2018
ANNUAL REPORT
Intermap Technologies Corporation
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
BOARD OF DIRECTORS
Partick A. Blott
Chairman and CEO
New York, New York, USA
Philippe Frappier
Director
Toronto, Ontario, Canada
TRANSFER AGENT
Computershare Trust
Company of Canada
600, 530 - 8th Avenue S.W.
Calgary, Alberta T2P 3S8
Canada
AUDITORS
KPMG LLP
150 Elgin Street
Suite 1800
Ottawa, ON K2P 2P8
Canada
P.T. ExsaMap Asia
Wisma Anugraha - 2nd Floor
Jl. Taman Kemang No.32B
Jakarta, Selatan 12510
Indonesia
Phone: +62 021 719 3808
Fax: +62 021 719 3818
Intermap Technologies s.r.o.
Zelený pruh 95/97
140 00 Prague 4
Czech Republic
Phone: +420 261 341 411
Fax +420 261 341 414
Andrew P. Hines
Director and Corporate Secretary
Westfield, New Jersey, USA
Michael R. Zapata
Director
New York, New York, USA
STOCK EXCHANGE
INTERMAP STOCK IS LISTED
ON THE TORONTO STOCK
EXCHANGE UNDER THE
SYMBOL “IMP”
OFFICERS AND KEY PERSONNEL
Patrick A. Blott
Chairman and CEO
Jennifer S. Bakken
Exceutive Vice President and CFO
Management’s Discussion and Analysis
1
For the year ended December 31, 2018
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 28, 2019 and should be read
together with the Company’s audited Consolidated Financial Statements and the accompanying notes
for the years ended December 31, 2018 and 2017. 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.
These audited consolidated financial statements have been prepared on a going concern basis in
accordance with IFRS. The going concern basis of presentation assumes the Company will continue to
operate for the foreseeable future and will be able to realize its assets and discharge its liabilities in the
normal course of business.
These consolidated financial statements do not reflect adjustments that would be necessary if the going
concern assumption were not appropriate. If the going concern basis were not appropriate for these
financial statements, then adjustments would be necessary to the carrying amounts of assets and liabilities,
the reported expenses and the classifications used in the statements of financial position.
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, operations and financing
alternatives, 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 expressions suggesting future outcomes, and includes statements
that actions, events, or conditions “may,” “would,” “could,” or “will” be taken or occur in the future. These
forward-looking statements may be based on assumptions that the Company believes 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) payments on material contracts will occur within a reasonable period of time after
contract completion; (iii) the continued sales success of Intermap’s products and services; (iv) the continued
success of business development activities; (v) there will be no significant delays in the development
and commercialization of the Company’s products; (vi) the Company will continue to maintain sufficient
and effective production and software development capabilities to compete on the attributes and cost
of its products; (vii) there will be no significant reduction in the availability of qualified and cost-effective
2
human resources; (viii) the continued existence and productivity of subsidiary operations; (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, revenue fluctuations, nature of
government contracts, economic conditions, loss of key customers, retention and availability of executive
talent, competing technologies, continued listing of its common shares on the Toronto Stock Exchange or
equivalent exchange, common share price volatility, loss of proprietary information, software functionality,
internet and system infrastructure functionality, information technology security, breakdown 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 geospatial information company, creating a wide variety of geospatial solutions and
analytics for its customers. Intermap is a premier worldwide provider of geospatial data solutions.
Intermap currently generates revenue from three primary business activities, comprised of i) data
acquisition and collection, using proprietary radar sensor technologies, ii) value-added data products
and services, which leverage the Company’s proprietary NEXTMap® database, together with proprietary
software and fusion technologies, and iii) commercial applications and solutions, including a webstore and
software sales targeting selected industry verticals that rely on accurate high resolution elevation data.
These geospatial solutions are used in a wide range of applications including, but not limited to, location-
based information, risk assessment, geographic information systems (GIS), engineering, utilities, global
positioning systems (GPS) maps, oil and gas, renewable energy, hydrology, environmental planning, land
management, wireless communications, transportation, advertising, and 3D visualization.
Intermap has the ability to create its own digital 3D geospatial data using its proprietary multi-frequency
radar mounted in Learjet aircraft. Intermap’s radar-based technology allows it to collect data at any time
of the day, including under conditions such as cloud and tree cover, or darkness, which are conditions that
limit most competitive technologies. The Company’s proprietary radar also enables data to be collected
over larger areas, at higher collection speeds, and at accuracy levels that are difficult to achieve with
competitive technologies.
In addition to data collection, the Company is a world leader in data fusion, analytics, and orthorectification,
and has decades of experience aggregating data derived from a number of different sensor technologies
and data sources. The Company processes raw digital elevation and image data from its own and other
sources to create three high resolution geospatial datasets that provide a ground-true foundation layer
upon which accurate value-added products and services can be developed. The three high resolution data
2018 Annual Report | Management’s Discussion and Analysis 3
sets include digital surface models (DSM), digital terrain models (DTM), and orthorectified radar images
(ORI). These datasets are further augmented with additional elevation and resolution data layers and served
to customers by web service to create other value-added products, such as viewsheds, line of sight maps,
and orthorectified mosaic tiles.
Unlike many geospatial companies, because of its unique acquisition and processing capability, Intermap
retains exclusive ownership of its high resolution NEXTMap® database, which covers the entire globe.
Intermap’s NEXTMap database, together with third party data and our in-house analytics team, provide a
variety of applications and geospatial solutions for its customers. The NEXTMap database contains a fusion
of proprietary multi-frequency radar imagery and data, including unique Interferometric Synthetic Aperture
Radar (IFSAR)-derived data, proprietary data models, and purchased third-party data, collected from
multiple commodity sensor technologies, such as light detection and ranging (LiDAR), photogrammetry,
satellite, and other available sources. The NEXTMap database also includes proprietary information
developed by our analytical teams such as 3D city models, census data, real-time traffic, 3D road vectors,
outdoor advertising assets, weather related hazards, points of interest, cellular towers, flood models and
wildfire models.
The Company generates revenue by licensing its geospatial products using its proprietary data, analytics,
and applications for specific industries.
FINANCIAL INFORMATION
The following table sets forth selected financial information for the periods indicated.
Selected Annual Information
U.S. $ millions, except per share data
Revenue:
Acquisition services
Value-added data
Software and solutions
Total revenue
Operating (loss) income
2018
2017
2016
$
8.7
4.7
2.4
$
14.9
2.8
1.6
$
3.5
2.2
1.3
$
15.8
$
19.3
$
7.0
$
(0.1)
$
1.3
$
(9.5)
Change in fair value of derivative instruments
$
-
$
0.1
$
1.9
Financing costs
Net loss
EPS basic and diluted (1)
Adjusted EBITDA
Assets:
$
(2.7)
$
(2.5)
$
(10.1)
$
(2.8)
$
(1.2)
$
(15.3)
$
(0.17)
$
(0.08)
$
(1.33)
$
2.1
$
3.5
$
(7.2)
Cash, amounts receivable, unbilled revenue
$
4.9
$
6.9
$
7.2
Total assets
Liabilities:
$
9.8
$
11.8
$
9.0
Long-term liabilities (including finance lease obligations)
$
29.3
$
26.8
$
22.2
Total liabilities
$
34.2
$
33.8
$
33.6
(1) Amounts have been adjusted following the rights offering and share consolidation that occurred during 2017.
Revenue
Consolidated revenue for the year ended December 31, 2018 totaled $15.8 million, compared to $19.3
million for 2017, representing an 18% decrease. Approximately 33% of consolidated revenue was generated
2018 Annual Report | Management’s Discussion and Analysis
4
outside the United States, compared to 65% for 2017.
Acquisition services revenue for the year ended December 31, 2018 totaled $8.7 million, compared to $14.9
million for 2017. The decrease is due to a change in government control resulting in a reset procurement
process for a single international government customer impacting the follow-on project from 2017 to 2018.
Value-added data revenue for the year ended December 31, 2018 was $4.7 million, a 68% increase from
$2.8 million in 2017. The increase primarily resulted from one $1.8 million contract to deliver high-resolution
terrain data to an international government customer.
Software and solutions revenue increased for the year ended December 31, 2018 to $2.4 million from $1.6
million for 2017. The growth is consistent with management expectations for adding subscriptions and
achieving positive renewal rates from existing customers.
