. corporation); Intermap Technologies PTY Ltd (an Australian corporation); Intermap Technologies s.r.o. (a Czech Republic corporation); and a 90% owned subsidiary, PT ExsaMap Asia (an Indonesian corporation). With respect to PT ExsaMap Asia (a 90% owned subsidiary), the non-controlling shareholder owns a written put option for which the Company has recognized as a liability in the financial statements in accordance with IAS 32, Financial Instruments: Presentation. The Company has elected to use the anticipated acquisition method to account for the arrangement, in which the recognition of the liability implies that the interests subject to the put option are deemed to have already been acquired, even though legally they are still non-controlling interests. Therefore, PT ExsaMap Asia is presented in the financial statements as fully owned by the Company for accounting purposes, and profits and losses attributable to the holder of the non-controlling interest subject to the put option are presented as attributable to the owners of the parent and not as attributable to those non-controlling shareholders. Inter-company balances and transactions, and any unrealized income and expenses arising from intra- group transactions, are eliminated in preparing the consolidated financial statements. The accounting policies of all subsidiaries are consistent with the Company’s policies. b. Cash and cash equivalents: Cash and cash equivalents include unrestricted cash balances and highly liquid marketable securities with maturity at the date of purchase of 30 days or less. c. Work in process: Work in process is measured at the lower of cost or net realizable value. When work in process is sold, the carrying amount of the work in process is recognized as an expense in the period in which the related revenue is recognized. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completing and selling expenses. The amount of any write- down of work in process to net realizable value is recognized as an expense in the period in which the write-down or loss occurs. d. Property and equipment: Property and equipment are measured at cost less accumulated depreciation. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of aircraft overhauls are capitalized and depreciated over the period until the next overhaul. When parts of an item of property and equipment have different useful lives, they are accounted for as separate items. 2014 Annual Report | Consolidated Financial StatementsINTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) Years ended December 31, 2014 and 2013 Page 6 in the period in which the related revenue is recognized. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completing and selling expenses. The amount of any write-down of work in process to net realizable value is recognized as an expense in the period in which the write-down or loss occurs. (d)Property and equipment: Property and equipment are measured at cost less accumulated depreciation. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of aircraft overhauls are capitalized and depreciated over the period until the next overhaul. When parts of an item of property and equipment have different useful lives, they are accounted for as separate items. Depreciation is calculated over the Depreciation is calculated over the depreciable amount which is the cost of an asset, less its residual depreciable amount which is the cost of an asset, less its residual value. Depreciation is value. Depreciation is provided on the straight-line basis over the following useful lives of the assets: provided on the straight-line basis over the following useful lives of the assets: Assets Years 35 Aircraft Aircraft engines Mapping equipment and software Radar equipment Furniture and fixtures Leasehold improvements 10 7 3 5 5 Shorter of useful life or term of lease Depreciation methods, useful lives and residual values are reviewed at each financial Depreciation methods, useful lives and residual values are reviewed at each financial year end and year end and adjusted, if appropriate. adjusted, if appropriate. Assets under construction are not depreciated until available for use by the Company. Expenditures for maintenance and repairs are expensed when incurred. Assets under construction are not depreciated until available for use by the Company. Expenditures for maintenance and repairs are expensed when incurred. The cost of replacing an item of property and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within The cost of replacing an item of property and equipment is recognized in the carrying amount of the part will flow to the Company, and its cost can be measured reliably. The carrying the item if it is probable that the future economic benefits embodied within the part will flow to amount of the replaced part is derecognized. The costs of the day-to-day servicing of the Company, and its cost can be measured reliably. The carrying amount of the replaced part is property and equipment are recognized in profit or loss as incurred. derecognized. The costs of the day-to-day servicing of property and equipment are recognized in profit Gains and losses on disposal of property and equipment are determined by comparing or loss as incurred. the proceeds from disposal with the carrying amount, and are recognized net of costs Gains and losses on disposal of property and equipment are determined by comparing the proceeds associated with the disposal within other income in net loss for the period. from disposal with the carrying amount, and are recognized net of costs associated with the disposal within other income in net loss for the period. (e) Data library: e. Data library: The Company maintains an extensive world-wide data library, which results from the acquisition and processing of IFSAR-derived data and third-party data collected by The Company maintains an extensive world-wide data library, which results from the acquisition and multiple sensor technologies, including light detection and ranging (LiDAR), processing of IFSAR-derived data and third-party data collected by multiple sensor technologies, photogrammetry, satellite, and other available sources. The NEXTMap database also including light detection and ranging (LiDAR), photogrammetry, satellite, and other available sources. The NEXTMap database also includes information such as 3D city models, census data, real-time traffic, outdoor advertising assets, weather related hazards, points of interest, cellular towers, and flood models. In general, all ownership rights to this data are retained by the Company, and the data is licensed to customers on a non-transferable basis. All related expenditures were expensed as incurred. The data library amounts shown on the Company’s consolidated balance sheet included only elevation related data and imagery from the Company’s original NEXTMap USA and NEXTMap Europe radar mapping programs. Historically, the Company had capitalized costs associated with its NEXTMap USA and NEXTMap Europe datasets. Capitalized costs included direct costs of acquiring and processing the digital map data, direct overhead associated with the acquisition and processing of the data and depreciation of the property and equipment used in the production of the data. Data library capitalized costs were amortized on a straight-line basis over five years. The data library was fully impaired during the year ended December 31, 2013. f. Intangible assets: Identifiable intangible assets represent assets acquired in a business combination, and internally developed assets. Upon acquisition, identifiable intangible assets are recorded at fair value and are carried at cost less accumulated amortization. These intangible assets held by the Company are amortized on a straight-line basis, based on the estimated useful life of the asset. 2014 Annual Report | Consolidated Financial Statements 36 The intangible assets internally developed represent Web site development costs, which are amortized over a period of three years. The amortization method, estimate of the useful life, and residual values of intangible assets are reviewed annually. g. Leases: Leases are classified as either finance or operating in nature. Management exercises judgment to determine whether substantially all the risks and rewards incidental to ownership have been transferred to the Company. Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments under an operating lease (net of any incentives received from the lessor) are recognized in net loss on a straight-line basis over the period of the lease. Finance leases are those that substantially transfer the benefits and risks of ownership to the lessee. Assets acquired under finance leases are measured at the lower of the present value of the minimum lease payments or the fair value of the leased asset at the inception of the lease. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Obligations recorded under finance leases are reduced by the principal portion of lease payments. The imputed interest portion of lease payments is charged to finance costs. h. Provisions: A provision is recognized, if as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost. i. Restructuring: A provision for restructuring is recognized when the Company has approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced publicly. Future operating losses are not provided for. ii. Onerous contracts: A provision for onerous contracts is recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Company recognizes any impairment loss on the assets associated with the contract. i. Deferred lease inducements: Deferred lease inducements represent the unamortized cost of lease inducements on certain of the Company’s leased commercial office space. Amortization is provided on the straight-line basis over the term of the lease and recognized as a reduction in rent expense. j. Income taxes: Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income. 2014 Annual Report | Consolidated Financial Statements37 Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously. A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. k. Impairment: The carrying values of all property and equipment, data library and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The recoverable amount of an asset or cash generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash-generating unit, or CGU). Management exercises judgment to determine whether there are factors that would indicate that an asset or a CGU is impaired. The determination of CGUs is also based on management’s judgment and is an assessment of the smallest group of assets that generate cash inflows independently of other assets. Factors considered include whether an active market exists for the output produced by the asset or group of assets as well as how management monitors and makes decisions about the Company’s operations. An impairment loss is recorded when the recoverable amount of an asset or its CGU is less than its carrying amounts. Impairment losses are evaluated for potential reversals when events or changes in circumstances warrant such consideration. l. Revenue recognition: Revenue is recognized when (i) persuasive evidence of an arrangement exists; (ii) the significant risks and rewards of ownership have been transferred to the buyer; (iii) the amount of revenue can be measured reliably; and (iv) costs incurred or to be incurred can be measured reliably. Billings in excess of revenue are recorded as unearned revenue. Revenue recognized in excess of billings is recorded as unbilled revenue. 2014 Annual Report | Consolidated Financial Statements38 i. Goods sold: Revenue from the sale of data in the ordinary course is measured at the fair value of the consideration received or receivable. ii. Subscriptions: Revenue from data sold on a subscription basis is recognized straight-line over the term of the agreement. iii. Fixed-price contracts: Revenue from fixed-price contracts is recognized using the percentage-of-completion method, based on the ratio of costs incurred to estimated final costs. The use of the percentage of completion method requires estimates to determine the cost to complete each contract. The stage of completion is determined by costs incurred and labor hours worked in comparison to total expected costs and hours. These estimates are reviewed monthly and adjusted as necessary. Provisions for estimated losses, if any, are recognized in the period in which the loss is determined. Contract losses are measured in the amount by which the estimated costs of the related project exceed the estimated total revenue for the project. iv. Multiple component arrangements: When a single sales transaction requires the delivery of more than one product or service (multiple components), the revenue recognition criteria are applied separately to identifiable components. A component is considered to be separately identifiable if the product or service delivered has stand-alone value to that customer. The consideration is allocated to deliverables based on their relative fair values. The fair value of each component is determined using vendor specific objective evidence, third party evidence of selling price, or estimated selling price. m. Research and development: Research costs are expensed as incurred. Development costs are expensed in the year incurred unless management believes a development project meets the specified criteria for deferral and amortization. n. Share-based compensation: The grant date fair value of equity-settled share-based payment awards granted to employees is recognized as an employee expense, with a corresponding increase in equity, over the period the employees unconditionally become entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes. Share-based payment arrangements in which the Company receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the company. The grant date fair value of the equity-settled portion of the LTIP is recognized as an employee expense, with a corresponding increase in equity, over the service period, and the liability is re- measured at each reporting date. The fair value of the optional settlement portion of the LTIP is recognized as an employee expense, with a corresponding increase in liabilities, over the service period, and is re-measured to the current fair value at each reporting date. 2014 Annual Report | Consolidated Financial Statements39 o. Earnings per share: The basic earnings per share is computed by dividing net earnings (loss) by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share is computed similar to basic earnings per share, except the weighted average number of common shares outstanding are increased to include additional shares from the assumed exercise of share options and warrants, if dilutive. p. Financial instruments: i. Non-derivative financial assets: The Company initially recognizes loans and receivables on the date that they are originated. All other financial assets are recognized initially on the date at which the Company becomes a party to the contractual provisions of the instrument. The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Company is recognized as a separate asset or liability. Financial assets and liabilities are offset and the net amount presented in the consolidated balance sheet when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. ii. Loans and receivables: Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses. iii. Financial liabilities at fair value through profit or loss: Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition at fair value through profit or loss. The Company has issued non-broker warrants that are considered to be derivative liabilities due to the warrants being exercisable in a currency (Canadian dollar) other than the Company’s functional currency (United States dollar). Accordingly, the warrants are measured at fair value at each reporting date, with changes in fair value included in the consolidated statement of profit and loss and other comprehensive income for the applicable reporting period. iv. Other liabilities: The Company initially recognizes debt liabilities on the date that they are originated. All other financial liabilities are recognized initially on the date at which the Company becomes a party to the contractual provisions of the instrument. The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire. Such financial liabilities are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method. 2014 Annual Report | Consolidated Financial Statements40 INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) Years ended December 31, 2014 and 2013 Page 12 ii. Loans and receivables: Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses. iii. Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition at fair value through profit or loss. The Company has issued non-broker warrants that are considered to be derivative liabilities due to the warrants being exercisable in a currency (Canadian dollar) other than the Company’s functional currency (United States dollar). Accordingly, the warrants are measured at fair value at each reporting date, with changes in fair value included in the consolidated statement of profit and loss and other comprehensive income for the applicable reporting period. iv. Other liabilities: The Company initially recognizes debt liabilities on the date that they are originated. All other financial liabilities are recognized initially on the date at which the Company becomes a party to the contractual provisions of the instrument. The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire. Such financial liabilities are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method. The following is a summary of the classification the Company has applied to each of its significant The following is a summary of the classification the Company has applied to each of its categories of financial instruments outstanding: significant categories of financial instruments outstanding: Financial instrument: Cash and cash equivalents Amounts receivable Unbilled revenue Accounts payable and accrued liabilities Obligations under finance leases Convertible notes Notes payable Other long-term liabilities Warrant liability Conversion option liability Classification: Loans and receivables Loans and receivables Loans and receivables Other liabilities Other liabilities Other liabilities Other liabilities Other liabilities Financial liability at fair value through profit and loss Financial liability at fair value through profit and loss v. Share capital: Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognized as a deduction from equity, net of any tax effects. vi. Compound financial instruments: Compound financial instruments issued by the Company comprise convertible notes denominated in United States dollars that can be converted to share capital at the option of the holder. The liability component of a compound financial instrument is recognized initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognized initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition. Interest related to the financial liability is recognized in profit or loss. On conversion, the financial liability is reclassified to equity and no gain or loss is recognized. q. Segments: The operations of the Company are in one industry segment: digital mapping and related services. 4. New standards and interpretations: a. New accounting standards: The Company adopted the following new accounting standards and amendments which are effective for the Company’s interim and annual consolidated financial statements commencing January 1, 2014. i. IAS 32, Financial Instruments: Presentation In December 2011, the International Accounting Standards Board amended International Accounting Standard 32 to clarify the meaning of when an entity has a current legally enforceable right of set-off. The amendments are effective for annual periods beginning on or after January 1, 2014 and are required to be applied retrospectively. The adoption of IAS 32 did not have a material impact on the consolidated financial statements. 2014 Annual Report | Consolidated Financial Statements 41 ii. IFRIC 21, Levies In May 2013, the International Accounting Standards Board issued IFRIC 21 which provides guidance on accounting for levies in accordance with the requirements of International Accounting Standard 37: Provisions, Contingent Liabilities and Contingent Assets. The interpretation defines a levy as an outflow from an entity imposed by a government in accordance with legislation. It also notes that levies do not arise from executor contracts of other contractual arrangements. The interpretation also confirms that an entity recognizes a liability for a levy only when the triggering event specified in the legislation occurs. This IFRIC is effective for annual reporting periods beginning on or after January 1, 2014 and is required to be applied retrospectively. The adoption of IFRIC 21 did not have a material impact on the consolidated financial statements. b. Future pronouncements: The IASB and International Financial Reporting Interpretations Committee (IFRIC) issued the following standards that have not been applied in preparing these Consolidated Financial Statements, as their effective dates fall within annual periods beginning subsequent to the current reporting period. i. IFRS 9, Financial Instruments In July 2014, the IASB issued the final version of IFRS 9, bringing together the classification and measurement, impairment and hedge accounting phases of the project to replace IAS 39, Financial Instruments: Recognition and Measurement. This standard simplifies the classification of a financial asset as either at amortized cost or at fair value as opposed to the multiple classifications which were permitted under IAS 39. This standard also requires the use of a single impairment method as opposed to the multiple methods in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. The standard also adds guidance on the classification and measurement of financial liabilities. IFRS 9 is to be applied retrospectively for annual periods beginning on or after January 1, 2018. Early application is permitted. The Company does not intend to adopt this standard early and is currently evaluating the impact of adopting this standard on the consolidated financial statements. ii. IFRS 15, Revenue from Contracts with Customers In May 2014, the International Standards Board issued IFRS 15, Revenue from Contracts with Customers, which provides a single, principles-based five-step model for revenue recognition to be applied to all customer contracts, and requires enhanced disclosures. This standard is effective January 1, 2017 and allows early adoption. The Company does not intend to adopt this standard early and is currently evaluating the impact of adopting this standard on the consolidated financial statements. 5. Restatement of prior years: During the year ended December 31, 2014, the Company corrected the accounting for certain financial instruments that were denominated in a foreign currency or included as foreign currency embedded derivatives - these include all non-broker warrants. Previously the Company accounted for the warrants as a component of equity; however, in accordance with IAS 39, Financial Instruments: Recognition and Measurement, warrants denominated in a foreign currency and foreign currency embedded derivatives are required to be classified as liabilities under IFRS and marked to fair value through profit and loss each reporting period. There is no impact on total assets, revenue, costs of sales, operating loss, or total cash flows from operating activities, as a result of this restatement. 2014 Annual Report | Consolidated Financial StatementsINTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements INTERMAP TECHNOLOGIES CORPORATION (In thousands of United States dollars, except per share information) Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) Years ended December 31, 2014 and 2013 Years ended December 31, 2014 and 2013 5. Restatement of prior years: Page 15 Page 15 5. Restatement of prior years: During the year ended December 31, 2014, the Company corrected the accounting for certain financial instruments that were denominated in a foreign currency or included as During the year ended December 31, 2014, the Company corrected the accounting for foreign currency embedded derivatives - these include all non-broker warrants. Previously certain financial instruments that were denominated in a foreign currency or included as the Company accounted for the warrants as a component of equity; however, in accordance foreign currency embedded derivatives - these include all non-broker warrants. Previously with IAS 39, Financial Instruments: Recognition and Measurement, warrants the Company accounted for the warrants as a component of equity; however, in accordance denominated in a foreign currency and foreign currency embedded derivatives are required with IAS 39, Financial Instruments: Recognition and Measurement, warrants to be classified as liabilities under IFRS and marked to fair value through profit and loss denominated in a foreign currency and foreign currency embedded derivatives are required each reporting period. There is no impact on total assets, revenue, costs of sales, operating to be classified as liabilities under IFRS and marked to fair value through profit and loss loss, or total cash flows from operating activities, as a result of this restatement. each reporting period. There is no impact on total assets, revenue, costs of sales, operating loss, or total cash flows from operating activities, as a result of this restatement. The financial statement impact of the change in accounting at January 1, 2013, which has been derived from the consolidated financial statements as at and for the year ended The financial statement impact of the change in accounting at January 1, 2013, which has December 31, 2012, is as follows: The financial statement impact of the change in accounting at January 1, 2013, which has been derived been derived from the consolidated financial statements as at and for the year ended from the consolidated financial statements as at and for the year ended December 31, 2012, is as follows: December 31, 2012, is as follows: January 1, 2013 Consolidated Balance Sheet January 1, 2013 Consolidated Balance Sheet Convertible note Conversion option liability Convertible note Warrant liability Conversion option liability Share capital Warrant liability Contributed surplus Share capital Deficit Contributed surplus Deficit 2,357 - 2,357 - - 194,144 - 10,354 194,144 (186,198) 10,354 (186,198) 1,918 1,994 1,918 3,083 1,994 189,263 3,083 10,222 189,263 (185,823) 10,222 (185,823) (439) 1,994 (439) 3,083 1,994 (4,881) 3,083 (132) (4,881) 375 (132) 375 As previously reported As previously reported Effect of restatement Effect of restatement As restated As restated $ $ $ $ $ $ 42 Effect of restatement Effect of restatement As previously reported As previously reported $ - The financial statement impact of the change in accounting at December 31, 2013 is as The financial statement impact of the change in accounting at December 31, 2013 is as follows: follows: The financial statement impact of the change in accounting at December 31, 2013 is as follows: December 31, 2013 Consolidated Balance Sheet December 31, 2013 Consolidated Balance Sheet Warrant liability 1,286 Share capital (3,039) Warrant liability 1,286 Contributed surplus - Share capital (3,039) Deficit 1,753 Contributed surplus - Deficit 1,753 December 31, 2013 Effect of Consolidated Statement of Comprehensive Income restatement December 31, 2013 Effect of Consolidated Statement of Comprehensive Income restatement INTERMAP TECHNOLOGIES CORPORATION Financing costs Change in fair value of derivative instruments Notes to Consolidated Financial Statements Financing costs $ Net loss for the period (In thousands of United States dollars, except per share information) Change in fair value of derivative instruments Comprehensive loss for the period Net loss for the period Basic and diluted loss per share Comprehensive loss for the period Basic and diluted loss per share December 31, 2013 Consolidated Statement of Changes in Equity 197,376 - $ 10,671 197,376 (201,105) 10,671 (201,105) As previously reported As previously reported $ (512) - (512) (14,907) - (14,928) (14,907) (0.18) (14,928) (0.18) Years ended December 31, 2014 and 2013 (439) 1,817 (439) 1,378 1,817 1,378 1,378 0.02 1,378 0.02 As previously reported Effect of restatement Page 16 $ $ $ $ $ $ As restated As restated $ As restated As restated $ As restated 1,286 194,337 1,286 10,671 194,337 (199,352) 10,671 (199,352) (951) 1,817 (951) (13,529) 1,817 (13,550) (13,529) (0.16) (13,550) (0.16) Comprehensive loss for the period Share capital Contributed surplus Deficit $ (14,928) 197,376 10,671 (201,105) $ 1,378 (3,039) - 1,753 $ (13,550) 194,337 10,671 (199,352) December 31, 2013 Consolidated Statement of Cash Flows As previously reported Effect of restatement As restated Net loss for the period Financing costs Change in fair value of derivative instruments (14,907) 512 - 1,378 439 (1,817) (13,529) 951 (1,817) 6. Property and equipment: Property and equipment Aircraft Mapping equipment Furniture, fixtures & auto Under construction Leases Total Balance at December 31, 2012 $ 2,617 $ 873 $ 6 $ 187 $ 20 $ 3,703 Additions Finance Lease Depreciation Transfer from under construction 39 - (650) 95 384 316 (654) 256 Balance at December 31, 2013 2,101 1,175 Additions Finance Lease Disposals Depreciation Transfer from under construction 95 - - (488) - 276 35 (2) (544) - - - - - - - (6) - 8 (2) 26 - (111) - 102 112 - (64) (89) 118 331 - - (351) 780 316 (1,421) - - 3,378 118 - - - (118) 609 35 (66) (1,123) - Balance at December 31, 2014 $ 1,708 $ 940 $ 6 $ 179 $ - $ 2,833 2014 Annual Report | Consolidated Financial Statements INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) Years ended December 31, 2014 and 2013 Page 16 December 31, 2013 Consolidated Statement of Changes in Equity As previously reported Effect of restatement As restated Comprehensive loss for the period $ (14,928) $ 1,378 $ (13,550) Share capital Contributed surplus Deficit 197,376 10,671 (201,105) (3,039) - 1,753 194,337 10,671 (199,352) December 31, 2013 Consolidated Statement of Cash Flows As previously reported Effect of restatement As restated Net loss for the period Financing costs Change in fair value of derivative instruments (14,907) 512 - 1,378 439 (1,817) (13,529) 951 (1,817) 43 6. Property and equipment: 6. Property and equipment: Property and equipment Aircraft Mapping equipment Furniture, fixtures & auto Under construction Leases Total Balance at December 31, 2012 $ 2,617 $ 873 $ 6 $ 187 $ 20 $ 3,703 Additions Finance Lease Depreciation Transfer from under construction 39 - (650) 95 384 316 (654) 256 - - - (6) 26 - (111) - 331 - - (351) 780 316 (1,421) - - 3,378 Balance at December 31, 2013 2,101 INTERMAP TECHNOLOGIES CORPORATION 95 - - Notes to Consolidated Financial Statements INTERMAP TECHNOLOGIES CORPORATION - - (In thousands of United States dollars, except per share information) Notes to Consolidated Financial Statements (2) (488) (In thousands of United States dollars, except per share information) - Years ended December 31, 2014 and 2013 Additions Finance Lease Disposals Depreciation Transfer from under construction 276 35 (2) (544) - 112 - (64) (89) 118 1,175 102 8 - - 118 - - - (118) Page 17 609 35 (66) (1,123) - Years ended December 31, 2014 and 2013 1,708 Balance at December 31, 2014 $ Property and equipment Property and equipment Cost Aircraft Aircraft $ 10,856 940 $ Mapping equipment Mapping equipment $ 27,748 6 Furniture, $ fixtures & Furniture, auto fixtures & auto 555 $ Leases Leases 1,537 $ $ Under construction Under construction - $ Total Total 40,696 $ $ 179 Page 17 - $ 2,833 Accumulated depreciation Cost $ (8,755) 10,856 $ (26,573) 27,748 $ (555) 555 (1,435) $ 1,537 $ - - (37,318) $ 40,696 Balance at December 31, 2013 Accumulated depreciation $ 2,101 (8,755) $ 1,175 (26,573) $ - (555) $ 102 (1,435) $ - Cost Balance at December 31, 2013 $ $ 10,951 2,101 $ $ 27,393 1,175 $ $ 372 - Accumulated depreciation Cost (9,243) 10,951 $ (26,453) 27,393 $ $ (366) 372 $ $ 921 102 (742) $ 921 $ $ - - $ Balance at December 31, 2014 Accumulated depreciation $ 1,708 (9,243) $ 940 (26,453) $ 6 (366) $ 179 $ - (742) - - - - $ 3,378 (37,318) $ 39,637 $ 3,378 (36,804) $ 39,637 $ 2,833 (36,804) - 6 $ 179 940 $ $ 1,708 2,833 $ $ $ Balance at December 31, 2014 During the year ended December 31, 2014, the Company disposed of fully depreciated During the year ended December 31, 2014, the Company disposed of fully depreciated assets of $1,638, assets of $1,638, recognized a gain of $128 on the sale of those assets, and received cash recognized a gain of $128 on the sale of those assets, and received cash proceeds of $44. During the year ended December 31, 2014, the Company disposed of fully depreciated proceeds of $44. assets of $1,638, recognized a gain of $128 on the sale of those assets, and received cash In May 2014, the Company exited a leased facility in Calgary and recognized a loss on the In May 2014, the Company exited a leased facility in Calgary and recognized a loss on the disposal of proceeds of $44. disposal of leasehold improvements with a net book value of $64 and recognized a gain of leasehold improvements with a net book value of $64 and recognized a gain of $76 on the disposal of the $76 on the disposal of the remaining deferred leasehold inducement. In May 2014, the Company exited a leased facility in Calgary and recognized a loss on the remaining deferred leasehold inducement. disposal of leasehold improvements with a net book value of $64 and recognized a gain of Additionally, a gain of $316 was recognized on the settlement of an insurance claim for Additionally, a gain of $316 was recognized on the settlement of an insurance claim for damaged computer $76 on the disposal of the remaining deferred leasehold inducement. damaged computer and storage equipment. The damaged assets were fully depreciated at and storage equipment. The damaged assets were fully depreciated at the time of the claim. the time of the claim. Additionally, a gain of $316 was recognized on the settlement of an insurance claim for 7. Accounts payable and accrued liabilities: damaged computer and storage equipment. The damaged assets were fully depreciated at 7. Accounts payable and accrued liabilities: the time of the claim. 7. Accounts payable and accrued liabilities: December 31, 2014 December 31, 2013 $ $ 1,513 December 31, 2,259 2014 13 3,785 1,997 December 31, 1,936 2013 20 3,953 Accounts payable Accrued liablities (1) Other taxes payable Accounts payable Accrued liablities (1) (1) Accrued liabilities include $737 of accrued interest on convertible notes for the twelve months ended December 31, 2014. (1) Accrued liabilities include $737 of accrued interest on convertible notes for the twelve Other taxes payable $ $ $ $ months ended December 31, 2014. $ $ 1,997 1,936 20 3,953 1,513 2,259 13 3,785 (1) Accrued liabilities include $737 of accrued interest on convertible notes for the twelve months ended December 31, 2014. 2014 Annual Report | Consolidated Financial Statements 44 INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) Years ended December 31, 2014 and 2013 Page 18 8. Convertible notes: 8. Convertible notes: The following table details the liability and equity components of each convertible note, and The following table details the liability and equity components of each convertible note, and the the convertible note balance at December 31, 2014: convertible note balance at December 31, 2014: December 26, 2014 December 12, 2014 February 7, 2014 Proceeds from convertible note Transaction costs Net proceeds $ $ 500 (31) 469 Contributed surplus-conversion option Warrant liability Effective interest incurred on note discount (83) (100) 9 $ 500 (34) 466 (16) (57) 6 $ 5,000 (93) 4,907 (598) (673) 983 Total 6,000 (158) 5,842 (697) (830) 998 Carrying amount of convertible notes $ 295 $ 399 $ 4,619 $ 5,313 a. February 7, 2014, convertible promissory note: (a) February 7, 2014 convertible promissory note: On February 7, 2014, the Company issued convertible promissory notes totaling $5,000. Simple interest is payable at maturity at an annual rate of 16%. The notes are convertible into 12,367,054 On February 7, 2014, the Company issued convertible promissory notes totaling $5,000. common shares of the Company at any time at the option of the holders. Under the terms of the Simple interest is payable at maturity at an annual rate of 16%. The notes are convertible notes, the accrued interest payable on any converted principal balances will be waived at the time into 12,367,054 common shares of the Company at any time at the option of the holders. of conversion. The notes also include 3,091,572 detachable warrants to purchase Class A common Under the terms of the notes, the accrued interest payable on any converted principal shares at a per share price of C$0.56 that expire on February 7, 2017. The notes are secured by a second balances will be waived at the time of conversion. The notes also include 3,091,572 priority security interest in the Company’s amounts receivable and its two aircraft. The noteholder detachable warrants to purchase Class A common shares at a per share price of C$0.56 has a general security interest in the remaining assets of the Company on a pari pasu basis with the that expire on February 7, 2017. The notes are secured by a second priority security December 12, 2014 and December 26, 2014 convertible note holder. Any unconverted principal and interest in the Company’s amounts receivable and its two aircraft. The noteholder has a accrued interest balance is payable at maturity on February 6, 2015. The Company has the option, after general security interest in the remaining assets of the Company on a pari pasu basis with six months from the closing date of the notes, and upon sixty days’ notice, to repay the note at 116% of the December 12, 2014 and December 26, 2014 convertible note holder. Any unconverted the outstanding principal balance. The fair value of the prepayment option at December 31, 2014 was principal and accrued interest balance is payable at maturity on February 6, 2015. The $Nil. At December 31, 2014, $733 of accrued interest is included in accrued liabilities. Company has the option, after six months from the closing date of the notes, and upon sixty days’ notice, to repay the note at 116% of the outstanding principal balance. The fair value of the prepayment option at December 31, 2014 was $Nil. At December 31, 2014, $733 of accrued interest is included in accrued liabilities. The convertible notes represent hybrid instruments that need to be bifurcated between their liability and equity components. The warrants and notes are considered liabilities and the conversion option is equity. In determining the fair value of the warrant liability, the Company used the Black-Scholes The convertible notes represent hybrid instruments that need to be bifurcated between option pricing model with the following assumptions: average volatility rate of 109.3%; risk-free their liability and equity components. The warrants and notes are considered liabilities interest rate of 0.98%; expected life of three years; and an exchange rate of 0.904. The value of $673 and the conversion option is equity. In determining the fair value of the warrant liability, was established on February 7, 2014. The fair value of the convertible notes at February 7, 2014 was the Company used the Black-Scholes option pricing model with the following assumptions: determined to be $3,636 net of transaction costs of $93. The estimated discount rate is 29% which is average volatility rate of 109.3%; risk-free interest rate of 0.98%; expected life of three subject to estimation uncertainty. The discount to the convertible notes is being amortized over the years; and an exchange rate of 0.904. The value of $673 was established on February 7, term of the notes using the effective interest method. The amount