Classification of Operating Costs
The composition of the operating costs on the Consolidated Statements of Profit and Loss and Other
Comprehensive Income is as follows:
U.S. $ millions
Personnel
Purchased services & materials
Facilities and other expenses
Travel
Personnel
2018
2017
$
$
8.2
3.8
1.6
0.5
14.1
8.5
5.4
2.3
0.6
16.8
$
$
Personnel expense includes direct labor, employee compensation, employee benefits, and commissions.
Personnel expense for the years ended December 31, 2018 and 2017, totaled $8.2 million and $8.5
million, respectively. The 4% year-over-year decrease in personnel expense is primarily due to personnel
restructuring activities offset by the mix of talent and key resources.
During 2018, the Company notified certain individual employees of its intent to discontinue their
employment. The Company incurred $0.5 million (December 31, 2017 - $0.2 million) in restructuring
charges from these reductions.
Non-cash compensation expense is included in operating costs and relates to the Company’s omnibus
incentive plan, share options, and shares granted to employees and non-employees. Non-cash share-based
compensation for the years ended December 31, 2018 and 2017, increased slightly to $0.4 million from $0.3
million, respectively.
Purchased Services and Materials
Purchased services and materials (PS&M) includes (i) aircraft and radar related costs, including jet fuel; (ii)
professional and consulting costs; (iii) third-party support services related to the collection, processing and
editing of the Company’s airborne radar data 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 support).
For the years ended December 31, 2018 and 2017, PS&M expense was $3.8 million and $5.4 million,
respectively. The decrease was partially due to decreased expenses on acquisition projects.
2018 Annual Report | Management’s Discussion and Analysis
5
Facilities and Other Expenses
For the years ended December 31, 2018 and 2017, facilities and other expenses were $1.6 million and $2.3
million, respectively. The decrease was due to non-recurring payments during the first quarter of 2017
associated with the 2017 restructuring efforts without similar payments in 2018.
Travel
For the years ended December 31, 2018 and 2017, travel expense was $0.5 million and $0.6 million,
respectively. The decrease was due to decreased travel on acquisition services projects.
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 (financing costs), taxes, and depreciation. Adjusted EBITDA also excludes share-based
compensation, change in fair value of derivative instruments, restructuring costs and related non-recurring
payments supporting the corporate restructuring, 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
Financing costs
Income tax recovery
Depreciation of property and equipment
EBITDA
Share-based compensation
Restructuring costs
Loss on foreign currency translation
Non-recurring payments
Change in value of derivative instruments
Adjusted EBITDA
2018
2017
$
(2.8)
2.7
-
1.3
$
(1.2)
2.5
(0.1)
0.9
$
1.2
$
2.1
0.4
0.5
-
-
-
0.3
0.2
0.2
0.8
(0.1)
$
2.1
$
3.5
Adjusted EBITDA for the year ended December 31, 2018 was $2.1 million, compared $3.5 million for 2017.
The decrease in adjusted EBITDA is primarily attributable to a decrease in revenue.
Financing Costs
Financing costs for the year ended December 31, 2018 totaled $2.7 million, compared to $2.5 million for
2017. Financing costs are non-cash and relate mostly to the accretion of the notes payable interest using
the effective interest method. The notes mature on September 1, 2020.
Depreciation of Property and Equipment
Depreciation expense for the years ended December 31, 2018 was $1.3 million and $0.9 million,
respectively. The increase was due to placing the upgraded radar system into service during the third
quarter of 2017.
Derivative Instruments
The Company has issued non-broker warrants that are considered to be derivative liabilities as the warrants
are 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
2018 Annual Report | Management’s Discussion and Analysis
6
value included in the consolidated statement of profit and loss and other comprehensive income for the
applicable reporting period. During the years ended December 31, 2018 and 2017, the change in the fair
value of derivative instruments was $Nil and a gain of $0.1 million, respectively. See Selected Quarterly
Information for the change recognized each reporting period.
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, 2018, a foreign currency translation loss of $27 thousand was
recorded, compared to a loss of $214 thousand in 2017.
Trade Receivables and Unbilled Revenue
Work is performed on contracts that provide invoicing upon the completion of identified contract
milestones. Revenue on certain of these acquisition services contracts is recognized using the percentage-
of-completion method of accounting based on the ratio of costs incurred to date over the estimated
total costs to complete the contract. While an effort is made to align payments on contracts with work
performed, the completion of milestones does not always coincide with the costs incurred on a contract,
resulting in revenue being recognized in excess of billings. These amounts are recorded in the consolidated
balance sheets as unbilled revenue.
Trade receivables and unbilled revenue increased from $0.6 million at December 31, 2017, to $3.6 million
at December 31, 2018. Trade receivables due in the current period represent 95% and 66% of total trade
receivables at December 31, 2018 and 2017, respectively. Trade receivables aged greater than 90 days
relate to historically slow paying, but reliable customers. The Company reviews the trade receivables
aging monthly and monitors the payment status of each invoice. The Company also communicates with
slow paying or delinquent customers on a regular basis regarding the schedule of future payments. At
December 31, 2018 and 2017, $Nil has been reserved as uncollectible as all trade receivable balances
greater than 90 days are considered to be collectible.
Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities generally include trade payables, project-related accruals and
personnel-related costs. Accounts payable and accrued liabilities decreased to $2.8 million at December 31,
2018, from $4.0 million at December 31, 2017.
U.S. $ millions
Accounts payable
Accrued liablities
December 31,
2018
December 31,
2017
$
$
1.1
1.7
2.8
1.9
2.1
4.0
$
$
The accounts payable balance decreased from $1.9 million at December 31, 2017 to $1.1 million at
December 31, 2018 due to the timing of trade payables and the expiration of vendor payables recorded
in prior periods. The accrued liabilities balance decreased from $2.1 million at December 31, 2017 to $1.7
million at December 31, 2018. The decrease is due to unbilled costs associated with the radar system
upgrade at December 31, 2017 being paid during the first quarter of 2018.
2018 Annual Report | Management’s Discussion and Analysis
7
Notes Payable
The increase in the notes payable balance from December 31, 2017 of $26.5 million to $29.1 million at
December 31, 2018 is purely due to the accretion of the non-cash interest on the two notes outstanding.
The notes payable balance of $26.5 million at December 31, 2017 reflects the debt restructuring that
occurred during the fourth quarter of 2016 and the first quarter of 2017 as follows:
•
•
During the fourth quarter of 2016, the Company restructured the outstanding notes (July 8, 2016
note for $2.0 million and September 15, 2016 note for $25.8 million), which resulted in the extension
of the maturity date to September 1, 2020 and the elimination of the interest. The restructuring also
included the elimination of a 17.5% royalty agreement. The note is secured by a first priority lien on all
the assets of the Company. The fair value of the notes at December 31, 2017 reflected in the balance
sheet is $24.0 million and is subject to prepayment provisions if the Company builds excess cash; if
the Company’s aggregate cash and cash equivalents balance exceeds $10.0 million at the end of any
calendar quarter, 50% of the balance greater than $10.0 million must be applied to reduce debt against
the outstanding notes payable.
During the first quarter of 2017, $2.9 million of proceeds from a Rights Offering was used to partially
repay a $6.0 million Bridge Loan, received on December 14, 2016. The balance of the Bridge Loan was
converted into a non-interest bearing note payable due September 1, 2020. The fair value of the note
payable at December 31, 2017 was $2.5 million, following the recognition of a $0.7 million gain on
the modification of the Bridge Loan, which was credited to contributed surplus. Additionally, the note
is secured by a first priority lien on all assets of the Company and is subject to the same prepayment
provisions as the Company’s other debt, should the Company build excess cash; if the Company’s
aggregate cash and cash equivalents balance exceeds $10.0 million at the end of any calendar quarter,
50% of the balance greater than $10.0 million must be pre-paid against the outstanding notes payable.
(See Note 8(a) to the Consolidated Financial Statements for further discussion of the terms of the notes
and Rights Offering).
Project Financing
The project financing balance at December 31, 2018 increased slightly to $1.6 million from $1.5 million at
December 31, 2017. The increase is due to accrued interest.