of the convertible note classified as 2014. The fair value of the convertible notes at February 7, 2014 was determined to be equity is $598 and has been recorded in contributed surplus. $3,636 net of transaction costs of $93. The estimated discount rate is 29% which is subject to estimation uncertainty. The discount to the convertible notes is being amortized over b. December 12, 2014, convertible promissory note: On December 12, 2014, the Company issued a convertible promissory note for $500. Simple interest is payable at maturity at an annual rate of 16%. The note is convertible into 5,741,187 common shares of the Company at any time at the option of the holder. Under the terms of the note, the accrued interest payable on any converted principal balances will be waived at the time of conversion. The note also includes 1,137,202 detachable warrants to purchase Class A common shares at a per share price of C$0.10 that expire on December 12, 2017. The note is secured by a first priority security interest in the Company’s amounts receivable and its two aircraft. The noteholder has a general security interest in the remaining assets of the Company on a pari pasu basis with the February 2014 convertible 2014 Annual Report | Consolidated Financial Statements 45 note holders. Any unconverted principal and accrued interest balance is payable at maturity on June 12, 2015. The Company has the option upon sixty days’ notice, to repay the note at 108% of the outstanding principal balance. The fair value of the prepayment option at December 31, 2014 was $Nil. At December 31, 2014, $3 of accrued interest is included in accrued liabilities. The convertible note represents a hybrid instrument that needs to be bifurcated between its liability and equity components. The warrant and note are considered liabilities and the conversion option is equity. In determining the fair value of the warrant liability, the Company used the Black-Scholes option pricing model with the following assumptions: average volatility rate of 109.4%; risk-free interest rate of 1.02%; expected life of three years; and an exchange rate of 0.871. The value of $57 was established on December 12, 2014. The fair value of the convertible note at December 12, 2014 was determined to be $394 net of transaction costs of $34. The estimated discount rate is 17% which is subject to estimation uncertainty. The discount to the convertible note is being amortized over the term of the note using the effective interest method. The amount of the convertible note classified as equity is $16 and has been recorded in contributed surplus. c. December 26, 2014, convertible promissory note: On December 26, 2014, the Company issued a convertible promissory note for $500 to the same note holder as the December 12, 2014 convertible note. Simple interest is payable at maturity at an annual rate of 18%. The note is convertible into 8,333,333 common shares of the Company at any time at the option of the holder. Under the terms of the note, the accrued interest payable on any converted principal balances will be waived at the time of conversion. The note also includes 1,666,667 detachable warrants to purchase Class A common shares at a per share price of C$0.07 that expire on December 26, 2017. The note is secured by a first priority position security interest in the Company’s amounts receivable and its two aircraft. The noteholder has a general security interest in the remaining assets of the Company on a pari pasu basis with the February 2014 convertible note holders. Any unconverted principal and accrued interest balance is payable at maturity on March 31, 2015. The Company has the option upon thirty days’ notice, to repay the note at 105% of the outstanding principal balance. The fair value of the prepayment option at December 31, 2014 was $Nil. At December 31, 2014, $1 of accrued interest is included in accrued liabilities. The convertible note represents a hybrid instruments that needs to be bifurcated between its liability and equity components. The warrant and note are considered liabilities and the conversion option is equity. In determining the fair value of the warrant liability, the Company used the Black-Scholes option pricing model with the following assumptions: average volatility rate of 114.8%; risk-free interest rate of 1.02%; expected life of three years; and an exchange rate of 0.863. The value of $100 was established on December 26, 2014. The fair value of the convertible note at December 26, 2014 was determined to be $286 net of transaction costs of $31. The estimated discount rate is 47% which is subject to estimation uncertainty. The discount to the convertible note is being amortized over the term of the note using the effective interest method. The amount of the convertible note classified as equity is $83 and has been recorded in contributed surplus. 9. Notes payable: Notes payable includes a promissory note with a service provider. The note bears interest at 8% per annum and is secured by a last priority lien on an aircraft owned by the Company. As of December 31, 2014, the balance of the note is $1,168. Additionally, the notes payable balance includes reimbursable project development funds provided by a corporation designed to enable the development and commercialization of geomatics solutions in Canada. The funding will be received in quarterly installments through the second quarter of 2016. 2014 Annual Report | Consolidated Financial StatementsINTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) Years ended December 31, 2014 and 2013 Page 20 unconverted principal and accrued interest balance is payable at maturity on March 31, 2015. The Company has the option upon thirty days’ notice, to repay the note at 105% of the outstanding principal balance. The fair value of the prepayment option at December 31, 2014 was $Nil. At December 31, 2014, $1 of accrued interest is included in accrued liabilities. The convertible note represents a hybrid instruments that needs to be bifurcated between its liability and equity components. The warrant and note are considered liabilities and the conversion option is equity. In determining the fair value of the warrant liability, the Company used the Black-Scholes option pricing model with the following assumptions: average volatility rate of 114.8%; risk-free interest rate of 1.02%; expected life of three years; and an exchange rate of 0.863. The value of $100 was established on December 26, 2014. The fair value of the convertible note at December 26, 2014 was determined to be $286 net of transaction costs of $31. The estimated discount rate is 47% which is subject to estimation uncertainty. The discount to the convertible note is being amortized over the term of the note using the effective interest method. The amount of the convertible note classified as equity is $83 and has been recorded in contributed surplus. 9. Notes payable: Notes payable includes a promissory note with a service provider. The note bears interest at 8% per annum and is secured by a last priority lien on an aircraft owned by the Company. As of December 31, 2014, the balance of the note is $1,168. Additionally, the notes payable balance includes reimbursable project development funds provided by a corporation designed to enable the development and commercialization of geomatics solutions in Canada. The funding will be received in quarterly installments through the second quarter of 2016. During the nine months ended December 31, 2014, the first three quarterly installments totaling $130 were received. The funding is repayable During the nine months ended December 31, 2014, the first three quarterly installments totaling $130 upon the completion of a specific development project and the first sale of any of the were received. The funding is repayable upon the completion of a specific development project and resulting product(s). Repayment is to be made in quarterly installments equal to the lesser the first sale of any of the resulting product(s). Repayment is to be made in quarterly installments equal of 20% of the funding amount or 25% of the prior quarter’s sales. to the lesser of 20% of the funding amount or 25% of the prior quarter’s sales. December 31, 2014 December 31, 2013 46 Promissory note payable Reimbursable project funding INTERMAP TECHNOLOGIES CORPORATION INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) (In thousands of United States dollars, except per share information) $ Years ended December 31, 2014 and 2013 Years ended December 31, 2014 and 2013 Less current portion $ (1,168) 1,290 122 1,188 (1,188) $ $ 1,168 122 1,120 68 Page 21 - Page 21 10. Finance lease liabilities: 10. Finance lease liabilities: 10. Finance lease liabilities: Finance lease liabilities are payable as follows: Finance lease liabilities are payable as follows: Finance lease liabilities are payable as follows: December 31, 2014 December 31, 2014 Future Future minimum minimum lease lease payments payments $ $ 150 150 Interest (1) Interest (1) $ 19 $ 19 105 105 255 255 $ $ 9 9 $ 28 28 $ Less than one year Less than one year (current portion) (current portion) Between one and five years Between one and five years (long-term portion) (long-term portion) Present Present value of value of minimum minimum lease lease payments payments December 31, 2013 December 31, 2013 Future Future minimum minimum lease lease payments payments Interest (2) Interest (2) Present Present value of value of minimum minimum lease lease payments payments $ $ 131 131 $ $ 142 142 96 96 227 227 $ $ 212 354 212 354 $ $ $ 27 $ 27 $ 115 $ 115 20 $ 47 $ 20 47 192 $ 307 $ 192 307 (1) Interest rate ranging from 7.48% to 8.20%. (1) Interest rate ranging from 7.48% to 8.20%. (1) Interest rate ranging from 7.48% to 8.20%. (2) Interest rate ranging from 8.20% to 12.93%. (2) Interest rate ranging from 8.20% to 12.93%. (2) Interest rate ranging from 8.20% to 12.93%. In December 2014, the Company entered into a finance lease to purchase $35 of new In December 2014, the Company entered into a finance lease to purchase $35 of new In December 2014, the Company entered into a finance lease to purchase $35 of new telephone equipment telephone equipment (computer hardware). The lease bears interest at an implicit rate of telephone equipment (computer hardware). The lease bears interest at an implicit rate of (computer hardware). The lease bears interest at an implicit rate of 7.48% and is secured by the underlying 7.48% and is secured by the underlying assets. The lease matures in December 2019. 7.48% and is secured by the underlying assets. The lease matures in December 2019. assets. The lease matures in December 2019. In December 2013, the Company entered into a finance lease to purchase $382 of data In December 2013, the Company entered into a finance lease to purchase $382 of data In December 2013, the Company entered into a finance lease to purchase $382 of data storage equipment storage equipment and software (mapping equipment). The lease bears interest at an storage equipment and software (mapping equipment). The lease bears interest at an and software (mapping equipment). The lease bears interest at an implicit rate of 8.20% and is secured by implicit rate of 8.20% and is secured by the underlying assets. The lease matures in June implicit rate of 8.20% and is secured by the underlying assets. The lease matures in June the underlying assets. The lease matures in June 2016. 2016. 2016. In September 2011, the Company entered into a finance lease to purchase $614 of data storage equipment In September 2011, the Company entered into a finance lease to purchase $614 of data In September 2011, the Company entered into a finance lease to purchase $614 of data and software. The lease bears interest at an implicit rate of 12.93% and was secured by the underlying storage equipment and software. The lease bears interest at an implicit rate of 12.93% and storage equipment and software. The lease bears interest at an implicit rate of 12.93% and assets. The lease matured in September 2013. was secured by the underlying assets. The lease matured in September 2013. was secured by the underlying assets. The lease matured in September 2013. 11. Revenue: 11. Revenue: 11. Revenue: Details of revenue are as follows: Details of revenue are as follows: Details of revenue are as follows: For the twelve months ended December 31, For the twelve months ended December 31, Mapping services Mapping services Professional services Professional services Data licenses Data licenses 3DBI software applications 3DBI software applications 2014 2014 2013 2013 $ $ $ $ 2,886 2,886 869 869 3,275 3,275 1,224 1,224 8,254 8,254 18,041 1,034 3,915 1,452 24,442 18,041 1,034 3,915 1,452 24,442 $ $ $ $ 2014 Annual Report | Consolidated Financial Statements INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) Years ended December 31, 2014 and 2013 Page 22 Years ended December 31, 2014 and 2013 12. Operating costs: Details of operating costs are as follows: 12. Operating costs: 12. Operating costs: For the twelve months ended December 31, Details of operating costs are as follows: Details of operating costs are as follows: Page 22 2014 2013 47 For the twelve months ended December 31, Personnel Purchased services & materials (1) Travel Facilities and other expenses (2) Personnel Purchased services & materials (1) Travel Facilities and other expenses (2) 12,430 7,784 1,577 1,306 (1) Purchased services and materials include aircraft costs, project costs, professional and 23,097 12,096 5,532 1,025 2,065 20,718 $ $ $ $ $ $ consulting fees, and selling and marketing costs. (1) Purchased services and materials include aircraft costs, project costs, professional and consulting fees, and selling and (1) Purchased services and materials include aircraft costs, project costs, professional and (2) Includes a facility closure provision reversal of $678 during the twelve months ended marketing costs. (2) Includes a facility closure provision reversal of $678 during the twelve months ended December 31, 2013. December 31, 2013. (2) Includes a facility closure provision reversal of $678 during the twelve months ended consulting fees, and selling and marketing costs. $ $ 2014 12,096 5,532 1,025 2,065 20,718 2013 12,430 7,784 1,577 1,306 23,097 Details of finance costs are as follows: Details of finance costs are as follows: December 31, 2013. Details of finance costs are as follows: Year ended December 31, 2014 (as restated - Note 5) 2013 $ (as restated - Note 5) 2013 839 64 48 $ 951 839 64 48 951 $ 1,878 29 99 2,006 $ $ $ 2014 1,878 29 99 $ 2,006 $ Year ended December 31, Convertible note Notes payable Finance lease Convertible note Notes payable Finance lease 13. Share capital: 13. Share capital: INTERMAP TECHNOLOGIES CORPORATION (a) Authorized: a. Authorized: 13. Share capital: Notes to Consolidated Financial Statements The authorized share capital of the Company consists of an unlimited number of Class A The authorized share capital of the Company consists of an unlimited number of Class A common (a) Authorized: (In thousands of United States dollars, except per share information) common shares and an unlimited number of Class A participating preferred shares. There shares and an unlimited number of Class A participating preferred shares. There are no Class A The authorized share capital of the Company consists of an unlimited number of Class A are no Class A participating preferred shares outstanding. participating preferred shares outstanding. Page 23 Years ended December 31, 2014 and 2013 common shares and an unlimited number of Class A participating preferred shares. There are no Class A participating preferred shares outstanding. b. (b) Issued: Issued: Class A common shares Shares Amount Shares Amount December 31, 2014 Number of (as restated - Note 5) December 31, 2013 Number of Balance, beginning of period: Unrestricted shares Restricted shares held in escrow Share-based compensation Restricted shares released from escrow and cancelled Issuance of common shares for conversion of convertible note Securities issuance costs Balance, end of period: Components of issued shares: Unrestricted shares Restricted shares held in escrow 91,613,401 526,098 $ 194,337 - 78,887,915 526,098 $ 189,263 - 169,264 (526,098) 40 - 210,010 - 81 - - - 91,782,665 - - 194,377 $ 12,515,476 - 92,139,499 4,999 (6) 194,337 $ $ 91,782,665 194,377 - - 194,377 91,782,665 $ $ 91,613,401 194,337 526,098 - 194,337 92,139,499 $ On June 11, 2014, 169,264 Class A common shares were issued to directors of the Company as On June 11, 2014, 169,264 Class A common shares were issued to directors of the compensation for services. Compensation expense of $40 for these Class A common shares is included Company as compensation for services. Compensation expense of $40 for these Class A in operating costs (see Note 13(i)). common shares is included in operating costs (see Note 13(i)). On March 13, 2014, 526,098 Class A common shares originally issued in 2011, pursuant to the five year employment agreement with the Company’s Chief Executive Officer and held in escrow for release upon achievement of certain market performance conditions, were released from escrow and cancelled. On August 28, 2013, 5,000,000 Class A common shares were issued upon conversion to the holder of a convertible promissory note. The value attributed to the conversion was $1,997 and includes the accrued interest of $209 attributable to the principal balance converted of $999, and $789 for the proportionate share of the conversion option liability. On June 27, 2013, 7,515,476 Class A common shares were issued upon conversion to the holder of a convertible promissory note. The value attributed to the conversion was $3,002 and includes the accrued interest of $316 attributable to the principal balance converted of $1,501, and $1,185 for the proportionate share of the conversion option. On June 13, 2013, 210,010 Class A common shares were issued to directors of the Company as compensation for services. Compensation expense of $81 for these Class A common shares is included in operating costs (see Note 13(i)). 2014 Annual Report | Consolidated Financial Statements 48 On March 13, 2014, 526,098 Class A common shares originally issued in 2011, pursuant to the five year employment agreement with the Company’s Chief Executive Officer and held in escrow for release upon achievement of certain market performance conditions, were released from escrow and cancelled. On August 28, 2013, 5,000,000 Class A common shares were issued upon conversion to the holder of a convertible promissory note. The value attributed to the conversion was $1,997 and includes the accrued interest of $209 attributable to the principal balance converted of $999, and $789 for the proportionate share of the conversion option liability. On June 27, 2013, 7,515,476 Class A common shares were issued upon conversion to the holder of a convertible promissory note. The value attributed to the conversion was $3,002 and includes the accrued interest of $316 attributable to the principal balance converted of $1,501, and $1,185 for the proportionate share of the conversion option. INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) On June 13, 2013, 210,010 Class A common shares were issued to directors of the Company as compensation for services. Compensation expense of $81 for these Class A common shares is included Page 24 in operating costs (see Note 13(i)). Years ended December 31, 2014 and 2013 c. Contributed surplus: (c) Contributed surplus: Balance, beginning of period Share-based compensation Conversion option of convertible note Issuance costs of convertible note Deferred tax effect of convertible note Balance, end of period d. Earnings (loss) per share: (d) Earnings (loss) per share: December 31, 2014 (as restated) December 31, 2013 $ 10,671 408 704 (5) (383) $ 10,222 449 - - - $ 11,395 $ 10,671 The calculation of earnings (loss) per share is based on the weighted average number of The calculation of earnings (loss) per share is based on the weighted average number of Class A common shares outstanding. Where the impact of the exercise of options or warrants is anti-dilutive, Class A common shares outstanding. Where the impact of the exercise of options or they are not included in the calculation of diluted loss per share. The Company has incurred a net loss warrants is anti-dilutive, they are not included in the calculation of diluted loss per share. for each period presented and the inclusion of the outstanding options and warrants in the loss per The Company has incurred a net loss for each period presented and the inclusion of the share calculation are considered to be anti-dilutive and are therefore not included in the calculation. outstanding options and warrants in the loss per share calculation are considered to be anti-dilutive and are therefore not included in the calculation. The underlying Class A common shares pertaining to 7,427,400 outstanding share options and The underlying Class A common shares pertaining to 7,427,400 outstanding share options 7,595,441 outstanding warrants could potentially dilute earnings. and 7,595,441 outstanding warrants could potentially dilute earnings. e. Director’s share compensation plan: (e) Director’s share compensation plan: The Company has a director’s share compensation plan which originally allowed for the issuance The Company has a director’s share compensation plan which originally allowed for the of up to 400,000 shares of the Company’s Class A common shares to non-employee directors of the issuance of up to 400,000 shares of the Company’s Class A common shares to non- Company as part of their annual compensation and was amended in 2011 to 1,400,000 shares. At the employee directors of the Company as part of their annual compensation and was Annual General and Special Meeting of the Shareholders on August 9, 2012, an amendment to the amended in 2011 to 1,400,000 shares. At the Annual General and Special Meeting of the share compensation plan was approved to increase the maximum number of Class A common shares Shareholders on August 9, 2012, an amendment to the share compensation plan was of the Corporation issuable thereunder from 1,400,000 to 2,400,000. As of December 31, 2014, 727,139 approved to increase the maximum number of Class A common shares of the Corporation Class A common shares remain available under the plan. Compensation expense for issued shares is issuable thereunder from 1,400,000 to 2,400,000. As of December 31, 2014, 727,139 Class included in operating costs. A common shares remain available under the plan. Compensation expense for issued shares is included in operating costs. (f) Employee share compensation plan: The Company established an employee share compensation plan to compensate employees for services performed. The plan was approved by the shareholders of the Company at the Annual General Meeting on May 12, 2009. The plan originally allowed for the issuance of up to 1,500,000 shares of the Company’s Class A common shares to employees. At the Annual General and Special Meeting of the Shareholders on August 3, 2011, an amendment to the share compensation plan was approved to increase the maximum number of Class A common shares of the Corporation issuable thereunder from 1,500,000 to 4,000,000. At the Annual General and Special Meeting of the Shareholders on August 2014 Annual Report | Consolidated Financial Statements f. Employee share compensation plan: 49 Years ended December 31, 2014 and 2013 INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) The Company established an employee share compensation plan to compensate employees for services performed. The plan was approved by the shareholders of the Company at the Annual General Meeting on May 12, 2009. The plan originally allowed for the issuance of up to 1,500,000 shares of the Company’s Class A common shares to employees. At the Annual General and Special Meeting of the Shareholders on August 3, 2011, an amendment to the share compensation plan was approved to Page 25 increase the maximum number of Class A common shares of the Corporation issuable thereunder from 14, 2014, an amendment to the share compensation plan was approved to increase the 1,500,000 to 4,000,000. At the Annual General and Special Meeting of the Shareholders on August 14, maximum number of Class A common shares of the Corporation issuable thereunder from 2014, an amendment to the share compensation plan was approved to increase the maximum number 4,000,000 to 8,000,000. As of December 31, 2014, 6,794,812 Class A common shares of Class A common shares of the Corporation issuable thereunder from 4,000,000 to 8,000,000. As of remain available for issuance under the plan. Compensation expense for issued shares is December 31, 2014, 6,794,812 Class A common shares remain available for issuance under the plan. included in operating costs. Compensation expense for issued shares is included in operating costs. (g) Share option plan: g. Share option plan: The Company established a share option plan to provide long-term incentives to attract, The Company established a share option plan to provide long-term incentives to attract, motivate, and motivate, and retain certain key employees, officers, directors, and consultants providing retain certain key employees, officers, directors, and consultants providing services to the Company. services to the Company. The plan permits the granting of options to purchase up to 10% The plan permits the granting of options to purchase up to 10% of the outstanding Class A common of the outstanding Class A common shares of the Company. As of December 31, 2014, shares of the Company. As of December 31, 2014, 9,178,267 Class A common shares were authorized 9,178,267 Class A common shares were authorized under the plan, of which 7,427,400 share under the plan, of which 7,427,400 share options are issued and outstanding and 1,750,867 options options are issued and outstanding and 1,750,867 options remain available for future remain available for future issuance. Under the plan, no one individual shall be granted an option issuance. Under the plan, no one individual shall be granted an option resulting in resulting in cumulative grants in excess of 5% of the issued and outstanding Class A common shares cumulative grants in excess of 5% of the issued and outstanding Class A common shares of of the Company. In addition, the exercise price of each option shall not be less than the market price the Company. In addition, the exercise price of each option shall not be less than the of the Company’s Class A common shares on the date of grant. The options are exercisable for a period market price of the Company’s Class A common shares on the date of grant. The options of not greater than six years, and generally vest over a period of one to four years. Options granted to are exercisable for a period of not greater than six years, and generally vest over a period of directors generally vest on the date of the grant and expire on the fifth anniversary of the date of such one to four years. Options granted to directors generally vest on the date of the grant and grant. expire on the fifth anniversary of the date of such grant. The following table summarizes information regarding share options outstanding: The following table summarizes information regarding share options outstanding: Options outstanding, beginning of period Granted Expired Forfeitures Options outstanding, end of period December 31, 2014 December 31, 2013 Number of shares under option Weighted average exercise price (CDN) Number of shares under option Weighted average exercise price (CDN) 6,287,320 1,839,630 (462,550) (237,000) 7,427,400 $ $ 0.55 0.28 1.04 0.33 0.46 4,846,320 1,930,000 (373,625) (115,375) 6,287,320 $ $ 0.82 0.40 3.18 0.56 0.55 Options exercisable, end of period 4,398,592 $ 0.53 3,850,154 $ 0.62 2014 Annual Report | Consolidated Financial Statements 50 INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) Years ended December 31, 2014 and 2013 Page 26 Exercise Price (CDN$) 0.17 0.24 0.25 0.27 0.29 0.33 0.38 0.43 0.44 0.46 0.48 0.50 0.66 1.60 1.84 Options outstanding 25,000 50,000 134,630 20,000 1,505,000 700,000 40,000 1,142,240 1,535,000 778,230 450,000 450,000 300,000 51,000 246,300 7,427,400 Weighted average remaining contractual life 5.62 years 5.44 years 4.12 years 3.36 years 5.17 years 3.84 years 4.37 years 2.25 years 3.78 years 2.96 years 2.01 years 1.93 years 1.81 years 0.98 years 0.99 years 3.36 years Options exercisable - - 129,630 10,000 25,000 550,000 10,000 1,134,240 627,500 583,672 337,500 450,000 243,750 51,000 246,300 4,398,592 During the twelve months ended December 31, 2014, 1,839,630 (year ended December 31, During the twelve months ended December 31, 2014, 1,839,630 (year ended December 31, 2013 – 2013 – 1,930,000) options were granted at a weighted-average grant date fair value of 1,930,000) options were granted at a weighted-average grant date fair value of C$0.22 per share (year C$0.22 per share (year ended December 31, 2013 – C$0.31), determined using the Black- ended December 31, 2013 – C$0.31), determined using the Black-Scholes option pricing model on the Scholes option pricing model on the date of grant with the following assumptions: share date of grant with the following assumptions: share price equal to the TSX closing price on the date of price equal to the TSX closing price on the date of grant, expected dividend yield 0% (year grant, expected dividend yield 0% (year ended December 31, 2013 – 0%), risk-free interest rate ranging ended December 31, 2013 – 0%), risk-free interest rate ranging from 1.02% to 1.97% (year from 1.02% to 1.97% (year ended December 31, 2013 – 1.41% to 2.13%), volatilities ranging from 98.9% ended December 31, 2013 – 1.41% to 2.13%), volatilities ranging from 98.9% to 108.9% to 108.9% (year ended December 31, 2013 – 94.6% to 103.0%), and expected lives of five to six years. Volatilities are calculated based on the actual historical trading statistics of the Company’s Class A (year ended December 31, 2013 – 94.6% to 103.0%), and expected lives of five to six years. common shares for the period commensurate with the expected option term. The estimated forfeiture Volatilities are calculated based on the actual historical trading statistics of the Company’s rate was 5.43% (year ended December 31, 2013 – 5.43%). Class A common shares for the period commensurate with the expected option term. The estimated forfeiture rate was 5.43% (year ended December 31, 2013 – 5.43%). h. Long-term incentive plan: (h) Long-term incentive plan: During the third quarter of 2014, the Board of Directors approved the terms of a long-term incentive plan (LTIP) intended to retain and compensate senior management of the Company. The LTIP is a share- During the third quarter of 2014, the Board of Directors approved the terms of a long-term based payments plan, based on the average stock price of the Company during the last quarter of incentive plan (LTIP) intended to retain and compensate senior management of the the year ended December 31, 2015, and includes the award of up to 2,398,000 common shares to be Company. The LTIP is a share-based payments plan, based on the average stock price of the issued as equity-settled share-based compensation and up to 3,597,000 common shares to be settled Company during the last quarter of the year ended December 31, 2015, and includes the in either cash or common shares, at the discretion of the Board of Directors. Any awards settled in award of up to 2,398,000 common shares to be issued as equity-settled share-based cash will be paid 50% of the earned award on March 31, 2016 and 50% of the earned award on March compensation and up to 3,597,000 common shares to be settled in either cash or common 31, 2017, subject to predetermined working capital thresholds. To receive the awards, the eligible shares, at the discretion of the Board of Directors. Any awards settled in cash will be paid employees must be employed by the Company on the scheduled payment dates. 50% of the earned award on March 31, 2016 and 50% of the earned award on March 31, The fair value of the awards is subject to estimation uncertainty and was calculated using a Monte 2017, subject to predetermined working capital thresholds. To receive the awards, the Carlo simulation model with the following assumptions: expected dividend yield 0%, risk-free interest eligible employees must be employed by the Company on the scheduled payment dates. rate of 1.02%, volatility of 94.35%, grant date of August 8, 2014 and expiration date of December 31, The fair value of the awards is subject to estimation uncertainty and was calculated using a 2015. Volatilities are calculated based on the actual historical trading statistics of the Company’s Class A Monte Carlo simulation model with the following assumptions: expected dividend yield 0%, common shares with a 1.4 year historical look back, commensurate with the term of the LTIP. risk-free interest rate of 1.02%, volatility of 94.35%, grant date of August 8, 2014 and The grant date fair value of the equity-settled portion of the LTIP was $133 and is charged to non-cash compensation expense over the service period, which ends March 31, 2016, with a corresponding charge to contributed surplus. For the year ending December 31, 2014, $31 has been charged to non- cash compensation expense and as of December 31, 2014, $31 is included in contributed surplus. 2014 Annual Report | Consolidated Financial Statements INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) Years ended December 31, 2014 and 2013 Page 27 expiration date of December 31, 2015. Volatilities are calculated based on the actual historical trading statistics of the Company’s Class A common shares with a 1.4 year historical look back, commensurate with the term of the LTIP. The grant date fair value of the equity-settled portion of the LTIP was $133 and is charged to non-cash compensation expense over the service period, which ends March 31, 2016, with a corresponding charge to contributed surplus. For the year ending December 31, 2014, $31 has been charged to non-cash compensation expense and as of December 31, 2014, $31 is included in contributed surplus. The grant date fair value of the optional settlement portion of the LTIP was $88 for the 50% that will be paid in 2016 and $81 for the 50% that will be paid in 2017, subject to The grant date fair value of the optional settlement portion of the LTIP was $88 for the 50% that will predetermined working capital thresholds, and was determined using a discount rate of be paid in 2016 and $81 for the 50% that will be paid in 2017, subject to predetermined working 8.97%. The fair value of the amount estimated to be payable to employees under the capital thresholds, and was determined using a discount rate of 8.97%. The fair value of the amount optional settlement portion of the LTIP is charged to non-cash compensation expense with estimated to be payable to employees under the optional settlement portion of the LTIP is charged to a corresponding increase in liabilities, over the service period, and will be re-measured to non-cash compensation expense with a corresponding increase in liabilities, over the service period, the current fair value at each reporting date. Any changes in the liability are recognized in and will be re-measured to the current fair value at each reporting date. Any changes in the liability are profit or loss. For the year ended December 31, 2014, $6 has been charged to non-cash recognized in profit or loss. For the year ended December 31, 2014, $6 has been charged to non-cash compensation expense and as of December 31, 2014, $6 is included in other long-term compensation expense and as of December 31, 2014, $6 is included in other long-term liabilities. liabilities. i. (i) Share-based compensation expense: Share-based compensation expense: Non-cash compensation expense has been included in operating costs with respect to the Non-cash compensation expense has been included in operating costs with respect to the LTIP, share LTIP, share options and shares granted to employees and non-employees as follows: options and shares granted to employees and non-employees as follows: 51 For the twelve months ended December 31, INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) Employees Non-employees $ 2014 389 65 $ 2013 353 177 Years ended December 31, 2014 and 2013 Non-cash compensation $ 454 $ 530 Page 28 14. Class A common share purchase warrants: 14. Class A common share purchase warrants: The following table details the number of Class A common share purchase warrants The following table details the number of Class A common share purchase warrants outstanding at each outstanding at each balance sheet date. balance sheet date. Grant Date Expiry Date Exercise Price (CDN) Granted Expired January 1, 2013 December 31, 2013 Number of Warrants Outstanding 19,050,000 19,050,000 2/7/2014 2/7/2017 $ 0.56 3,091,572 - 3,091,572 4/28/2011 4/28/2014 $ 0.40 - (1,225,000) (1,225,000) 4/28/2011 4/28/2014 12/12/2014 12/12/2017 12/26/2014 12/26/2017 $ $ $ 0.48 - (16,125,000) (16,125,000) 0.10 1,137,202 - 1,137,202 0.07 1,666,667 - 1,666,667 December 31, 2014 5,895,441 (17,350,000) 7,595,441 The following table details the value of the broker and non-broker Class A common share purchase warrants outstanding at each balance sheet date. Non-Broker Broker Number of Warrants Value Number of Warrants Value1 Total Number of Warrants Value Balance at January 1, 2013 17,825,000 $ 3,083 1,225,000 $ - 19,050,000 $ 3,083 Revaluation - (1,797) - - - (1,797) Balance at December 31, 2013 17,825,000 $ 1,286 1,225,000 $ - 19,050,000 $ 1,286 Issued Expired Revaluation 5,895,441 830 - (16,125,000) (34) (1,225,000) 5,895,441 830 (17,350,000) (34) - - - - (1,856) - - (1,856) Balance at December 31, 2014 7,595,441 $ 226 - $ - 7,595,441 $ 226 1Non-broker warrants were accounted for as part of share capital. Each warrant entitles its holder to purchase one Class A common share. The warrants are denominated in Canadian dollars, a currency different from the Company’s functional 2014 Annual Report | Consolidated Financial Statements INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) Years ended December 31, 2014 and 2013 Page 28 14. Class A common share purchase warrants: The following table details the number of Class A common share purchase warrants outstanding at each balance sheet date. Grant Date Expiry Date Granted Expired Exercise Price (CDN) Number of Warrants Outstanding 19,050,000 19,050,000 January 1, 2013 December 31, 2013 2/7/2014 2/7/2017 $ 0.56 3,091,572 - 3,091,572 4/28/2011 4/28/2014 $ 0.40 - (1,225,000) (1,225,000) 4/28/2011 4/28/2014 12/12/2014 12/12/2017 12/26/2014 12/26/2017 $ $ $ 0.48 - (16,125,000) (16,125,000) 0.10 1,137,202 - 1,137,202 0.07 1,666,667 - 1,666,667 December 31, 2014 5,895,441 (17,350,000) 7,595,441 52 The following table details the value of the broker and non-broker Class A common share purchase warrants The following table details the value of the broker and non-broker Class A common share purchase warrants outstanding at each balance sheet date. outstanding at each balance sheet date. Non-Broker Broker Number of Warrants Value Number of Warrants Value1 Total Number of Warrants Value Balance at January 1, 2013 17,825,000 $ 3,083 1,225,000 $ - 19,050,000 $ 3,083 Revaluation - (1,797) - - - (1,797) Balance at December 31, 2013 17,825,000 $ 1,286 1,225,000 $ - 19,050,000 $ 1,286 Issued Expired Revaluation 5,895,441 830 - (16,125,000) (34) (1,225,000) - (1,856) - - - - 5,895,441 830 (17,350,000) (34) - (1,856) Balance at December 31, 2014 7,595,441 $ 226 - $ - 7,595,441 $ 226 (1) Non-broker warrants were accounted for as part of share capital. 