Unearned Revenue and Deposits
The unearned revenue balance at December 31, 2018 decreased to $0.6 million from $1.6 million at
December 31, 2017. This balance consists of payments received from customers for contracts that are in
progress and have not yet fulfilled the necessary revenue recognition criteria. At December 31, 2018 and
December 31, 2017 83% and 32% of the total balance, respectively, is related to software and solutions
license revenue, in which the license fee is paid upfront for the term of the license.
QUARTERLY FINANCIAL 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 normal, recurring nature that are,
in the opinion of management, necessary to present a fair statement of Intermap’s consolidated results of
operations for the periods presented. Quarter-to-quarter comparisons of Intermap’s financial results are not
necessarily meaningful and should not be relied on as an indication of future performance.
2018 Annual Report | Management’s Discussion and Analysis 8
U.S. $ millions, except per
share data
Q1
2017
Q2
2017
Q3
2017
Q4
2017
Q1
2018
Q2
2018
Q3
2018
Q4
2018
Total revenue
Depreciation
Financing costs
Change in fair value of
derivative intruments
$
2.6
$
4.5
$
6.3
$
5.9
$
3.4
$
4.5
$
3.7
$
4.2
$
0.2
$
0.1
$
0.3
$
0.3
$
0.3
$
0.3
$
0.4
$
0.3
$
0.7
$
0.6
$
0.6
$
0.6
$
0.6
$
0.7
$
0.6
$
0.8
$
(0.1)
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Operating income (loss)
$
(1.5)
$
(0.2)
$
1.8
$
1.2
$
-
$
0.3
$
(0.5)
$
0.1
Net income (loss)
$
(1.9)
$
(0.9)
$
1.1
$
0.5
$
(0.6)
$
(0.4)
$
(1.2)
$
(0.6)
Net income (loss) per share
- basic and diluted (1)
$
(0.13)
$
(0.06)
$
0.07
$
0.04
$
(0.04)
$
(0.02)
$
(0.07)
$
(0.04)
Adjusted EBITDA
$
(0.8)
$
0.3
$
2.1
$
1.9
$
0.4
$
0.9
$
0.4
$
0.4
(1) Amounts have been adjusted following the rights offering and share consolidation that occurred during 2017.
Revenue
Consolidated revenue for the fourth quarter of 2018 totaled $4.2 million, compared to $5.9 million for
the same period in 2017, representing a 29% decrease. Approximately 66% of consolidated revenue was
generated outside the United States during the fourth quarter of 2018, compared to 79% for the same
period in 2017.
Acquisition services revenue for the quarter ended December 31, 2018 totaled $1.0 million, compared
to $4.6 million for the same period in 2017. Consistent with the annual results, the difference is due to
the change in government control resulting in a reset procurement process for a single international
government customer impacting the follow-on project from 2017 to 2018.
Value-added data revenue for the quarter ended December 31, 2018 was $2.5 million, an increase from
the same period in 2017 which totaled $0.8 million. The increase primarily resulted from the $1.8 million
contract to deliver high-resolution terrain data to an international government customer.
Software and solutions revenue increased for the quarter ended December 31, 2018 to $0.7 million from
$0.5 million for the same period in 2017. Again, the growth is consistent with management expectations for
adding subscriptions and achieving positive renewal rates from existing customers.
Personnel
Personnel expense for the three-month periods ended December 31, 2018 and 2017, totaled $2.2 million
and $2.5 million, respectively. The decrease in personnel expense is primarily due to the decrease in
headcount offset by the mix of talent and key resources.
Non-cash share-based compensation for the quarters ended December 31, 2018 and 2017, increased
slightly to $35 thousand from $15 thousand, respectively.
Purchased Services and Materials
For the three-month periods ended December 31, 2018 and 2017, PS&M expense was $1.1 million and $1.2
million, respectively.
Facilities and Other Expenses
For the three-month periods ended December 31, 2018 and 2017, facilities and other expenses were $0.6
million and $0.5 million, respectively.
2018 Annual Report | Management’s Discussion and Analysis
9
Travel
For the quarters ended December 31, 2018 and 2017, travel expense was $48 thousand and $98 thousand,
respectively. The decrease was due to decreased travel on acquisition services projects.
CONTRACTUAL OBLIGATIONS
Contractual obligations include (i) operating leases on office locations; (ii) notes payable; and (iii) finance
leases on computer equipment and software. Principal and interest repayments of these obligations are as
follows:
Payments due by Period (US $ thousands)
Contractual obligations
Operating leases
Notes payable
Project financing
Finance leases
Total
Total
$
655
33,914
1,588
14
36,171
$
Less than 1 year
429
$
-
1,411
11
1,851
$
$
1 - 3 years
226
33,914
177
3
34,320
$
4 - 5 years After 5 years
-
$
-
-
-
$
-
-
$
-
-
-
$
-
LIQUIDITY AND CAPITAL RESOURCES
Management continually assesses liquidity in terms of the ability to generate sufficient cash flow to fund
the business. Net cash flow is affected by the following items: (i) operating activities, including the level
of trade receivables, unbilled receivables, accounts payable, accrued liabilities and unearned revenue and
deposits; (ii) investing activities, including the purchase of property and equipment; and (iii) financing
activities, including debt financing and the issuance of capital stock.
During the year ended December 31, 2018, the Company generated operating loss of $0.1 million and
achieved positive adjusted EBITDA of $2.1 million. Revenue for the year ended December 31, 2018 was
$15.8 million, which represents a $3.5 million decrease in revenue from 2017, and the Company had
negative cash flow from operations of $3.9 million. At December 31, 2018, the Company has a shareholders’
deficiency of $24.4 million that was generated by current and prior years’ accumulated losses.
Cash used in operations during the year ended December 31, 2018 totaled $3.9 million, compared to cash
provided by operations of $3.5 million during 2017. The year-over-year increase in cash used of $7.4 million
is due primarily to the decrease in accounts payable and accrued liabilities and unearned revenue along
with a decrease in revenue year-over-year.
Net cash used in investing activities totaled $1.2 million for the year ended December 31, 2018, compared
to $3.5 million during 2017. Net cash used in investing activities for both periods related to the purchase of
computer related equipment and radar system upgrades. The cash used in investing activities for 2018 also
includes capitalization of labor and materials to build the data library, processing capabilities, and software
assets.
Net cash used in financing activities totaled $12 thousand for the year ended December 31, 2018 compared
to $220 thousand during 2017. The net cash used during the year ended December 31, 2018 resulted from
the repayment of finance leases of $12 thousand. The net cash used during the year ended December 31,
2017 resulted from $164 thousand of issuance costs and the repayment of finance leases of $56 thousand.
The Company is dependent upon its cash flow from operations to fund its business as it currently has $33.9
million in outstanding secured long-term debt, no line of credit or credit facility, access to equity capital
markets is severely constrained and the current share price is significantly depressed. The cash position of
the Company at December 31, 2018 was $1.3 million, compared to $6.4 million at December 31, 2017. Over
2018 Annual Report | Management’s Discussion and Analysis
10
the past two years, the Company has undertaken a significant reduction in staff and realigning of the mix of
talent and key resources, as well as overall reductions in operating costs.
The above factors in the aggregate indicate there are material uncertainties which may cast 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 secure sales with upfront payments,
restructure the balance sheet (including a reduction of debt) and obtain additional financing. Failure
to achieve one or more of these requirements could have a materially adverse effect on the Company’s
financial condition and / or results of operations. The Board of Directors and management have taken
actions to address these issues including retaining a financial advisor as well as a strategic consultant to
explore strategic alternatives. Such alternatives could include, a sale of the Company, a sale of assets, a
business combination or continuing as a standalone entity under a new capital structure. The Board of
Directors has been informed by Vertex One Asset Management (“Vertex”), the Company’s only first lien
secured creditor and its largest shareholder, of its general preference for liquidity at this time. Vertex
has provided financial support to the Company for the past six years. There can be no assurance that
the consideration of strategic alternatives will result in the completion of any transaction or any other
alternative. The Company may not be able to meet its future obligations if it is unable to complete a
strategic alternative transaction or secure additional capital.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Revenue Recognition
Revenue is recognized when a customer obtains control of the good or services. Determining the timing of
the transfer of control, at a point in time or overtime, requires judgement.