1Non-broker warrants were accounted for as part of share capital. Each warrant entitles its holder to purchase one Class A common share. The warrants are denominated in Canadian dollars, a currency different from the Company’s functional currency. The non-broker warrants are Each warrant entitles its holder to purchase one Class A common share. The warrants are recognized as a financial liability at fair value through profit and loss. denominated in Canadian dollars, a currency different from the Company’s functional On December 31, 2013, the non-broker warrants issued in 2011 and 2012 were re-valued to $1,286 using the Black-Scholes option pricing model with the following assumptions: exercise price of $0.31-$0.48; average volatility rate of 89.2%-120.2%; risk-free interest rate of 1.07%; expected life of 5-18 months; and an exchange rate of 0.940. On January 1, 2013, the non-broker warrants issued in 2011 and 2012 were re-valued to $3,083 using the Black-Scholes option pricing model with the following assumptions: exercise price of $0.31-$0.48; average volatility rate of 113.7%-123.9%; risk-free interest rate of 1.10%; expected life of 17-30 months; and an exchange rate of 1.005. In determining the fair value of the non-broker warrants issued on February 7, 2014, the Company used the Black-Scholes option pricing model with the following assumptions: exercise price of $0.56; average volatility rate of 109.3%; risk-free interest rate of 0.98%; expected life of three years; and an exchange rate of 0.904. The value of $673 was established on February 7, 2014 and subsequently revalued to $97 on December 31, 2014 utilizing the Black-Scholes option pricing model with the following assumptions: exercise price of $0.08; average volatility rate of 115.8%; risk-free interest rate of 1.02%; expected life of three years; and an exchange rate of 0.862. In determining the fair value of the non-broker warrants issued on December 12, 2014, the Company used the Black-Scholes option pricing model with the following assumptions: exercise price of $0.10; average volatility rate of 109.4%; risk-free interest rate of 1.02%; expected life of three years; and an exchange rate of 0.871. The value of $57 was established on December 12, 2014 and subsequently revalued on to $39 December 31, 2014 utilizing the Black-Scholes option pricing model with the following assumptions: exercise price of $0.10; average volatility rate of 116.7%; risk-free interest rate of 1.02%; expected life of three years; and an exchange rate of 0.862. In determining the fair value of the non-broker warrants issued on December 26, 2014, the Company used the Black-Scholes option pricing model with the following assumptions: exercise price of $0.07; average volatility rate of 114.8%; risk-free interest rate of 1.02%; expected life of three years; and an exchange rate of 0.863. The value of $100 was established on December 26, 2014 and subsequently revalued to $63 on December 31, 2014 utilizing the Black-Scholes option pricing model with the following assumptions: exercise price of $0.07; average volatility rate of 116.0%; risk-free interest rate of 1.02%; expected life of three years; and an exchange rate of 0.862. 2014 Annual Report | Consolidated Financial Statements INTERMAP TECHNOLOGIES CORPORATION INTERMAP TECHNOLOGIES CORPORATION INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) (In thousands of United States dollars, except per share information) (In thousands of United States dollars, except per share information) Years ended December 31, 2014 and 2013 Years ended December 31, 2014 and 2013 Years ended December 31, 2014 and 2013 Page 30 Page 30 Page 30 53 15. Income taxes: a. Current tax (expense) recovery: 15. Income Taxes: 15. Income Taxes: 15. Income Taxes: (a) Current tax (expense) recovery: (a) Current tax (expense) recovery: (a) Current tax (expense) recovery: December 31 December 31 December 31 Current period Current period Current period Adjustment for prior periods Adjustment for prior periods Adjustment for prior periods 2014 2014 2014 $ - $ - - $ - - - $ - $ - $ - 2013 2013 2013 $ (28) $ (28) (28) $ - - - $ (28) $ (28) $ (28) b. Deferred tax recovery: c. Reconciliation of effective tax rate: 2014 2014 2014 383 383 383 $ $ $ 2013 2013 2013 $ - $ - $ - (b) Deferred tax recovery: (b) Deferred tax recovery: (b) Deferred tax recovery: December 31 December 31 December 31 Origination and reversal of temporary differences Origination and reversal of temporary differences Origination and reversal of temporary differences During 2014, the Company recognized $383 (2013 - nil) in deferred tax expense related to the During 2014, the Company recognized $383 (2013 - nil) in deferred tax expense related to During 2014, the Company recognized $383 (2013 - nil) in deferred tax expense related to During 2014, the Company recognized $383 (2013 - nil) in deferred tax expense related to the convertible note directly in equity. convertible note directly in equity. the convertible note directly in equity. the convertible note directly in equity. (c) Reconciliation of effective tax rate: (c) Reconciliation of effective tax rate: (c) Reconciliation of effective tax rate: Income tax expense varies from the amount that would be computed by applying the basic Income tax expense varies from the amount that would be computed by applying the basic federal Income tax expense varies from the amount that would be computed by applying the basic Income tax expense varies from the amount that would be computed by applying the basic federal and provincial income tax rates to the net loss before taxes as follows: federal and provincial income tax rates to the net loss before taxes as follows: and provincial income tax rates to the net loss before taxes as follows: federal and provincial income tax rates to the net loss before taxes as follows: December 31, 2013 December 31, 2013 December 31, 2013 Losses, excluding income tax (12,420) Losses, excluding income tax (12,420) Losses, excluding income tax (12,420) Tax rate 25.0% Tax rate 25.0% Tax rate 25.0% Expected Canadian income tax recovery 3,105 Expected Canadian income tax recovery 3,105 Expected Canadian income tax recovery 3,105 Decrease resulting from: Decrease resulting from: Decrease resulting from: 2013 2013 2013 (13,501) (13,501) (13,501) 25.0% 25.0% 25.0% 3,375 3,375 3,375 $ $ $ $ $ $ $ $ $ $ $ $ Change in unrecognized temporary differences Change in unrecognized temporary differences Change in unrecognized temporary differences Difference between Canadian statutory rate and those Difference between Canadian statutory rate and those Difference between Canadian statutory rate and those applicable to U.S. and other foreign subsidiaries applicable to U.S. and other foreign subsidiaries applicable to U.S. and other foreign subsidiaries Non-deductible expenses and non-taxable income Non-deductible expenses and non-taxable income Non-deductible expenses and non-taxable income Adjustment for prior years income tax matters Adjustment for prior years income tax matters Adjustment for prior years income tax matters Other Other Other (4,417) (4,417) (4,417) 1,595 1,595 1,595 183 183 183 2 2 2 (85) (85) (85) 383 383 383 INTERMAP TECHNOLOGIES CORPORATION INTERMAP TECHNOLOGIES CORPORATION d. Recognized deferred tax assets and liabilities: (d) Recognized deferred tax assets and liabilities: (d) Recognized deferred tax assets and liabilities: Notes to Consolidated Financial Statements (d) Recognized deferred tax assets and liabilities: Notes to Consolidated Financial Statements Deferred income taxes reflect the impact of temporary differences between amounts of assets and (In thousands of United States dollars, except per share information) Deferred income taxes reflect the impact of temporary differences between amounts of (In thousands of United States dollars, except per share information) Deferred income taxes reflect the impact of temporary differences between amounts of Deferred income taxes reflect the impact of temporary differences between amounts of liabilities for financial reporting purposes and such amounts as measured by tax laws. Deferred tax assets and liabilities for financial reporting purposes and such amounts as measured by tax assets and liabilities for financial reporting purposes and such amounts as measured by tax Page 31 Page 31 assets and liabilities for financial reporting purposes and such amounts as measured by tax assets and liabilities recognized at December 31, 2014 and 2013, are as follows: laws. Deferred tax assets and liabilities recognized at December 31, 2014 and 2013, are as laws. Deferred tax assets and liabilities recognized at December 31, 2014 and 2013, are as laws. Deferred tax assets and liabilities recognized at December 31, 2014 and 2013, are as follows: follows: follows: December 31, December 31, (4,946) (4,946) (4,946) 1,752 1,752 1,752 (207) (207) (207) (4) (4) (4) 2 2 2 (28) (28) (28) Years ended December 31, 2014 and 2013 Years ended December 31, 2014 and 2013 $ $ $ $ $ $ Liabilities Liabilities Assets Assets 2013 2013 2013 2013 2013 2013 Net Net 2014 2014 2014 2014 2014 2014 Property and equipment Property and equipment Convertible note Convertible note Tax loss carryforwards Tax loss carryforwards Tax (assets) liabilities Tax (assets) liabilities Set off of tax Set off of tax Net tax (assets) liabilities Net tax (assets) liabilities $ $ $ $ $ $ $ $ $ $ $ $ - - - - (341) (341) (341) (341) 341 341 - - - - - - (677) (677) (677) (677) 677 677 - - 209 209 132 132 - - 341 341 (341) (341) - - 677 677 - - - - 677 677 (677) (677) - - 209 209 132 132 (341) (341) - - - - - - 677 677 - - (677) (677) - - - - - - $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ e. Unrecognized deferred tax assets: (e) Unrecognized deferred tax assets: (e) Unrecognized deferred tax assets: Deferred tax assets have not been recognized in respect of the following items: Deferred tax assets have not been recognized in respect of the following items: Deferred tax assets have not been recognized in respect of the following items: December 31 December 31 Deductible temporary differences Deductible temporary differences Tax loss carryforwards Tax loss carryforwards 2014 2014 2013 2013 $ $ $ $ 18,327 18,327 205,521 205,521 223,848 223,848 $ $ $ $ 19,222 19,222 194,237 194,237 213,459 213,459 The deferred tax asset is recognized when it is probable that future taxable profit will be available to The deferred tax asset is recognized when it is probable that future taxable profit will be The deferred tax asset is recognized when it is probable that future taxable profit will be utilize the benefits. The Company has not recognized deferred tax assets with respect to these items available to utilize the benefits. The Company has not recognized deferred tax assets with available to utilize the benefits. The Company has not recognized deferred tax assets with respect to these items due to the uncertainty of future Company earnings. due to the uncertainty of future Company earnings. respect to these items due to the uncertainty of future Company earnings. Loss carry forwards: Loss carry forwards: At December 31, 2014 approximately $206,600 of loss carry forwards and $2,210 of tax At December 31, 2014 approximately $206,600 of loss carry forwards and $2,210 of tax credits were available in various jurisdictions. A summary of losses by year of expiry are as credits were available in various jurisdictions. A summary of losses by year of expiry are as follows: follows: Twelve months ended December 31, Twelve months ended December 31, 2015 2015 2018 2018 2020-2034 2020-2034 2,816 2,816 3,135 3,135 200,649 200,649 206,600 206,600 $ $ (f) Movement in deferred tax balances during the year: (f) Movement in deferred tax balances during the year: Balance at Balance at December 31, 2013 December 31, 2013 Recognized in Recognized in Profit and Loss Profit and Loss Recognized Recognized in Equity in Equity Balance at Balance at December 31, 2014 December 31, 2014 Property and equipment Property and equipment $ $ 677 677 $ $ (468) (468) $ $ $ $ Convertible note Convertible note Tax loss carryforwards Tax loss carryforwards - - (677) (677) 132 132 336 336 209 209 132 132 (341) (341) Net tax (assets) liabilities Net tax (assets) liabilities $ $ - - $ $ - - $ $ $ $ - - - - - - - - - - 2014 Annual Report | Consolidated Financial Statements INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements INTERMAP TECHNOLOGIES CORPORATION (In thousands of United States dollars, except per share information) Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) Years ended December 31, 2014 and 2013 Years ended December 31, 2014 and 2013 Page 31 Page 31 Net Net 2013 2014 2014 $ 209 $ 209 132 2013 $ 677 $ 677 - 132 (341) (341) - (677) (677) Assets Liabilities 2014 Assets 2013 2014 Liabilities 2013 2014 2013 $ - $ - $ - - (341) - $ - - (677) - 2014 $ 209 $ 209 132 2013 $ 677 $ 677 132 - - - - - - (341) (677) $ (341) $ (677) $ 341 $ (341) $ (677) 341 677 $ - $ - 341 $ - 677 $ - $ 341 (341) (341) $ - $ - $ 677 $ 677 $ - $ - (677) (677) $ - $ - - - $ - $ - $ - $ - - - $ - $ - (e) Unrecognized deferred tax assets: (e) Unrecognized deferred tax assets: Deferred tax assets have not been recognized in respect of the following items: Deferred tax assets have not been recognized in respect of the following items: 2014 2014 2013 2013 December 31, December 31, Property and equipment Convertible note Property and equipment Tax loss carryforwards Convertible note Tax loss carryforwards Tax (assets) liabilities Tax (assets) liabilities Set off of tax Set off of tax Net tax (assets) liabilities Net tax (assets) liabilities December 31 December 31 Deductible temporary differences Tax loss carryforwards Deductible temporary differences Tax loss carryforwards $ $ $ $ 18,327 18,327 205,521 205,521 223,848 223,848 $ $ $ $ 19,222 19,222 194,237 194,237 213,459 213,459 54 The deferred tax asset is recognized when it is probable that future taxable profit will be The deferred tax asset is recognized when it is probable that future taxable profit will be available to utilize the benefits. The Company has not recognized deferred tax assets with available to utilize the benefits. The Company has not recognized deferred tax assets with respect to these items due to the uncertainty of future Company earnings. respect to these items due to the uncertainty of future Company earnings. Loss carry forwards: Loss carry forwards: i. Loss carry forwards: At December 31, 2014 approximately $206,600 of loss carry forwards and $2,210 of tax At December 31, 2014 approximately $206,600 of loss carry forwards and $2,210 of tax credits were available in various jurisdictions. A summary of losses by year of expiry are as credits were available in various jurisdictions. A summary of losses by year of expiry are as At December 31, 2014 approximately $206,600 of loss carry forwards and $2,210 of tax credits follows: follows: were available in various jurisdictions. A summary of losses by year of expiry are as follows: Twelve months ended December 31, Twelve months ended December 31, 2015 2018 2020-2034 2015 2018 2020-2034 2,816 2,816 3,135 3,135 200,649 200,649 206,600 206,600 $ $ (f) Movement in deferred tax balances during the year: (f) Movement in deferred tax balances during the year: f. Movement in deferred tax balances during the year: Balance at December 31, 2013 Recognized in Profit and Loss Balance at December 31, 2013 INTERMAP TECHNOLOGIES CORPORATION Property and equipment (468) $ 677 INTERMAP TECHNOLOGIES CORPORATION INTERMAP TECHNOLOGIES CORPORATION Property and equipment 677 Notes to Consolidated Financial Statements Convertible note 132 - Convertible note - Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) Tax loss carryforwards 336 (677) Tax loss carryforwards (677) (In thousands of United States dollars, except per share information) (In thousands of United States dollars, except per share information) Net tax (assets) liabilities - Years ended December 31, 2014 and 2013 $ Years ended December 31, 2014 and 2013 Years ended December 31, 2014 and 2013 $ - - - $ - Recognized in Profit and Loss $ $ - Net tax (assets) liabilities (468) 132 336 - $ $ $ $ $ $ - - - - - Balance at Balance at December 31, 2014 December 31, 2014 $ $ 209 209 132 132 (341) (341) $ - Page 32 $ - Page 32 Page 32 Recognized Recognized in Equity in Equity $ 16. Commitments: 16. Commitments: 16. Commitments: 16. Commitments: The Company has commitments related to operating leases for office space and equipment The Company has commitments related to operating leases for office space and equipment The Company has commitments related to operating leases for office space and equipment The Company has commitments related to operating leases for office space and equipment which require which require the following payments for each year ending December 31: which require the following payments for each year ending December 31: which require the following payments for each year ending December 31: the following payments for each year ending December 31: 2015 2015 2015 2016 2016 2016 2017 2017 2017 2018 2018 2018 2019 2019 2019 2020 2020 2020 $ 795 795 795 $ 482 482 482 117 117 117 118 118 118 120 120 120 100 100 100 $ 1,732 1,732 $ 1,732 During the twelve months ended December 31, 2014, the Company recognized $1,114 During the twelve months ended December 31, 2014, the Company recognized $1,114 During the twelve months ended December 31, 2014, the Company recognized $1,114 During the twelve months ended December 31, 2014, the Company recognized $1,114 (December 31, 2013 (December 31, 2013 - $413, which included a facility closure provision reversal of $678) in (December 31, 2013 - $413, which included a facility closure provision reversal of $678) in (December 31, 2013 - $413, which included a facility closure provision reversal of $678) in - $413, which included a facility closure provision reversal of $678) in operating lease expense for office operating lease expense for office space. operating lease expense for office space. operating lease expense for office space. space. 17. Segmented information: 17. Segmented information: 17. Segmented information: 17. Segmented information: The operations of the Company are in one industry segment: digital mapping and related The operations of the Company are in one industry segment: digital mapping and related The operations of the Company are in one industry segment: digital mapping and related services. The operations of the Company are in one industry segment: digital mapping and related services. services. services. Geographic segments of revenue are as follows: Geographic segments of revenue are as follows: Geographic segments of revenue are as follows: Geographic segments of revenue are as follows: Year ended December 31, Year ended December 31, Year ended December 31, United States United States Asia/Pacific United States Asia/Pacific Europe Asia/Pacific Europe Europe $ $ $ $ 7,317 15,544 1,581 24,442 4,499 2,424 1,331 8,254 $ $ $ $ $ 2013 2014 $ $ $ $ 2014 2014 4,499 2,424 4,499 1,331 2,424 8,254 1,331 8,254 2014 2013 $ $ $ $ $ $ $ Property and equipment of the Company are located as follows: Property and equipment of the Company are located as follows: Property and equipment of the Company are located as follows: Property and equipment of the Company are located as follows: December 31, December 31, December 31, Canada Canada United States Canada United States Asia/Pacific United States Asia/Pacific Europe Asia/Pacific Europe Europe Intangible assets are located in the United States. Intangible assets are located in the United States. Intangible assets are located in the United States. A summary of sales to major customers that exceeded 10% of total sales during each period A summary of sales to major customers that exceeded 10% of total sales during each period A summary of sales to major customers that exceeded 10% of total sales during each period are as follows: are as follows: are as follows: Year ended December 31, Year ended December 31, Year ended December 31, Customer A Customer A Customer B Customer A Customer B Customer C Customer B Customer C Customer C 2014 2014 200 $ 200 2,609 200 $ 2,609 7 2,609 7 17 7 17 $ 2,833 2,833 17 2,833 2013 2013 96 96 3,263 96 3,263 9 3,263 9 10 9 10 3,378 3,378 10 3,378 2013 2013 4,580 4,580 24 4,580 24 13,453 24 13,453 18,057 13,453 18,057 18. Financial risk management: 18. Financial risk management: 18. Financial risk management: The Company has exposure to the following risks from its use of financial instruments: The Company has exposure to the following risks from its use of financial instruments: credit risk, market risk, liquidity risk, and capital risk. Management, the Board of The Company has exposure to the following risks from its use of financial instruments: credit risk, market risk, liquidity risk, and capital risk. Management, the Board of credit risk, market risk, liquidity risk, and capital risk. Management, the Board of $ $ $ 3,873 $ 18,057 2014 2014 2,873 2,873 986 2,873 986 14 986 14 3,873 14 3,873 $ $ $ $ $ $ $ $ $ $ 2014 2013 2013 2013 7,317 15,544 7,317 1,581 15,544 24,442 1,581 24,442 2014 Annual Report | Consolidated Financial Statements INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) Years ended December 31, 2014 and 2013 Page 32 16. Commitments: The Company has commitments related to operating leases for office space and equipment which require the following payments for each year ending December 31: 2015 2016 2017 2018 2019 2020 $ 795 482 117 118 120 100 $ 1,732 During the twelve months ended December 31, 2014, the Company recognized $1,114 (December 31, 2013 - $413, which included a facility closure provision reversal of $678) in The operations of the Company are in one industry segment: digital mapping and related operating lease expense for office space. 17. Segmented information: Geographic segments of revenue are as follows: services. Year ended December 31, United States Asia/Pacific Europe Property and equipment of the Company are located as follows: $ 4,499 $ 7,317 2014 2,424 1,331 2013 15,544 1,581 $ 8,254 $ 24,442 December 31, Canada United States Asia/Pacific Europe 2014 2013 $ $ 200 2,609 7 17 2,833 96 3,263 9 10 3,378 $ $ 55 Intangible assets are located in the United States. Intangible assets are located in the United States. A summary of sales to major customers that exceeded 10% of total sales during each period are as follows: A summary of sales to major customers that exceeded 10% of total sales during each period are as follows: Year ended December 31, 2014 2013 Customer A Customer B Customer C $ $ 2,873 986 14 3,873 4,580 24 13,453 18,057 $ $ 18. Financial risk management: 18. Financial risk management: The Company has exposure to the following risks from its use of financial instruments: The Company has exposure to the following risks from its use of financial instruments: credit risk, market credit risk, market risk, liquidity risk, and capital risk. Management, the Board of risk, liquidity risk, and capital risk. Management, the Board of Directors, and the Audit Committee monitor risk management activities and review the adequacy of such activities. This note presents information about the Company’s exposure to each of the risks as well as the objectives, policies and processes for measuring and managing those risks. The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. a. Credit risk: Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Such risks arise principally from certain financial assets held by the Company consisting of outstanding trade receivables and investment securities. The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Company’s customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk. Approximately 35 percent of the Company’s revenue is attributable to transactions with one key customer (year ended December 31, 2013 - 19 percent of the revenue was attributable to the same customer), and approximately 45 percent of the Company’s trade amounts receivable at year end are attributable to customers located in Asia/Pacific (December 31, 2013 – approximately 76 percent). The Company has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Company’s standard payment and delivery terms and conditions are offered. A significant portion of the Company’s customers have transacted with the Company in the past or are reputable large Companies and losses have occurred infrequently. The maximum exposure to credit risk of the Company at period end is the carrying value of these financial assets. INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) Years ended December 31, 2014 and 2013 Page 32 16. Commitments: The Company has commitments related to operating leases for office space and equipment which require the following payments for each year ending December 31: $ 795 482 117 118 120 100 $ 1,732 During the twelve months ended December 31, 2014, the Company recognized $1,114 (December 31, 2013 - $413, which included a facility closure provision reversal of $678) in operating lease expense for office space. 17. Segmented information: The operations of the Company are in one industry segment: digital mapping and related Geographic segments of revenue are as follows: Property and equipment of the Company are located as follows: 2015 2016 2017 2018 2019 2020 services. Year ended December 31, United States Asia/Pacific Europe December 31, Canada United States Asia/Pacific Europe are as follows: Year ended December 31, Customer A Customer B Customer C $ 4,499 $ 7,317 $ 8,254 $ 24,442 2014 2,424 1,331 2014 2,609 7 17 2013 15,544 1,581 2013 3,263 9 10 $ 200 $ 96 $ 2,833 $ 3,378 $ 2,873 $ 4,580 2014 986 14 2013 24 13,453 $ 3,873 $ 18,057 Intangible assets are located in the United States. A summary of sales to major customers that exceeded 10% of total sales during each period 18. Financial risk management: The Company has exposure to the following risks from its use of financial instruments: credit risk, market risk, liquidity risk, and capital risk. Management, the Board of 2014 Annual Report | Consolidated Financial Statements 56 i. 2014 $ $ $ $ $ 1,453 2014 $ $ $ Page 34 Page 34 Page 34 $ $ $ $ Trade receivables: 2014 1,386 9 2014 1,386 70 9 (12) 1,386 70 1,453 9 (12) 70 1,453 (12) Years ended December 31, 2014 and 2013 INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements INTERMAP TECHNOLOGIES CORPORATION (In thousands of United States dollars, except per share information) INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements Provisions for doubtful accounts are made on a customer-by-customer basis. All write downs (In thousands of United States dollars, except per share information) Years ended December 31, 2014 and 2013 Notes to Consolidated Financial Statements against receivables are recorded within sales, general and administrative expense in the (In thousands of United States dollars, except per share information) statement of operations. The Company is exposed to credit-related losses on sales to customers Years ended December 31, 2014 and 2013 losses on sales to customers outside North America due to potentially higher risks of outside North America due to potentially higher risks of collectability. collectability. losses on sales to customers outside North America due to potentially higher risks of collectability. Amounts receivable as of December 31, 2014, and December 31, 2013, consist of: Amounts receivable as of December 31, 2014, and December 31, 2013, consist of: losses on sales to customers outside North America due to potentially higher risks of December 31, December 31, collectability. Amounts receivable as of December 31, 2014, and December 31, 2013, consist of: 2013 December 31, December 31, Amounts receivable as of December 31, 2014, and December 31, 2013, consist of: 2013 Trade amounts receivable 6,245 $ December 31, December 31, 9 Employee receivables 2013 Trade amounts receivable 6,245 Other miscellaneous receivables 180 9 Employee receivables - Allowance for doubtful accounts Trade amounts receivable 6,245 Other miscellaneous receivables 180 6,434 9 Employee receivables Allowance for doubtful accounts - Other miscellaneous receivables 180 Trade amounts receivable by geography consist of: 6,434 $ - Allowance for doubtful accounts December 31, December 31, Trade amounts receivable by geography consist of: Trade amounts receivable by geography consist of: 6,434 $ 2013 December 31, December 31, 2013 414 $ December 31, December 31, 214 2013 414 4,765 214 852 414 4,765 6,245 214 852 4,765 6,245 852 Trade amounts receivable by geography consist of: 2014 United States 454 Canada 59 2014 United States 454 Asia/Pacific 620 Canada 59 Europe 253 United States 454 Asia/Pacific 620 1,386 Canada 59 Europe 253 Asia/Pacific 620 An aging of the Company’s trade amounts receivable are as follows: 1,386 Europe 253 December 31, December 31, An aging of the Company’s trade amounts receivable are as follows: 1,386 2013 2014 An aging of the Company’s trade amounts receivable are as follows: December 31, December 31, An aging of the Company’s trade amounts receivable are as follows: 2013 2014 Current 4,782 $ 760 December 31, December 31, 88 31-60 days 48 2013 2014 Current 4,782 760 61-90 days 104 14 31-60 days 88 48 1,271 Over 91 days 564 4,782 Current 760 61-90 days 104 14 88 31-60 days 6,245 48 1,386 1,271 Over 91 days 564 61-90 days 104 14 6,245 1,386 As of December 31, 2014, $578 of trade amounts receivable (December 31, 2013 - 1,271 Over 91 days 564 $1,375) were past due. The balance of the past due amounts relates to reoccurring, and 6,245 As of December 31, 2014, $578 of trade amounts receivable (December 31, 2013 - historically slow paying customers and are considered collectible. $1,375) were past due. The balance of the past due amounts relates to reoccurring, and As of December 31, 2014, $578 of trade amounts receivable (December 31, 2013 - As of December 31, 2014, $578 of trade amounts receivable (December 31, 2013 - $1,375) were historically slow paying customers and are considered collectible. $1,375) were past due. The balance of the past due amounts relates to reoccurring, and past due. The balance of the past due amounts relates to reoccurring, and historically slow paying historically slow paying customers and are considered collectible. The Company manages its credit risk surrounding cash and cash equivalents by customers and are considered collectible. dealing solely with what management believes to be reputable banks and financial The Company manages its credit risk surrounding cash and cash equivalents by Investments in securities: institutions, and limiting the allocation of excess funds into financial instruments that dealing solely with what management believes to be reputable banks and financial The Company manages its credit risk surrounding cash and cash equivalents by The Company manages its credit risk surrounding cash and cash equivalents by dealing solely management believes to be highly liquid, low risk investments. The balance at institutions, and limiting the allocation of excess funds into financial instruments that dealing solely with what management believes to be reputable banks and financial with what management believes to be reputable banks and financial institutions, and limiting December 31, 2014, is held in cash at banks within the United States, Canada, Europe, management believes to be highly liquid, low risk investments. The balance at institutions, and limiting the allocation of excess funds into financial instruments that the allocation of excess funds into financial instruments that management believes to be highly Asia, and Australia to facilitate the payment of operations in those jurisdictions. December 31, 2014, is held in cash at banks within the United States, Canada, Europe, management believes to be highly liquid, low risk investments. The balance at liquid, low risk investments. The balance at December 31, 2014, is held in cash at banks within the Asia, and Australia to facilitate the payment of operations in those jurisdictions. December 31, 2014, is held in cash at banks within the United States, Canada, Europe, United States, Canada, Europe, Asia, and Australia to facilitate the payment of operations in those Asia, and Australia to facilitate the payment of operations in those jurisdictions. (b)Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates and jurisdictions. interest rates, will affect the Company’s income or the value of its holding of financial (b)Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates and instruments. interest rates, will affect the Company’s income or the value of its holding of financial Market risk is the risk that changes in market prices, such as foreign exchange rates and Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, instruments. interest rates, will affect the Company’s income or the value of its holding of financial will affect the Company’s income or the value of its holding of financial instruments. instruments. ii. Investments in securities ii. Investments in securities ii. Investments in securities (b)Market risk $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1,386 6,245 ii. b. Market risk 2014 Annual Report | Consolidated Financial Statements INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements INTERMAP TECHNOLOGIES CORPORATION (In thousands of United States dollars, except per share information) Notes to Consolidated Financial Statements INTERMAP TECHNOLOGIES CORPORATION (In thousands of United States dollars, except per share information) Years ended December 31, 2014 and 2013 Notes to Consolidated Financial Statements Page 34 (In thousands of United States dollars, except per share information) Years ended December 31, 2014 and 2013 losses on sales to customers outside North America due to potentially higher risks of Page 34 Years ended December 31, 2014 and 2013 collectability. losses on sales to customers outside North America due to potentially higher risks of Page 34 collectability. Amounts receivable as of December 31, 2014, and December 31, 2013, consist of: losses on sales to customers outside North America due to potentially higher risks of collectability. Amounts receivable as of December 31, 2014, and December 31, 2013, consist of: December 31, December 31, Amounts receivable as of December 31, 2014, and December 31, 2013, consist of: December 31, December 31, Trade amounts receivable Employee receivables Trade amounts receivable Other miscellaneous receivables Employee receivables Allowance for doubtful accounts Trade amounts receivable Other miscellaneous receivables Employee receivables Allowance for doubtful accounts Other miscellaneous receivables Trade amounts receivable by geography consist of: Allowance for doubtful accounts $ 180 $ 6,434 Trade amounts receivable by geography consist of: Trade amounts receivable by geography consist of: An aging of the Company’s trade amounts receivable are as follows: An aging of the Company’s trade amounts receivable are as follows: $ 1,386 An aging of the Company’s trade amounts receivable are as follows: 2014 2014 1,386 9 2014 1,386 70 9 (12) 70 1,453 9 (12) 70 1,453 (12) 2014 454 59 2014 454 620 59 253 454 620 1,386 59 253 620 1,386 253 2013 2013 6,245 180 9 9 - - - 2013 414 214 2013 214 852 414 4,765 6,245 214 852 4,765 6,245 852 $ December 31, December 31, $ 2013 6,245 $ $ $ 1,386 $ $ $ 6,245 180 6,434 9 December 31, December 31, $ 1,453 2014 $ 6,434 2013 December 31, December 31, $ December 31, December 31, $ $ $ 414 4,765 $ $ $ $ $ $ December 31, December 31, 2014 $ 6,245 2013 December 31, December 31, $ December 31, December 31, $ $ $ $ $ $ $ 2014 760 48 2014 760 14 48 564 760 14 1,386 48 564 14 2013 4,782 88 2013 4,782 104 88 1,271 4,782 104 88 6,245 1,271 104 United States Canada United States Asia/Pacific Canada Europe United States Asia/Pacific Canada Europe Asia/Pacific Europe Current 31-60 days Current 61-90 days 31-60 days Over 91 days Current 61-90 days 31-60 days Over 91 days 61-90 days As of December 31, 2014, $578 of trade amounts receivable (December 31, 2013 - Over 91 days 1,271 564 $ 1,386 $ 6,245 $1,375) were past due. The balance of the past due amounts relates to reoccurring, and As of December 31, 2014, $578 of trade amounts receivable (December 31, 2013 - $ $ historically slow paying customers and are considered collectible. $1,375) were past due. The balance of the past due amounts relates to reoccurring, and As of December 31, 2014, $578 of trade amounts receivable (December 31, 2013 - 6,245 1,386 ii. Investments in securities historically slow paying customers and are considered collectible. $1,375) were past due. The balance of the past due amounts relates to reoccurring, and ii. Investments in securities historically slow paying customers and are considered collectible. The Company manages its credit risk surrounding cash and cash equivalents by ii. Investments in securities dealing solely with what management believes to be reputable banks and financial The Company manages its credit risk surrounding cash and cash equivalents by institutions, and limiting the allocation of excess funds into financial instruments that dealing solely with what management believes to be reputable banks and financial The Company manages its credit risk surrounding cash and cash equivalents by management believes to be highly liquid, low risk investments. The balance at institutions, and limiting the allocation of excess funds into financial instruments that dealing solely with what management believes to be reputable banks and financial December 31, 2014, is held in cash at banks within the United States, Canada, Europe, management believes to be highly liquid, low risk investments. The balance at institutions, and limiting the allocation of excess funds into financial instruments that Asia, and Australia to facilitate the payment of operations in those jurisdictions. December 31, 2014, is held in cash at banks within the United States, Canada, Europe, management believes to be highly liquid, low risk investments. The balance at (b)Market risk Asia, and Australia to facilitate the payment of operations in those jurisdictions. December 31, 2014, is held in cash at banks within the United States, Canada, Europe, Asia, and Australia to facilitate the payment of operations in those jurisdictions. Market risk is the risk that changes in market prices, such as foreign exchange rates and (b)Market risk (b)Market risk interest rates, will affect the Company’s income or the value of its holding of financial Market risk is the risk that changes in market prices, such as foreign exchange rates and instruments. interest rates, will affect the Company’s income or the value of its holding of financial Market risk is the risk that changes in market prices, such as foreign exchange rates and instruments. interest rates, will affect the Company’s income or the value of its holding of financial instruments. INTERMAP TECHNOLOGIES CORPORATION INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) Years ended December 31, 2014 and 2013 Years ended December 31, 2014 and 2013 Page 35 Page 35 57 i. i. i. Foreign exchange risk Foreign exchange risk Foreign exchange risk: The Company operates internationally and is exposed to foreign exchange risk from The Company operates internationally and is exposed to foreign exchange risk from The Company operates internationally and is exposed to foreign exchange risk from various various currencies, primarily the Canadian dollar, Euro, British pound, Indonesian various currencies, primarily the Canadian dollar, Euro, British pound, Indonesian currencies, primarily the Canadian dollar, Euro, British pound, Indonesian rupiah, Czech Republic rupiah, Czech Republic koruna, Philippines peso, Malaysian ringgit and Australian rupiah, Czech Republic koruna, Philippines peso, Malaysian ringgit and Australian koruna, Philippines peso, Malaysian ringgit and Australian dollar. Foreign exchange risk arises dollar. Foreign exchange risk arises from sales and purchase transactions as well as dollar. Foreign exchange risk arises from sales and purchase transactions as well as from sales and purchase transactions as well as recognized financial assets and liabilities that are recognized financial assets and liabilities that are denominated in a currency other recognized financial assets and liabilities that are denominated in a currency other than the United States dollar, which is the functional currency of the Company and the denominated in a currency other than the United States dollar, which is the functional currency of than the United States dollar, which is the functional currency of the Company