Acquisition Service Contracts
Revenue from acquisition service contracts is recognized overtime based on the ratio of costs incurred to
estimated final contract costs. The use of this method of measuring progress towards complete satisfaction
of the performance obligations 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. Invoices
are issued according to contractual terms and are usually payable within 30 days. Revenue recognized in
advance of billings are presented as unbilled revenue.
Data Licenses
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. Customers obtain control of data products upon receipt of a
physical hard drive or download of the data from a web link provided. Invoices are generated, and revenue
is recognized at that point in time. Invoices are generally paid within 30 days.
Software Subscriptions
Software subscriptions are generally one year or less, with invoices issued and paid at the beginning of the
license term. Revenue is recognized overtime, and payments for future months of service are recognized
in unearned revenue. While the license agreements are for a fixed term, some agreements also contain a
limited number of clicks or uses. If the limit is reached prior to the end of the term, the license ends early.
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. Although the carrying value of the data library at December 31, 2018 is $Nil, management
believes the asset generates significant value to the Company and the solutions it provides. In accordance
2018 Annual Report | Management’s Discussion and Analysis 11
with IFRS, the Company will review each reporting period for indications that an adjustment to the carrying
value may be necessary.
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:
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.
Trade receivables
The Company uses historical trends and performs specific account assessments when determining the
expected credit losses. These accounting estimates are in respect to the trade receivables line item in the
Company’s consolidated balance sheet. At December 31, 2018, trade receivables represented 33% of total
assets.
The estimate of the Company’s expected credit losses could change from period to period due to the
allowance being a function of the balance and composition of trade receivables. At December 31, 2018, the
expected credit losses of trade receivables were $Nil due to less than 1% of the aged trade receivables over
61 days was past due.
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. Any impact reported has no net
effect on cash flows or the operating results of the Company.
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.
2018 Annual Report | Management’s Discussion and Analysis 12
Compound financial instruments
The Company has issued compound financial instruments which comprise promissory notes denominated
in United States dollars that include detachable warrants denominated in United States dollars and
Canadian 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.
Notes Payable
The Company has issued long-term promissory notes with no stated interest obligation. The valuation
and accounting for the zero-interest notes is complex and requires the application of management
estimates and judgments with respect to the determination of appropriate valuation method applied on
initial recognition. The assumptions and models used for estimating fair value of the note transactions are
disclosed in Note 8(a) to the Consolidated Financial Statements.
Revenue
Changes to the assumptions used to measure revenue could impact the amount of revenue recognized in
the consolidated financial statements.
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, 2018.
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. The adoption of
this standard did not have a material impact on the consolidated financial statements.
Under IFRS 9, on initial recognition, a financial asset is classified as measured at: amortized cost; fair value
through other comprehensive income (FVOCI) – debt investment; FVOCI – equity investment; or fair
value through profit or loss (FVTPL). The classification of financial assets under IFRS 9 is generally based
on the business model in which a financial asset is managed and its contractual cash flow characteristics.
Derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never
separated. Instead, the hybrid financial instrument is assessed for classification.
The following table summarizes the classification and measurement changes for each class of the
Company’s financial assets and financial liabilities upon adoption at January 1, 2018:
2018 Annual Report | Management’s Discussion and Analysis 13
Financial instrument
Category
Measurement
Category
IAS 39
IFRS 9
Cash
Trade receivables
Unbilled revenue
Accounts payable and
accrued liabilities
Obligations under
finance leases
Notes payable
Loans and receivables
Loans and receivables
Loans and receivables
Other liabilities
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Other liabilities
Amortized cost
Other liabilities
Amortized cost
Other long-term liabilities Other liabilities
Amortized cost
Assets at amortized cost
Assets at amortized cost
Assets at amortized cost
Financial liabilities at
amortized cost
Financial liabilities at
amortized cost
Financial liabilities at
amortized cost
Financial liabilities at
amortized cost
Measurement
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with an ‘expected credit loss’ (ECL) model. The new
impairment model applies to financial assets measured at amortized cost, contract assets and debt
investments at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit losses are
recognized earlier than under IAS 39. The financial assets at amortized cost consist of cash and trade
receivables.
Under IFRS 9, loss allowances are measured on either of the following bases:
•
•
12-month ECLs: these are ECLs that result from possible default events within the 12 months after the
reporting date; and
Lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a
financial instrument.
The Company has elected to measure expected credit losses for trade receivables as an amount equal to
lifetime ECLs.
When determining whether the credit risk of a financial asset has increased significantly since initial
recognition and then estimating ECLs, the Company considers reasonable and supportable information
that is relevant and available without undue cost or effort. This includes both quantitative and qualitative
information and analysis, based on historical experience and forward-looking information.
The Company considers a financial asset to be in default when the customer is highly unlikely to pay its
obligation in full.
IFRS 15, Revenue from Contracts with Customers
IFRS 15 provides a single, principles-based five-step model for revenue recognition to be applied to all
customer contracts and requires enhanced disclosures. The standard also provides guidance relating to
recognition of customer acquisition costs.
The Company has adopted this standard on the required effective date of January 1, 2018, using the
modified retrospective approach. The Company is providing expanded disclosures related to the nature,
amount and timing of the revenue (see Notes 10 and 16). In addition, the Company has elected to make use
of the following practical expedients:
•
•
IFRS 15 is only applied to revenue contracts that are not completed as the date of applying the
standard of January 1, 2018; and
The Company will expense sales commission costs when incurred if the amortization period is less than
12 months.
Under IFRS 15, revenue is recognized when a customer obtains control of the good or services. Determining
the timing of the transfer of control, at a point in time or overtime, requires judgement. IFRS 15 did not
have a significant impact on the Company’s accounting policies. See Critical Policies and Estimates for the
revenue recognition policy.
2018 Annual Report | Management’s Discussion and Analysis 14
FUTURE ACCOUNTING STANDARDS AND INTERPRETATIONS
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 after the current reporting period.
IFRS 16, Leases
In January 2016, the International Accounting Standards Board issued IFRS 16, Leases, which specifies
how to recognize, measure, present and disclose leases. The standard provides a single lessee accounting
model, requiring lessees to recognize right-of use-assets and lease liabilities for all leases unless the lease
term is 12 months or less or the underlying asset has a low value. Consistent with its predecessor, IAS 17,
the new lease standard continues to require lessors to classify leases as operating or finance The Company
is reviewing its leases to evaluate the impact of the standard. The Company will adopt the standard,
effective January 1, 2019, using the modified retrospective method, in which the cumulative effect of
adoption will be recognized as an adjustment to the opening balance of retained earnings. Prior year
period amounts will not be adjusted. While the assessment of the impact is still being determined and the
Company is not currently in a position to reliably quantify the full impact of IFRS 16 on the consolidated
financial statements, the Company expects the adoption of this standard to increase assets and liabilities as
it will be required to record a right-of-use asset and a corresponding liability in the consolidated financial
statements. The Company also expects an impact from the reclassification of lease expense from operating
to depreciation and interest expense. There will be no impact on cash flows, however, cash flows from
operating activities will increase as payments are reclassified to cash flows from investing activities.
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 29, 2019, 17,268,472 Class A common shares were issued and outstanding. There are no
preferred shares currently issued and outstanding.
As of March 29, 2019, potential dilutive securities include (i) 1,220,243 outstanding share options with a
weighted average exercise price of C$0.91, (ii) 410,400 restricted share units, and (iii) 546,456 warrants
outstanding with a weighted average exercise price of USD$0.70. Each option and warrant entitles the
holder to purchase one Class A common share. The warrants are currently being held by current Directors of
the Company, which expire on September 1, 2020.
INTERNAL CONTROLS AND DISCLOSURE CONTROLS AND PROCEDURES
Internal Control over Financial Reporting
The Company’s Chairman and Chief Executive Officer and the Company’s 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 Chairman and Chief
Executive Officer and the Company’s 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 effective at December 31, 2018.
2018 Annual Report | Management’s Discussion and Analysis
15
Changes in Internal Control over Financial Reporting
There have been no significant changes in the design of internal control over financial reporting that
occurred during the year ended December 31, 2018 that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial reporting.