and the majority of its subsidiaries. the Company and the majority of its subsidiaries. majority of its subsidiaries. The Company’s primary objective in managing its foreign exchange risk is to preserve The Company’s primary objective in managing its foreign exchange risk is to preserve sales values The Company’s primary objective in managing its foreign exchange risk is to preserve sales values and cash flows and reduce variations in performance. Although and cash flows and reduce variations in performance. Although management monitors exposure sales values and cash flows and reduce variations in performance. Although management monitors exposure to such fluctuations, it does not employ any external to such fluctuations, it does not employ any external hedging strategies to counteract the foreign management monitors exposure to such fluctuations, it does not employ any external hedging strategies to counteract the foreign currency fluctuations. currency fluctuations. hedging strategies to counteract the foreign currency fluctuations. The balances in foreign currencies at December 31, 2014, are as follows: The balances in foreign currencies at December 31, 2014, are as follows: The balances in foreign currencies at December 31, 2014, are as follows: Australian Dollar Australian Dollar Canadian Dollar Canadian Dollar Euro Euro British Pound British Pound Indonesian Rupiah Indonesian Rupiah Czech Republic Czech Koruna Republic Koruna (in USD) (in USD) Cash and cash equivalents Cash and Amounts receivable cash equivalents Accounts payable and Amounts receivable accrued liabilities Accounts payable and accrued liabilities - - $ $ $ $ $ $ (4) 81 (4) 81 (478) (478) (401) (401) The balances in foreign currencies at December 31, 2013, are as follows: The balances in foreign currencies at December 31, 2013, are as follows: The balances in foreign currencies at December 31, 2013, are as follows: $ - $ - (152) (152) (139) (139) 5 17 5 17 (188) (188) (166) (166) - 139 - 139 (725) (725) (586) (586) 53 53 (11) (11) 42 42 $ $ $ $ $ $ $ $ $ $ $ $ 13 13 $ $ $ $ 23 80 23 80 (124) (124) (21) (21) Malaysian Ringgit Malaysian Ringgit $ $ - - 66 66 - - $ $ 66 66 Philippines Peso Philippines Peso Canadian Dollar Canadian Dollar Euro Euro British Pound British Pound Indonesian Rupiah Indonesian Rupiah Czech Republic Czech Koruna Republic Koruna Malaysian Ringgit Malaysian Ringgit (in USD) (in USD) Cash and cash equivalents Cash and Amounts receivable cash equivalents Accounts payable and Amounts receivable accrued liabilities Accounts payable and accrued liabilities - - $ $ $ $ $ $ $ $ $ $ $ $ 7 144 7 144 (413) (413) (262) (262) - 2,743 - 2,743 - - 2,743 2,743 24 47 24 47 (354) (354) (283) (283) Based on the net exposures at December 31, 2014 and 2013, and assuming that all other variables Based on the net exposures at December 31, 2014 and 2013, and assuming that all remain constant, a 10% depreciation or appreciation of the United States dollar against the Based on the net exposures at December 31, 2014 and 2013, and assuming that all other variables remain constant, a 10% depreciation or appreciation of the United following currencies would result in an increase / (decrease) in net earnings by the amounts other variables remain constant, a 10% depreciation or appreciation of the United States dollar against the following currencies would result in an increase / (decrease) Page 36 shown below: States dollar against the following currencies would result in an increase / (decrease) in net earnings by the amounts shown below: in net earnings by the amounts shown below: December 31, 2014 INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) Years ended December 31, 2014 and 2013 17 4 17 4 (189) (189) (168) (168) 15 159 15 159 (177) (177) (3) (3) 43 43 (665) (665) (622) (622) - 390 - 390 - - 390 390 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ (in USD) United States dollar: Depreciates 10% Appreciates 10% December 31, 2013 (in USD) United States dollar: Depreciates 10% Appreciates 10% Australian Dollar Canadian Dollar Euro British Pound Indonesian Rupiah Czech Republic Koruna Malaysian Ringgit $ (4) 4 $ 40 (40) $ 17 (17) $ 59 (59) $ 14 (14) $ 2 (2) $ (7) 7 Philippines Peso Canadian Dollar Euro British Pound Indonesian Rupiah Czech Republic Koruna Malaysian Ringgit $ (274) 274 $ 26 (26) $ 28 (28) $ 62 (62) $ 17 (17) - $ - $ 39 (39) ii. Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Financial assets and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk. The Company’s cash and cash equivalents include short-term highly liquid investments that earn interest at market rates. The Company does not have any debt instruments outstanding with variable interest rates at December 31, 2014, or December 31, 2013. Financial liabilities that bear interest at fixed rates are subject to fair value interest rate risk. No currency hedging relationships have been established for the related monthly interest and principle payments. The Company manages its interest rate risk by minimizing financing costs on its borrowings and maximizing interest income earned on excess funds while maintaining the liquidity necessary to conduct operations on a day-to-day basis. (c) Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its obligations as they become due. The Company’s approach to managing capital is to ensure, as far as possible, that it will have sufficient liquidity to meets its obligations. The Company manages its liquidity risk by evaluating working capital availability and forecasting cash flows from operations and anticipated investing and financing activities. At December 31, 2014, the Company has a cash and cash equivalent balance of $537 (year ended December 31, 2013 – $2,420) and working capital of negative $8,748 (year ended December 31, 2013 – positive $2,593). All of the Company’s financial liabilities, other than 2014 Annual Report | Consolidated Financial Statements 58 ii. Interest rate risk: Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Financial assets and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk. The Company’s cash and cash equivalents include short-term highly liquid investments that earn interest at market rates. The Company does not have any debt instruments outstanding with variable interest rates at December 31, 2014, or December 31, 2013. Financial liabilities that bear interest at fixed rates are subject to fair value interest rate risk. No currency hedging relationships have been established for the related monthly interest and principle payments. The Company manages its interest rate risk by minimizing financing costs on its borrowings and maximizing interest income earned on excess funds while maintaining the liquidity necessary to conduct operations on a day-to-day basis. c. Liquidity risk: Liquidity risk is the risk that the Company will not be able to meet its obligations as they become due. The Company’s approach to managing capital is to ensure, as far as possible, that it will have sufficient liquidity to meets its obligations. INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) The Company manages its liquidity risk by evaluating working capital availability and forecasting cash flows from operations and anticipated investing and financing activities. At December 31, 2014, the Company has a cash and cash equivalent balance of $537 (year ended December 31, 2013 – $2,420) and working capital of negative $8,748 (year ended December 31, 2013 – positive $2,593). All of the notes payable, obligations under finance leases, and other long-term liabilities have a Company’s financial liabilities, other than notes payable, obligations under finance leases, and other contractual maturity of less than 45 days. long-term liabilities have a contractual maturity of less than 45 days. Years ended December 31, 2014 and 2013 Page 37 The following are the contractual maturities of the undiscounted cash flows of financial The following are the contractual maturities of the undiscounted cash flows of financial liabilities as of liabilities as of December 31, 2014: December 31, 2014: Payment due: In less than 3 months Between 3 months and 6 months Between 6 months and 1 year Between 1 year and 2 years Between 2 years and 5 years Accounts payable and accrued liabilities Warrant liabilities(1) Convertible Note Note payable Other long-term liabilities Obligations under finance leases $ 2,749 226 5,500 1,168 - 38 $ - $ - 500 - - 38 1,036 - - - - 75 $ - - - 122 3 $ - - - - 3 79 26 $ 9,681 $ 538 $ 1,111 $ 204 $ 29 (1) The warrant liabilities are 100% vested and can be exercised by the holders at any time; however, the obligation is non- (1) The warrant liabilities are 100% vested and can be exercised by the holders at any cash and will be settled in equity (see Note 14). time; however, the obligation is non-cash and will be settled in equity (see Note 14). The following are the contractual maturities of the undiscounted cash flows of financial liabilities as of December 31, 2013: Payment due: In less than 3 months Between 3 months and 6 months Between 6 months and 1 year Between 1 year and 2 years Between 2 years and 5 years Accounts payable and accrued liabilities $ Warrant liabilities(1) Note payable Obligations under finance leases 2,962 1,286 600 35 $ 200 - 228 35 $ 791 - 380 71 $ - - - $ - - - 142 71 $ 4,883 $ 463 $ 1,242 $ 142 $ 71 (1) The warrant liabilities are 100% vested and can be exercised by the holders at any time; however, the obligation is non-cash and will be settled in equity (see Note 14). (d) Capital risk The Company’s objectives when managing its capital risk is to safeguard its assets, while at the same time maintaining investor, creditor, and market confidence, and to sustain future development of the business and ultimately protect shareholder value. The Company manages its risks and exposures by implementing the strategies below. The Company includes shareholders’ equity, long-term notes payable and long-term portion of obligations under finance leases in the definition of capital. Total capital at December 31, 2014, was negative $6,219 (December 31, 2013 – positive $5,885). To 2014 Annual Report | Consolidated Financial Statements INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) Years ended December 31, 2014 and 2013 Page 37 notes payable, obligations under finance leases, and other long-term liabilities have a contractual maturity of less than 45 days. The following are the contractual maturities of the undiscounted cash flows of financial liabilities as of December 31, 2014: and accrued liabilities $ 2,749 $ - $ 1,036 $ - $ - Payment due: Between Between Between Between In less than 3 3 months and 6 6 months and 1 1 year and 2 2 years and 5 months months year years years 226 5,500 1,168 - 38 500 - - - 38 - - - - 75 - - 3 122 79 - - - 3 26 Accounts payable Warrant liabilities(1) Convertible Note Note payable Other long-term liabilities Obligations under finance leases $ 9,681 $ 538 $ 1,111 $ 204 $ 29 59 (1) The warrant liabilities are 100% vested and can be exercised by the holders at any time; however, the obligation is non-cash and will be settled in equity (see Note 14). The following are the contractual maturities of the undiscounted cash flows of financial The following are the contractual maturities of the undiscounted cash flows of financial liabilities as of liabilities as of December 31, 2013: December 31, 2013: Payment due: In less than 3 months Between 3 months and 6 months Between 6 months and 1 year Between 1 year and 2 years Between 2 years and 5 years Accounts payable and accrued liabilities $ Warrant liabilities(1) Note payable Obligations under finance leases 2,962 1,286 600 35 $ 200 - 228 35 $ 791 - 380 71 $ - - - $ - - - 142 71 $ 4,883 $ 463 $ 1,242 $ 142 $ 71 (1) The warrant liabilities are 100% vested and can be exercised by the holders at any time; however, the obligation is (1) The warrant liabilities are 100% vested and can be exercised by the holders at any non-cash and will be settled in equity (see Note 14). time; however, the obligation is non-cash and will be settled in equity (see Note 14). d. Capital risk: (d) Capital risk The Company’s objectives when managing its capital risk is to safeguard its assets, while at the same time maintaining investor, creditor, and market confidence, and to sustain future development of the The Company’s objectives when managing its capital risk is to safeguard its assets, while at business and ultimately protect shareholder value. The Company manages its risks and exposures by the same time maintaining investor, creditor, and market confidence, and to sustain future INTERMAP TECHNOLOGIES CORPORATION implementing the strategies below. development of the business and ultimately protect shareholder value. The Company Notes to Consolidated Financial Statements manages its risks and exposures by implementing the strategies below. (In thousands of United States dollars, except per share information) The Company includes shareholders’ equity, long-term notes payable and long-term portion of The Company includes shareholders’ equity, long-term notes payable and long-term Years ended December 31, 2014 and 2013 obligations under finance leases in the definition of capital. Total capital at December 31, 2014, was portion of obligations under finance leases in the definition of capital. Total capital at negative $6,219 (December 31, 2013 – positive $5,885). To maintain or adjust the capital structure, the maintain or adjust the capital structure, the Company may issue new shares, issue new December 31, 2014, was negative $6,219 (December 31, 2013 – positive $5,885). To Company may issue new shares, issue new debt with different characteristics, acquire or dispose of debt with different characteristics, acquire or dispose of assets, or adjust the amount of assets, or adjust the amount of cash and short-term investment balances held. cash and short-term investment balances held. Page 38 The Company has established a budgeting and planning process with a focus on cash, The Company has established a budgeting and planning process with a focus on cash, working working capital, and operational expenditures and continuously assesses its capital capital, and operational expenditures and continuously assesses its capital structure in light of current structure in light of current economic conditions and changes in the Company’s short-term economic conditions and changes in the Company’s short-term and long-term plans. Neither the and long-term plans. Neither the Company nor any of its subsidiaries are subject to Company nor any of its subsidiaries are subject to externally imposed capital requirements. externally imposed capital requirements. 19. Fair values: 19. Fair values: a. Fair value: (a) Fair value: Set out below is a comparison by class of the carrying amounts and fair value of the Set out below is a comparison by class of the carrying amounts and fair value of the Company’s Company's financial instruments that are carried in the Consolidated Balance Sheet: financial instruments that are carried in the Consolidated Balance Sheet: December 31, 2014 Carrying Amount Fair Value December 31, 2013 Carrying Amount Fair Value January 1, 2013 Fair Value Carrying Amount Financial assets Loans and receivables: Cash and cash equivalents Accounts receivable Financial liabilities Derivative financial liabilities at fair value through profit and loss: Non-broker warrants Conversion option liability Other financial liabilities: $ $ 537 1,453 1,990 $ $ 537 1,453 1,990 $ $ 2,420 6,434 8,854 $ $ 2,420 6,434 8,854 $ $ 2,055 5,735 7,790 $ $ 2,055 5,735 7,790 $ 226 - $ 226 - $ 1,286 - $ 1,286 - $ 3,083 1,994 $ 3,083 1,994 Convertible notes Accounts payable and accrued liabilities 5,313 3,785 9,324 $ 5,313 3,785 9,324 $ - 3,953 5,239 $ - 3,953 5,239 $ 1,918 4,747 11,742 $ 1,918 4,747 11,742 $ The fair values of the financial assets and liabilities are shown at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:  Cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities and provisions approximate their carrying amounts largely due to the short- term maturities of these instruments.  Convertible notes are evaluated by the Company based on parameters such as interest rates and the risk characteristics of the instrument.  The fair value of the non-broker warrants are estimated using the Black-Scholes option pricing model incorporating various inputs including the underlying price volatility and discount rate (see Note 14). INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) Years ended December 31, 2014 and 2013 Page 37 notes payable, obligations under finance leases, and other long-term liabilities have a contractual maturity of less than 45 days. The following are the contractual maturities of the undiscounted cash flows of financial liabilities as of December 31, 2014: Payment due: Between Between Between Between In less than 3 3 months and 6 6 months and 1 1 year and 2 2 years and 5 months months year years years and accrued liabilities $ 2,749 $ - $ 1,036 $ - $ - Accounts payable Warrant liabilities(1) Convertible Note Note payable Other long-term liabilities Obligations under finance leases 226 5,500 1,168 - 38 500 - - - 38 - - - - 75 - - 3 122 79 $ 9,681 $ 538 $ 1,111 $ 204 $ 29 (1) The warrant liabilities are 100% vested and can be exercised by the holders at any time; however, the obligation is non-cash and will be settled in equity (see Note 14). The following are the contractual maturities of the undiscounted cash flows of financial liabilities as of December 31, 2013: Payment due: Between Between Between Between In less than 3 3 months and 6 6 months and 1 1 year and 2 2 years and 5 months months year years years Accounts payable Warrant liabilities(1) Note payable Obligations under finance leases and accrued liabilities $ 2,962 $ 200 $ 791 $ - $ - 1,286 600 35 - 228 35 - 380 71 - - 142 $ 4,883 $ 463 $ 1,242 $ 142 $ 71 (1) The warrant liabilities are 100% vested and can be exercised by the holders at any time; however, the obligation is non-cash and will be settled in equity (see Note 14). (d) Capital risk The Company’s objectives when managing its capital risk is to safeguard its assets, while at the same time maintaining investor, creditor, and market confidence, and to sustain future development of the business and ultimately protect shareholder value. The Company manages its risks and exposures by implementing the strategies below. The Company includes shareholders’ equity, long-term notes payable and long-term portion of obligations under finance leases in the definition of capital. Total capital at December 31, 2014, was negative $6,219 (December 31, 2013 – positive $5,885). To - - - 3 26 - - 71 2014 Annual Report | Consolidated Financial Statements 60 The fair values of the financial assets and liabilities are shown at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values: • • Cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities and provisions approximate their carrying amounts largely due to the short-term maturities of these instruments. Convertible notes are evaluated by the Company based on parameters such as interest rates and the risk characteristics of the instrument. • INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) The fair value of the non-broker warrants are estimated using the Black-Scholes option pricing model incorporating various inputs including the underlying price volatility and discount rate (see Note 14). Years ended December 31, 2014 and 2013 The fair value of the conversion option liability at January 1, 2013 was estimated using the •  The fair value of the conversion option liability at January 1, 2013 was estimated using Black-Scholes option pricing model incorporating various inputs including the underlying the Black-Scholes option pricing model incorporating various inputs including the price volatility and discount rate and considering the impact of the interest being waved upon underlying price volatility and discount rate and considering the impact of the interest conversion. In determining the fair value of the conversion option, the Company used the Black- being waved upon conversion. In determining the fair value of the conversion option, Scholes option pricing model with the following assumptions: average volatility rate of 128.8%; the Company used the Black-Scholes option pricing model with the following risk-free interest rate of 1.10%; expected life of half a year; and a strike price of $0.21. assumptions: average volatility rate of 128.8%; risk-free interest rate of 1.10%; expected life of half a year; and a strike price of $0.21. b. Fair value hierarchy: Page 39 (b)Fair value hierarchy: Financial instruments recorded at fair value on the Consolidated Balance Sheet are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The Financial instruments recorded at fair value on the Consolidated Balance Sheet are fair value hierarchy has the following levels: classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: • Level 1 – valuations based on quoted prices (unadjusted) in active markets for identical assets or Level 1 – valuations based on quoted prices (unadjusted) in active markets for identical liabilities; assets or liabilities; • Level 2 – valuation techniques based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices; Level 2 – valuation techniques based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices; • Level 3 – valuation techniques using inputs for the asset or liability that are not based on Level 3 – valuation techniques using inputs for the asset or liability that are not based on observable market data (unobservable inputs). observable market data (unobservable inputs). The fair value hierarchy of financial instruments recorded at fair value on the Consolidated Balance The fair value hierarchy of financial instruments recorded at fair value on the Consolidated Balance Sheet are as follows: Sheet are as follows: December 31, 2014 Level 1 Level 2 Level 3 December 31, 2013 Level 1 Level 2 Level 3 January 1, 2013 Level 1 Level 2 Level 3 Financial liabilities Non-broker warrants Conversion option liability - $ - $ 226 - - $ - $ - - $ 1,286 - - $ - $ - - $ 3,083 1,994 - $ - During the reporting periods, there were no transfers between Level 1 and Level 2 fair During the reporting periods, there were no transfers between Level 1 and Level 2 fair value value measurements. measurements. 20. Key management personnel and director compensation: The Company’s compensation program specifically provides for total compensation for executive officers, which is a combination of base salary, performance-based incentives and benefit programs that reflect aggregated competitive pay in light of business achievement, fulfillment of individual objectives and overall job performance. Executive officers participate in the Company’s share compensation and share option plans (Note 13). As of December 31, 2014, the Chief Executive Officer and Chief Financial Officer are each entitled to an amount equal to one year’s annual base salary in the event the Company INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements INTERMAP TECHNOLOGIES CORPORATION (In thousands of United States dollars, except per share information) Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) Years ended December 31, 2014 and 2013 Page 40 Years ended December 31, 2014 and 2013 were to terminate their employment agreement, other than due to a material breach of the Page 40 employment agreement or in the event the Company becomes insolvent. were to terminate their employment agreement, other than due to a material breach of the employment agreement or in the event the Company becomes insolvent. The compensation of non-employee directors consists of a cash component and a share component. Directors participate in the Company’s share option plan and director’s share The compensation of non-employee directors consists of a cash component and a share compensation plan (Note 13). component. Directors participate in the Company’s share option plan and director’s share compensation plan (Note 13). The following summarizes key management personnel and directors compensation for the years ended December 31, 2014 and 2013: The following summarizes key management personnel and directors compensation for the years ended December 31, 2014 and 2013: Year ended December 31, Short-term employee benefits Year ended December 31, Share-based payments Short-term employee benefits Share-based payments LTIP LTIP $ 1,414 2014 $ 1,658 2013 $ 1,414 $ 1,658 $ $ 2014 204 37 204 1,655 37 2013 323 323 1,981 - - 2013 1,854,652 2013 2.01% 1,854,652 2.01% The following summarizes key management personnel and directors share ownership of $ 1,981 $ 1,655 the Company as of December 31, 2014 and 2013: The following summarizes key management personnel and directors share ownership of the Company as of December 31, 2014 and 2013: December 31, Number of Class A Common shares held December 31, Percentage of total Class A Common shares issued Number of Class A Common shares held Percentage of total Class A Common shares issued 2014 1,931,679 2014 2.10% 1,931,679 2.10% 21. Subsequent events: 21. Subsequent events: On January 6, 2015, the Company issued warrants to purchase up to 4,597,443 common shares of the Company to certain holders of previously-issued promissory notes and warrants. On January 6, 2015, the Company issued warrants to purchase up to 4,597,443 common The warrant issuance was in consideration for the release by the note holders of a first priority shares of the Company to certain holders of previously-issued promissory notes and warrants. lien in certain of the Company’s secured assets and the sharing of security on the remainder of The warrant issuance was in consideration for the release by the note holders of a first priority the Company’s assets, on a pro-rata basis, with a new lender under a debt financing completed lien in certain of the Company’s secured assets and the sharing of security on the remainder of December 26, 2014. The new warrants are exercisable into common shares at $0.08 per share the Company’s assets, on a pro-rata basis, with a new lender under a debt financing completed until February 6, 2017. December 26, 2014. The new warrants are exercisable into common shares at $0.08 per share until February 6, 2017. On January 14, 2015, the Company issued a promissory note for $500. Simple interest is payable at maturity at an annual rate of 18%. The note also includes 6,000,000 detachable On January 14, 2015, the Company issued a promissory note for $500. Simple interest is warrants to purchase Class A common shares of the Company, of which 1,469,834 warrants payable at maturity at an annual rate of 18%. The note also includes 6,000,000 detachable have been issued at a per share price of C$0.08 and expire on January 21, 2018. The note is warrants to purchase Class A common shares of the Company, of which 1,469,834 warrants secured on a pari pasu basis with the other note holders by a general security interest in all of have been issued at a per share price of C$0.08 and expire on January 21, 2018. The note is the assets of the Company. The principal and accrued interest balance is payable at maturity secured on a pari pasu basis with the other note holders by a general security interest in all of on January 14, 2016. The Company has the option upon sixty days’ notice, to repay the note at the assets of the Company. The principal and accrued interest balance is payable at maturity 118% of the outstanding principal balance. on January 14, 2016. The Company has the option upon sixty days’ notice, to repay the note at 118% of the outstanding principal balance. On January 15, 2015, the Company amended the exercise price to C$0.08 per share for outstanding warrants to purchase 4,791,572 common shares of the Company. The original On January 15, 2015, the Company amended the exercise price to C$0.08 per share for number of underlying shares and exercise price of these warrants was (i) 3,091,572 common outstanding warrants to purchase 4,791,572 common shares of the Company. The original shares with an exercise price of C$0.56 per share, and (ii) 1,700,000 common shares with an number of underlying shares and exercise price of these warrants was (i) 3,091,572 common exercise price of C$0.31 per share. Other than the exercise price, the original terms of these shares with an exercise price of C$0.56 per share, and (ii) 1,700,000 common shares with an exercise price of C$0.31 per share. Other than the exercise price, the original terms of these 2014 Annual Report | Consolidated Financial Statements 20. Key management personnel and director compensation: 61 Years ended December 31, 2014 and 2013 The Company’s compensation program specifically provides for total compensation for executive officers, which is a combination of base salary, performance-based incentives and benefit programs that reflect aggregated competitive pay in light of business achievement, fulfillment of individual objectives and overall job performance. Executive officers participate in the Company’s share compensation and share option plans (Note 13). INTERMAP TECHNOLOGIES CORPORATION INTERMAP TECHNOLOGIES CORPORATION Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) Notes to Consolidated Financial Statements (In thousands of United States dollars, except per share information) Years ended December 31, 2014 and 2013 As of December 31, 2014, the Chief Executive Officer and Chief Financial Officer are each entitled to an amount equal to one year’s annual base salary in the event the Company were to terminate their were to terminate their employment agreement, other than due to a material breach of the employment agreement, other than due to a material breach of the employment agreement or in the event employment agreement or in the event the Company becomes insolvent. were to terminate their employment agreement, other than due to a material breach of the the Company becomes insolvent. employment agreement or in the event the Company becomes insolvent. The compensation of non-employee directors consists of a cash component and a share The compensation of non-employee directors consists of a cash component and a share component. component. Directors participate in the Company’s share option plan and director’s share The compensation of non-employee directors consists of a cash component and a share Directors participate in the Company’s share option plan and director’s share compensation plan (Note 13). compensation plan (Note 13). component. Directors participate in the Company’s share option plan and director’s share compensation plan (Note 13). The following summarizes key management personnel and directors compensation for the The following summarizes key management personnel and directors compensation for the years ended years ended December 31, 2014 and 2013: December 31, 2014 and 2013: The following summarizes key management personnel and directors compensation for the years ended December 31, 2014 and 2013: Year ended December 31, Page 40 Page 40 2013 2014 Short-term employee benefits Year ended December 31, Share-based payments Short-term employee benefits LTIP Share-based payments LTIP The following summarizes key management personnel and directors share ownership of the Company as of December 31, 2014 and 2013: The following summarizes key management personnel and directors share ownership of the Company as of The following summarizes key management personnel and directors share ownership of December 31, 2014 and 2013: the Company as of December 31, 2014 and 2013: December 31, 1,658 2013 323 1,658 - 323 1,981 - 1,981 1,414 2014 204 1,414 37 204 1,655 37 1,655 $ $ $ $ $ $ $ $ 2014 2013 Number of Class A Common shares held December 31, Percentage of total Class A Common shares issued Number of Class A Common shares held Percentage of total Class A Common shares issued 21. Subsequent events: 1,931,679 2014 2.10% 1,931,679 2.10% 1,854,652 2013 2.01% 1,854,652 2.01% 21. Subsequent events: 21. Subsequent events: On January 6, 2015, the Company issued warrants to purchase up to 4,597,443 common shares of the Company to certain holders of previously-issued promissory notes and warrants. On January 6, 2015, the Company issued warrants to purchase up to 4,597,443 common On January 6, 2015, the Company issued warrants to purchase up to 4,597,443 common shares of the The warrant issuance was in consideration for the release by the note holders of a first priority shares of the Company to certain holders of previously-issued promissory notes and warrants. Company to certain holders of previously-issued promissory notes and warrants. The warrant issuance was lien in certain of the Company’s secured assets and the sharing of security on the remainder of The warrant issuance was in consideration for the release by the note holders of a first priority in consideration for the release by the note holders of a first priority lien in certain of the Company’s secured the Company’s assets, on a pro-rata basis, with a new lender under a debt financing completed lien in certain of the Company’s secured assets and the sharing of security on the remainder of assets and the sharing of security on the remainder of the Company’s assets, on a pro-rata basis, with a December 26, 2014. The new warrants are exercisable into common shares at $0.08 per share the Company’s assets, on a pro-rata basis, with a new lender under a debt financing completed new lender under a debt financing completed December 26, 2014. The new warrants are exercisable into until February 6, 2017. December 26, 2014. The new warrants are exercisable into common shares at $0.08 per share common shares at $0.08 per share until February 6, 2017. until February 6, 2017. On January 14, 2015, the Company issued a promissory note for $500. Simple interest is On January 14, 2015, the Company issued a promissory note for $500. Simple interest is payable at payable at maturity at an annual rate of 18%. The note also includes 6,000,000 detachable On January 14, 2015, the Company issued a promissory note for $500. Simple interest is maturity at an annual rate of 18%. The note also includes 6,000,000 detachable warrants to purchase Class warrants to purchase Class A common shares of the Company, of which 1,469,834 warrants payable at maturity at an annual rate of 18%. The note also includes 6,000,000 detachable A common shares of the Company, of which 1,469,834 warrants have been issued at a per share price of have been issued at a per share price of C$0.08 and expire on January 21, 2018. The note is warrants to purchase Class A common shares of the Company, of which 1,469,834 warrants C$0.08 and expire on January 21, 2018. The note is secured on a pari pasu basis with the other note holders secured on a pari pasu basis with the other note holders by a general security interest in all of have been issued at a per share price of C$0.08 and expire on January 21, 2018. The note is by a general security interest in all of the assets of the Company. The principal and accrued interest balance the assets of the Company. The principal and accrued interest balance is payable at maturity secured on a pari pasu basis with the other note holders by a general security interest in all of is payable at maturity on January 14, 2016. The Company has the option upon sixty days’ notice, to repay on January 14, 2016. The Company has the option upon sixty days’ notice, to repay the note at the assets of the Company. The principal and accrued interest balance is payable at maturity the note at 118% of the outstanding principal balance. 118% of the outstanding principal balance. on January 14, 2016. The Company has the option upon sixty days’ notice, to repay the note at 118% of the outstanding principal balance. On January 15, 2015, the Company amended the exercise price to C$0.08 per share for outstanding On January 15, 2015, the Company amended the exercise price to C$0.08 per share for warrants to purchase 4,791,572 common shares of the Company. The original number of underlying shares outstanding warrants to purchase 4,791,572 common shares of the Company. The original On January 15, 2015, the Company amended the exercise price to C$0.08 per share for and exercise price of these warrants was (i) 3,091,572 common shares with an exercise price of C$0.56 per number of underlying shares and exercise price of these warrants was (i) 3,091,572 common outstanding warrants to purchase 4,791,572 common shares of the Company. The original share, and (ii) 1,700,000 common shares with an exercise price of C$0.31 per share. Other than the exercise shares with an exercise price of C$0.56 per share, and (ii) 1,700,000 common shares with an number of underlying shares and exercise price of these warrants was (i) 3,091,572 common price, the original terms of these warrants remain unchanged. The amendment to the warrant exercise exercise price of C$0.31 per share. Other than the exercise price, the original terms of these shares with an exercise price of C$0.56 per share, and (ii) 1,700,000 common shares with an exercise price of C$0.31 per share. Other than the exercise price, the original terms of these 2014 Annual Report | Consolidated Financial Statements 62 price was given as consideration for the release by the warrant holders of a first priority lien in certain of the Company’s secured assets and the sharing of security on the remainder of the Company’s assets on a pro- rata basis with the new lender under the Company’s debt financing completed on December 26, 2014. On February 25, 2015, the Company entered into promissory note totaling $7,300 that will mature 12 months from the date of issuance. Simple interest is payable at maturity at an annual rate of 25.0%. As additional consideration for the note, the Company entered into a royalty agreement, pursuant to which the Company agreed to pay a 17.5% royalty on its net revenues. Under the terms of the financing, the debt holder assumed the obligations of an outstanding $5,000 convertible note (plus accrued interest of $800), which was issued on February 6, 2014, and became due on February 6, 2015. The debt holder subsequently retired the February 6, 2014 note obligation, and the 12,367,054 conversion shares associated with the note were cancelled. The note is subject to a prepayment right by the Company at 125% of the principal amount at any time, subject to a 30 day notice period. 2014 Annual Report | Consolidated Financial StatementsCorporate Information 63 BOARD OF DIRECTORS Todd A. Oseth President and CEO Intermap Technologies Colorado, USA Larry G. Garberding Chairman Michigan, USA Donald R. Gardner Director Alberta, Canada Dr. John C. Curlander Director Colorado, USA L. David Sikes Director California, USA TRANSFER AGENT Computershare Trust Company of Canada 600, 530 - 8th Avenue S.W. Calgary, Alberta T2P 3S8 Canada AUDITORS KPMG LLP 160 Elgin Street Suite 2000 Ottawa, ON K2P 3S8 Canada STOCK EXCHANGE INTERMAP STOCK IS LISTED ON THE TORONTO STOCK EXCHANGE UNDER THE SYMBOL “IMP.” OFFICERS AND KEY PERSONNEL Todd A. Oseth President and CEO Richard L. Mohr Senior Vice President and CFO 2014 Annual Report | Consolidated Financial Statements64 Corporate Information OFFICES Canadian Corporate Office Intermap Technologies Corp. 840–6th Avenue SW Suite 200 Calgary, AB T2P 3E5 Canada Phone: (403) 266-0900 Fax: (403) 265-0499 Denver Worldwide Headquarters Intermap Technologies, Inc. 8310 South Valley Highway Suite 400 Englewood, CO 80112-5809 United States Phone: (303) 708-0955 Fax: (303) 708-0952 P.T. ExsaMap Asia Plaza City View - 2nd Floor Jl. Kemang Timur No.22 Pejaten Barat, Jakarta Selatan 12510 Phone: +62 21 719 3808 Fax: +62 21 719 3818 Intermap Technologies s.r.o. Novodvorska 1010/14 142 00 Prague 4 Czech Republic Phone: +420 261 341 411 Fax +420 261 341 414 THIS PAGE INTENTIONALLY LEFT BLANK. Intermap Technologies 8310 South Valley Highway, Suite 400 Englewood, Colorado 80112-5809 United States Phone: +1 (303) 708-0955 +1 (303) 708-0952 Fax: info@intermap.com E-mail: www.intermap.com Web: Denver · Calgary · Jakarta · Prague

Continue reading text version or see original annual report in PDF format above