Disclosure Controls and Procedures
The Company’s Chairman and Chief Executive Officer and the Company’s 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 Chairman and
Chief Executive Officer and the Company’s Chief Financial Officer have evaluated, or caused to be evaluated
under their supervision, the effectiveness of the Company’s disclosure controls and procedures and have
determined, based on that evaluation, that such disclosure controls and procedures were effective at
December 31, 2018.
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
Cash generated from its operations may not be sufficient to satisfy its current liquidity requirements and
will not be sufficient to discharge the outstanding notes when due. As such, the Company will require
additional capital. The extent of the Company’s future capital requirements will depend on many factors,
including, but not limited to, the market acceptance of its products and services, demand for geospatial
related products and service, and competition within this industry. 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.
Revenue Fluctuations
Intermap’s revenue has fluctuated over the years. Acquisition services projects, the purchase of value-
added data, and the purchase of software and solutions by the Company’s customers are all scheduled per
customer requirements and the timing of regulatory and/or budgetary decisions. The commencement or
completion of acquisition 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.
2018 Annual Report | Management’s Discussion and Analysis 16
Project Finance Facilities
Intermap’s contracts may include significant down payments and the commencement of work under such
contracts may be dependent on the finalization of a third-party project finance facility to provide for the
down payment and progress payments under the terms of the contract. While the Company expects that
such financing facilities will be finalized in a reasonable period of time from the date of contract completion,
Intermap is typically not a party to the financing facility negotiations and both finalization and timing of the
financing facility is therefore outside of the Company’s control. No assurance can be given that any required
financing facility will ultimately be completed subsequent to contract finalization.
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. If deemed necessary, the Company could secure export credit insurance on certain of its
international receivables, which greatly reduces the commercial and political risks of operating outside of
North America but involves additional cost for the Company.
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 2018, the Company had two key customers that accounted for 67% of total revenue. During 2017,
77% of the revenue was attributable to two key customers. 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 focused on aligning its resources with its acquisition services, value-added data and software
and solutions revenue opportunities. This realignment requires the retention of executive talent. The
Company will continue to invest in training and leadership development 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.
Competing Technologies
With respect to the Company’s software applications, several direct and indirect competitors are currently
in the market with product offerings that could be considered at least partially competitive to Intermap’s
products. These potential competitors vary in size and could have greater technical and/or financial
resources than the Company, to develop and market their products. The financial performance of the
Company may be adversely affected by such competition. Additionally, no assurances can be given that
additional direct competitors to the Company may not be formed or that the Company may not lose some
or all of its contracts with existing or future customers, thereby decreasing its ability to compete. Also,
existing and future customers may have, or may develop, in-house solutions that could take the place of
the Company’s software applications. Any adverse change in the business relationships with the Company’s
customers or partners could have a material adverse impact on the Company’s software applications
business and its future prospects.
2018 Annual Report | Management’s Discussion and Analysis 17
With respect to the Company’s radar data acquisition business, 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. 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 low daily trading volume of the
Company’s stock, (iii) announcement of technological innovations or new products by the Company or its
competitors, (iv) competition, including pricing pressures and the potential impact of competitors products
on sales, (v) changing conditions in the geospatial and related industries, (vi) unexpected production
difficulties, (vii) changes in financial estimates or recommendations by stock market analysts regarding
Intermap or its competitors, (viii) announcements by Intermap or its competitors of acquisitions, strategic
partnerships, or joint ventures, (ix) additions or departures of senior management, (x) changes in economic
or political conditions (xi) the selling of significant holdings by large investors, (xii) the financing terms of
existing large debt holders of the Company, and (xiii) the Company’s ability to meet the continued listing
requirements of the Toronto Stock Exchange to maintain the listing of its common shares.
Loss of Proprietary Information
Intermap currently holds patents on the technology used in its operations and also relies heavily 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.
Software Functionality
Defects in the Company’s software applications, delays in delivery, and failures or mistakes in the Company’s
software code could materially harm the Company’s business, including customer relationships and
operating results.
Internet and System Infrastructure Functionality
The end customers of the Company’s software applications depend on internet service providers, online
service providers and the Company’s infrastructure for access to the software applications the Company
2018 Annual Report | Management’s Discussion and Analysis 18
provides to its customers. These services are subject to service outages and delays due to system failures,
stability or interruption. As a result, the Company may not be able to meet a satisfactory level of service
as agreed to with its customers, which could have a material adverse effect on the Company’s business,
revenues, operating results and financial condition.
Information Technology Security
The Company’s software applications are dependent on its ability to protect its computer equipment
and the information stored in its data centers against damage that may be caused by fire, power loss,
telecommunication failures, unauthorized intrusion, computer viruses, disabling devices and other similar
events. A failure in the Company’s production systems or a disaster or other event affecting production
systems or business operations, both internally and externally, could result in a disruption to the Company’s
software services. Such a disruption could also impact the Company’s reputation and cause it to lose
customers, revenue, face litigation, or necessitate customer service/repair work that would involve
substantial costs and could ultimately have a material impact on the Company.
Intermap’s geospatial database has become a valuable asset to the Company. 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.
Cybersecurity
The Company’s software applications and geospatial database are dependent upon protection against
damage or loss that may be caused by a cyberattack. Loss or theft of the Company’s geospatial database
could result in lost revenue or the ability of a competitor to provide competing software solutions. A hostile
Denial of Service (DoS) action could disrupt the Company’s software services. Such a disruption could
impact the Company’s reputation and cause it to lose customers, revenue, face litigation, or necessitate
customer service/repair work that would involve substantial costs and could ultimately have a material
impact on the Company.
Intermap has invested in database management, information technology security, and firewalls to mitigate
the risk of loss or theft of the Company’s data. Further investments have been made to prevent DoS
activities, including the use of Microsoft’s Azure environment and the security it offers, and improvements
to the software services’ defenses against such attacks.
The Company undertakes periodic reviews of its information technology infrastructure and security policies
using the SANS CIS Critical Security Controls as a framework. The areas of focus for review pertain to user
and system authentication and access; internal network configuration and security; data storage resiliency
and security; and hosted application access security. These periodic reviews serve to proactively shore up
areas of vulnerability and ensure policies are effective and enforced. However, the risk cannot be eliminated
entirely, and the Company has invested in insurance to mitigate loss in the event of a cyberattack.
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.
2018 Annual Report | Management’s Discussion and Analysis 19
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 IFSAR 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.
Environmental Regulation
Changes in environmental regulation could have an adverse effect on the Company’s airborne data
acquisition services business. For example, requirements for cleaner burning aircraft fuel could result in
increased costs which could impact the Company’s pricing model for acquisition services projects. The
complexity and breadth of environmental and climate change related issues make it extremely difficult to
predict the potential impact on the Company. Compliance with environmental regulation can be costly,
and non-compliance can result in fines, penalties and loss of licenses.
Political Instability
Intermap understands that not every region enjoys the political stability that is taken for granted in North
America. 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.
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 are helpful in the collection of the Company’s IFSAR
2018 Annual Report | Management’s Discussion and Analysis 20
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.
2018 Annual Report | Management’s Discussion and Analysis 21
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22
Management’s Report
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.
Patrick A. Blott
Chairman of the Board and
Chief Executive Officer
Jennifer S. Bakken
Executive Vice President and
Chief Financial Officer
23
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24
Independent Auditors’ Report
TO THE SHAREHOLDERS OF INTERMAP TECHNOLOGIES CORPORATION
Opinion
We have audited the consolidated financial statements of Intermap Technologies Corporation (the Entity),
which comprise:
•
•
•
•
•
the consolidated balance sheets as at December 31, 2018 and December 31, 2017
the consolidated statements of profit and loss and other comprehensive income for the years then
ended
the consolidated statements of changes in shareholders’ deficiency for the years then ended
the consolidated statements of cash flows for the years then ended
and notes to the consolidated financial statements, including a summary of significant accounting
policies
(Hereinafter referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the
consolidated financial position of the Entity as at December 31, 2018 and December 31, 2017, and its
consolidated financial performance and its consolidated cash flows for the years then ended in accordance
with International Financial Reporting Standards (IFRS).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the “Auditors’ Responsibilities for the
Audit of the Financial Statements” section of our auditors’ report.
We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit
of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance
with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 2(a) in the financial statements, which indicates that Intermap Technologies
Corporation has incurred losses in current and prior years, negative cash flows from operations in the
current year and has a shareholders’ deficiency at December 31, 2018.
As stated in Note 2(a) in the financial statements, these events or conditions, along with other matters as
set forth in Note 2(a) in the financial statements, indicate that a material uncertainty exists that may cast
significant doubt on the Entity‘s ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
Other Information
Management is responsible for the other information. Other information comprises:
•
the information included in Management’s Discussion and Analysis filed with the relevant Canadian
Securities Commissions.
Our opinion on the financial statements does not cover the other information and we do not and will not
express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
Independent Auditors’ Report
25
identified above and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the audit and remain alert for indications that the other
information appears to be materially misstated.
We obtained the information included in Management’s Discussion and Analysis filed with the relevant
Canadian Securities Commissions as at the date of this auditors’ report. If, based on the work we have
performed on this other information, we conclude that there is a material misstatement of this other
information, we are required to report that fact in the auditors’ report.
We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the
Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in
accordance with International Financial Reporting Standards (IFRS), and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Entity’s ability to
continue as a going concern, disclosing as applicable, matters related to going concern and using the
going concern basis of accounting unless management either intends to liquidate the Entity or to cease
operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Entity’s financial reporting process.
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes
our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with Canadian generally accepted auditing standards will always detect a material
misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of the
financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit.
We also:
•
•
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit 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.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
26
Independent Auditors’ Report
Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Entity’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report
to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify
our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’
report. However, future events or conditions may cause the Entity to cease to continue as a going
concern.
•
•
Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in
a manner that achieves fair presentation.
Opinion
Communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
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
Provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
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
•
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
$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,
business activities within the group Entity to express an opinion on the financial statements. We
indicate the existence of a material uncertainty which may cast significant doubt on the Company’s ability
are responsible for the direction, supervision and performance of the group audit. We remain solely
to continue as a going concern.
responsible for our audit opinion.
Chartered Professional Accountants, Licensed Public Accountants
Chartered Accountants, Licensed Public Accountants
The engagement partner on the audit resulting in this auditors’ report is Andrew Watson.
March 3, 2010
Ottawa, Canada
Ottawa, Canada
March 28, 2019
Independent Auditors’ Report
27
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28
Consolidated Financial Statements
CONSOLIDATED BALANCE SHEETS
(In thousands of United States dollars)
Assets
Current assets:
Cash
Trade receivables
Unbilled revenue
Prepaid expenses
Property and equipment (Note 6)
Liabilities and Shareholders' Deficiency
Current liabilities:
Accounts payable and accrued liabilities (Note 7)
Current portion of project financing (Note 8(b))
Current portion of deferred lease inducements
Unearned revenue (Note 10)
Income taxes payable
Obligations under finance leases (Note 9)
Long-term notes payable (Note 8(a))
Long-term project financing (Note 8(b))
Deferred lease inducements
Obligations under finance leases (Note 9)
Shareholders' deficiency:
Share capital (Note 12(b))
Accumulated other comprehensive loss
Contributed surplus (Note 12(c))
Deficit
Commitments (Note 15)
Going concern (Note 2(a))
See accompanying notes to consolidated financial statements.
December 31, December 31,
2017
2018
$
1,284
3,221
421
567
5,493
$
6,363
521
65
359
7,308
$
4,311
9,804
$
4,460
11,768
$
2,836
1,411
32
626
1
11
4,917
$
4,011
1,303
30
1,604
2
10
6,960
29,065
177
64
3
34,226
199,917
(154)
25,379
(249,564)
(24,422)
26,496
191
120
14
33,781
199,634
(143)
25,242
(246,746)
(22,013)
$
9,804
$
11,768
On behalf of the Board:
(Signed) Patrick A. Blott
Patrick A. Blott
Chairman and CEO
On behalf of the Board:
(Signed) Andrew P. Hines
Andrew P. Hines
Director and Corporate Secretary
29
CONSOLIDATED STATEMENTS OF PROFIT AND LOSS AND OTHER
COMPREHENSIVE INCOME
(In thousands of United States dollars, except per share information)
For the years ended December 31,
2018
2017
Revenue (Note 10)
Expenses:
Operating costs (Note 11(a))
Restructuring costs (Note 11(b))
Depreciation of property and equipment
Operating (loss) income
Gain on disposal of equipment
Financing costs (Note 11(c))
Loss on foreign currency translation
Change in fair value of derivative instruments
Loss before income taxes
Income tax expense (Note 14):
Current
Deferred
$
15,820
$
19,304
14,119
478
1,339
15,936
(116)
7
(2,679)
(24)
-
(2,812)
-
(6)
(6)
16,828
244
924
17,996
1,308
3
(2,538)
(214)
137
(1,304)
(51)
200
149
Net loss for the period
$
(2,818)
$
(1,155)
Other comprehensive (loss) income:
Items that are or may be reclassified subsequently to profit or loss:
Foreign currency translation differences
(11)
3
Comprehensive loss for the period
$
(2,829)
$
(1,152)
Basic and diluted loss per share
$
(0.17)
$
(0.08)
Weighted average number of Class A common
shares - basic and diluted (Note 12(d))
See accompanying notes to consolidated financial statements.
16,840,744
15,182,474
2018 Annual Report | Consolidated Financial Statements
30
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIENCY
(In thousands of United States dollars)
Share
Capital
Contributed
Surplus
Accumulated
Other
Comprehensive
(Loss) Income
Deficit
Total
Balance at December 31, 2016
$
196,686
$
24,497
$
(146)
$
(245,591)
$
(24,554)
Comprehensive income (loss) for the period
Rights offering (Note 12(b))
Issuance costs (Note 12(b))
Gain on modification of debt (Note 8(a))
Deferred tax effect of notes payable
LTIP issuance
Share-based compensation
-
2,890
(164)
-
-
162
60
-
-
-
746
(200)
(115)
314
3
-
-
-
-
-
-
(1,155)
-
-
-
-
-
-
(1,152)
2,890
(164)
746
(200)
47
374
Balance at December 31, 2017
$
199,634
$
25,242
$
(143)
$
(246,746)
$
(22,013)
Comprehensive loss for the period
Share-based compensation
-
283
-
137
(11)
-
(2,818)
-
(2,829)
420
Balance at December 31, 2018
$
199,917
$
25,379
$
(154)
$
(249,564)
$
(24,422)
See accompanying notes to consolidated financial statements.
2018 Annual Report | Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of United States dollars)
For the years ended December 31,
2018
2017
31
Operating activities:
Net loss for the period
Adjusted for the following non-cash items:
Depreciation of property and equipment
Share-based compensation expense
Gain on disposal of equipment
Amortization of deferred lease inducements
Deferred taxes
Change in fair value of derivative instruments
Financing costs
Current income tax expense
Interest paid
Income tax paid
Changes in working capital:
Trade receivables
Unbilled revenue and prepaid expenses
Accounts payable and accrued liabilities
Unearned revenue
Gain on foreign currency translation
Cash flows (used) provided by operating activities
Investing activities:
Purchase of property and equipment
Proceeds from sale of equipment
Cash flows used in investing activities
Financing activities:
Proceeds from issuance of common shares
Repayment of notes payable
Share issuance costs
Repayment of obligations under finance leases
Cash flows used in financing activities
Effect of foreign exchange on cash
Decrease in cash
Cash, beginning of period
Cash, end of period
See accompanying notes to consolidated financial statements.
$
(2,818)
$
(1,155)
1,339
420
(7)
(46)
-
-
2,679
6
(2)
(7)
(2,705)
(564)
(1,213)
(978)
25
(3,871)
(1,190)
7
(1,183)
-
-
-
(12)
(12)
(13)
(5,079)
6,363
924
281
(3)
26
(200)
(137)
2,538
51
(7)
(52)
89
15
99
1,135
(107)
3,497
(3,471)
3
(3,468)
2,890
(2,890)
(164)
(56)
(220)
27
(164)
6,527
$
1,284
$
6,363
2018 Annual Report | Consolidated Financial Statements
32
Notes to Consolidated Financial Statements
(In thousands of United States dollars, except per share information)
1. Reporting entity:
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 400, 3rd Avenue SW, Suite 3700, Calgary, Alberta, Canada T2P 4H2.
Intermap is a global location-based geospatial information company, creating a wide variety of geospatial
solutions and analytics for its customers. Intermap’s geospatial solutions and analytics can be used in
a wide range of applications including, but not limited to, location-based information, geospatial risk
assessment, geographic information systems, engineering, utilities, global positioning systems maps, oil
and gas, renewable energy, hydrology, environmental planning, wireless communications, transportation,
advertising, and 3D visualization.
2. Basis of preparation:
a. Going concern:
These consolidated 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 can realize its assets and discharge its liabilities and
commitments in the normal course of business. During the year ended December 31, 2018, the
Company reported an operating loss of $116, a net loss of $2,818, and negative cash flows from
operating activities of $3,871. In addition, the Company has a shareholders’ deficiency of $24,422 at
December 31, 2018.
The above factors in the aggregate indicate there are material uncertainties which may cast 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 secure sales with upfront
payments, reduce existing debt and / or obtain additional financing. Failure to achieve one or more of
these requirements could have a materially adverse effect on the Company’s financial condition. The
Board of Directors and management have taken actions to address these issues including retaining
a financial advisor as well as a consultant to explore strategic alternatives. Such alternatives could
include, a sale of the Company, a sale of assets, a business combination or continuing as a standalone
entity under a new capital structure. The Board of Directors has been informed by Vertex One Asset
Management (“Vertex”), the Company’s only first lien secured creditor and its largest shareholder, of its
general preference for liquidity at this time. Vertex has provided financial support to the Company for
the past six years. There can be no assurance that the consideration of strategic alternatives will result
in the completion of any transaction or any other alternative. The Company may not be able to meet
its future obligations if it is unable to complete a strategic alternative transaction or secure additional
capital.
The consolidated 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
consolidated 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
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 28, 2019, the date the Board of Directors approved the consolidated financial statements.
33
c. Measurement basis:
The consolidated 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 consolidated 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
consolidated 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 8(a) –
Notes Payable.
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. 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.
ii. Trade receivables:
The Company uses historical trends and performs specific account assessments when
determining the expected credit losses. These accounting estimates are in respect to the trade
receivables line item in the Company’s consolidated balance sheet. At December 31, 2018, trade
receivables represented 33% of total assets.
The estimate of the Company’s expected credit losses could change from period to period due to
the allowance being a function of the balance and composition of trade receivables.
iii. 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.
iv. Derivative financial instruments:
The Company has determined that its functional currency is the United States dollar and
has issued non-broker warrants. 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.
2018 Annual Report | Consolidated Financial Statements
34
v. Provisions:
A provision is recognized, if because 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(f)).
vi. Compound financial instruments:
The Company has issued compound financial instruments which comprise promissory notes
denominated in United States dollars that include detachable purchase warrants denominated
in both United States dollars and Canadian dollars which 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.
vii. Notes payable:
The Company has issued long-term promissory notes with no stated interest obligation. The
valuation and accounting for the zero-interest notes is complex and requires the application
of management estimates and judgments with respect to the determination of appropriate
valuation method applied on initial recognition. The assumptions and models used for estimating
fair value of the note transactions are disclosed in Note 8.
viii. Revenue:
Changes to the assumptions used to measure revenue could impact the amount of revenue
recognized in the consolidated financial statements (see Note 3(i)).
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
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’ deficiency.
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. (a U.S. corporation); Intermap Insurance
Solutions Inc. (a U.S. corporation), Intermap Technologies PTY Ltd (an Australian corporation); Intermap
Technologies s.r.o. (a Czech Republic corporation); and PT ExsaMap Asia (an Indonesian corporation).
The Company accounts for PT ExsaMap Asia as a 100% owned subsidiary (previously a 90% owned
2018 Annual Report | Consolidated Financial Statements 35
subsidiary) and the non-controlling interest was removed.
With respect to PT ExsaMap Asia (a 90% owned subsidiary during all of 2017), the non-controlling
shareholder owned a written put option for which the Company had recognized as a liability in the
consolidated financial statements in accordance with IAS 32, Financial Instruments: Presentation.
The Company 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 was presented in the consolidated 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 were 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:
Cash includes unrestricted cash balances.
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
is 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 depreciable amount which is the cost of an asset, less its residual
value. Depreciation is provided on the straight-line basis over the following useful lives of the assets:
Depreciation methods, useful lives and residual values are reviewed at each financial year end and
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.
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 part will flow to
the Company, and its cost can be measured reliably. The carrying amount of the replaced part is
derecognized. The costs of the day-to-day servicing of property and equipment are recognized in profit
or loss as incurred.
2018 Annual Report | Consolidated Financial Statements 36
Gains and losses on disposal of property and equipment are determined by comparing the proceeds
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.
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. After
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.
f.
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.
g. 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.
h.
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.
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
2018 Annual Report | Consolidated Financial Statements 37
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.
i.
Revenue recognition:
Revenue is recognized upon transfer of control of goods or services to the buyer in an amount that
reflects the consideration the Company expects to receive in exchange for those good or services.
The Company’s goods and services are generally distinct and accounted for as separate performance
obligations. Billings in excess of revenue are recorded as unearned revenue. Revenue recognized in
excess of billings is recorded as unbilled revenue.
The company recognizes an asset related to the incremental costs of obtaining a contract with a
customer. The Company has elected to make use of the practical expedient and will expense sales
commission costs when incurred if the amortization period is less than 12 months.
i. Data licenses:
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. Customers obtain control of data products
upon receipt of a physical hard drive or download of the data from a web link provided. Invoices
are generated, and revenue is recognized when control is transferred. Invoices are generally paid
within 30 days.
ii. Software subscriptions:
Software subscriptions are generally one year or less, with invoices issued and paid at the
beginning of the license term. Revenue is recognized overtime, and payments for future months
of service are recognized in unearned revenue.
While the license agreements are for a fixed term, some agreements also contain a limited number
of clicks or uses. If the limit is reached prior to the end of the term, the license ends early.
iii. Fixed-price contracts:
Revenue from acquisition service contracts is recognized overtime based on the ratio of costs
incurred to estimated final contract costs. The use of this method of measuring progress towards
complete satisfaction of the performance obligations 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. Invoices are issued according to contractual
terms and are usually payable within 30 days. Revenue recognized in excess of billings is recorded
as unbilled revenue.
2018 Annual Report | Consolidated Financial Statements 38
iv. Multiple performance obligations:
When a single sales transaction requires more than one performance obligation, the total amount
of consideration to be received is allocated to distinct products or services deliverables based on
the stand-alone selling price of each.
j.
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.
k. 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 was recognized as an employee
expense, with a corresponding increase in equity, over the service period, and the liability was re-
measured at each reporting date. The fair value of the optional settlement portion of the LTIP was
recognized as an employee expense, with a corresponding increase in liabilities, over the service
period, and was re-measured to the current fair value at each reporting date.
l.
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.
m. Financial instruments:
i.
Initial measurement and classification:
Non-derivative financial assets: The Company initially recognizes trade 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.
Assets at amortized cost: Trade 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.
Financial liabilities at fair value through profit or loss: These 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).
Financial liabilities at amortized cost: The Company initially recognizes debt liabilities on the date
2018 Annual Report | Consolidated Financial Statements 39
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.
ii. Subsequent measurement:
Non-derivative financial assets: 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.
Assets at amortized cost: Subsequent to initial recognition, trade receivables are measured at
amortized cost using the effective interest method, less any impairment losses.
Financial liabilities at fair value through profit or loss: The 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) 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.
Financial liabilities at amortized cost: 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
categories of financial instruments outstanding:
Financial instrument:
Cash
Trade receivables
Unbilled revenue
Accounts payable and accrued liabilities
Obligations under finance leases
Notes payable
Other long-term liabilities
Classification:
Assets at amortized cost
Assets at amortized cost
Assets at amortized cost
Financial liabilities at amortized cost
Financial liabilities at amortized cost
Financial liabilities at amortized cost
Financial liabilities at amortized cost
iii. Compound financial instruments:
Compound financial instruments issued by the Company comprise promissory notes
denominated in United States dollars that include detachable warrants denominated in United
States dollars and Canadian 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 component. 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.
2018 Annual Report | Consolidated Financial Statements 40
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.
iv. Fair value measurement:
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 fair value hierarchy has the following levels:
Level 1 – valuations based on quoted prices (unadjusted) in active markets for identical 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 3 – valuation techniques using inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
During the reporting periods, there were no transfers between Level 1 and Level 2 fair value
measurements.
v.
Impairment of financial assets:
Loss allowances are measured based on the lifetime expected credit losses (ECLs). When
determining whether the credit risk of a financial asset has increased significantly since initial
recognition and then estimating ECLs, the Company considers reasonable and supportable
information that is relevant and available without undue cost or effort. This includes both
quantitative and qualitative information and analysis, based on historical experience and forward-
looking information. The Company considers a financial asset to be in default when the customer
is highly unlikely to pay its obligation in full and then impairs the asset.
n. Segments:
The operations of the Company are in one industry segment: digital mapping and related services.
o. 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.
4. New and revised IFRS accounting pronouncements:
The Company adopted the following new accounting standards and amendments which are effective for
the Company’s consolidated financial statements commencing January 1, 2018.
a.
IFRS 9, Financial Instruments:
Effective January 1, 2018, the Company adopted IFRS 9. 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. The adoption of this standard has not had a material impact on the
consolidated financial statements.
Under IFRS 9, on initial recognition, a financial asset is classified as measured at: amortized cost; fair
value through other comprehensive income (FVOCI) – debt investment; FVOCI – equity investment; or
fair value through profit or loss (FVTPL). The classification of financial assets under IFRS 9 is generally
based on the business model in which a financial asset is managed and its contractual cash flow
2018 Annual Report | Consolidated Financial Statements 41
characteristics. Derivatives embedded in contracts where the host is a financial asset in the scope of
the standard are never separated. Instead, the hybrid financial instrument is assessed for classification.
i.
Classification and measurement of financial assets and liabilities:
The following table summarizes the classification and measurement changes for each class of the
Company’s financial assets and financial liabilities upon adoption at January 1, 2018:
Financial instrument Category
Measurement Category
Measurement
IAS 39
IFRS 9
Loans and receivables
Loans and receivables
Loans and receivables
Cash
Trade receivables
Unbilled revenue
Accounts payable and Other liabilities
accrued liabilities
Obligations under
finance leases
Notes payable
Other liabilities
Other liabilities
Amortized cost Assets at amortized cost Amortized cost
Amortized cost Assets at amortized cost Amortized cost
Amortized cost Assets at amortized cost Amortized cost
Amortized cost
Amortized cost Financial liabilities at
amortized cost
Amortized cost Financial liabilities at
Amortized cost
amortized cost
Amortized cost Financial liabilities at
Amortized cost
amortized cost
Other long-term liabilities Other liabilities
Amortized cost Financial liabilities at
Amortized cost
amortized cost
ii.
Impairment of financial assets:
IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with an ‘expected credit loss’ (ECL) model. The
new impairment model applies to financial assets measured at amortized cost, contract assets
and debt investments at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit
losses are recognized earlier than under IAS 39. The financial assets at amortized cost consist of
cash and trade receivables.
Under IFRS 9, loss allowances are measured on either of the following bases:
•
•
12-month ECLs: these are ECLs that result from possible default events within the 12 months
after the reporting date; and
Lifetime ECLs: these are ECLs that result from all possible default events over the expected life
of a financial instrument.
The Company has elected to measure loss allowances for trade receivables as an amount equal to
lifetime ECLs.
When determining whether the credit risk of a financial asset has increased significantly since
initial recognition and then estimating ECLs, the Company considers reasonable and supportable
information that is relevant and available without undue cost or effort. This includes both
quantitative and qualitative information and analysis, based on historical experience and forward-
looking information.
The Company considers a financial asset to be in default when the customer is highly unlikely to
pay its obligation in full.
b.
IFRS 15, Revenue from Contracts with Customers:
IFRS 15 provides a single, principles-based five-step model for revenue recognition to be applied to all
customer contracts and requires enhanced disclosures. The standard also provides guidance relating to
recognition of customer acquisition costs.
The Company has adopted this standard on the required effective date of January 1, 2018, using the
modified retrospective approach. The Company is providing expanded disclosures related to the
nature, amount and timing of the revenue (see Note 10). In addition, the Company has elected to make
use of the following practical expedients:
•
IFRS 15 is only applied to revenue contracts that are not completed as the date of applying the
standard of January 1, 2018; and
2018 Annual Report | Consolidated Financial Statements 42
•
The Company will expense sales commission costs when incurred if the amortization period is less
than 12 months.
Under IFRS 15, revenue is recognized when a customer obtains control of the good or services.
Determining the timing of the transfer of control, at a point in time or overtime, requires judgement.
IFRS 15 did not have a significant impact on the Company’s accounting policies.
i. Data Licenses:
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. Customers obtain control of data products upon
receipt of a physical hard drive or download of the data from a web link provided. Invoices are
generated, and revenue is recognized at that point in time. Invoices are generally paid within 30
days.
ii. Software subscriptions:
Software subscriptions are generally one year or less, with invoices issued and paid at the
beginning of the license term. Revenue is recognized overtime, and payments for future months
of service are recognized in unearned revenue.
While the license agreements are for a fixed term, some agreements also contain a limited number
of clicks or uses. If the limit is reached prior to the end of the term, the license ends early.
iii. Acquisition service contracts:
Revenue from acquisition service contracts is recognized overtime based on the ratio of costs
incurred to estimated final contract costs. The use of this method of measuring progress towards
complete satisfaction of the performance obligations 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. Invoices are issued according to contractual
terms and are usually payable within 30 days. Uninvoiced amounts are presented as unbilled
revenue.
5. Future IFRS accounting 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 after the current reporting period.
a.
IFRS 16, Leases
In January 2016, the International Accounting Standards Board issued IFRS 16, Leases, which specifies
how to recognize, measure, present and disclose leases. The standard provides a single lessee
accounting model, requiring lessees to recognize right-of use-assets and lease liabilities for all leases
unless the lease term is 12 months or less or the underlying asset has a low value. Consistent with its
predecessor, IAS 17, the new lease standard continues to require lessors to classify leases as operating
or finance. The Company is reviewing its leases to evaluate the impact of the standard. The Company
will adopt the standard using the modified retrospective method, in which the cumulative effect of
adoption will be recognized as an adjustment to the opening balance of retained earnings. Prior year
period amounts will not be adjusted. While the assessment of the impact is still being determined
and the Company is not currently in a position to reliably quantify the full impact of IFRS 16 on the
consolidated financial statements, the Company expects the adoption of this standard to increase
assets and liabilities as it will be required to record a right-of-use asset and a corresponding liability in
the consolidated financial statements. The Company also expects an impact from the reclassification
2018 Annual Report | Consolidated Financial Statements 43
of lease expense from operating to depreciation and interest expense. There will be no impact on cash
flows, however, cash flows from operating activities will increase as payments will be reclassified to
cash flows from investing activities.
6. Property and equipment:
Property and equipment
Aircraft
and
engines
Radar and
mapping
equipment
Furniture
and
fixtures
Leasehold
improvements
Under
construction
Total
Balance at December 31, 2016
$
837
$
283
$
9
$
39
$
289
$
1,457
Additions
Transfer from under construction
Depreciation
-
-
(369)
294
3,489
(517)
3
-
(4)
24
-
(34)
3,606
(3,489)
-
3,927
-
(924)
Balance at December 31, 2017
$
468
$
3,549
$
8
$
29
$
406
$
4,460
Additions
Transfer from under construction
Depreciation
102
30
(363)
104
131
(927)
9
-
(6)
29
86
(43)
946
(247)
-
1,190
-
(1,339)
Balance at December 31, 2018
$
237
$
2,857
$
11
$
101
$
1,105
$
4,311
Property and equipment
Aircraft
and
engines
Radar and
mapping
equipment
Furniture
and
fixtures
Leasehold
improvements
Under
construction
Total
Cost
$
10,951
$
31,132
$
379
$
959
$
406
$
43,827
Accumulated depreciation
(10,483)
(27,583)
(371)
(930)
-
(39,367)
Balance at December 31, 2017
$
468
$
3,549
$
8
$
29
$
406
$
4,460
Cost
$
11,083
$
31,226
$
388
$
1,074
$
1,105
$
44,876
Accumulated depreciation
(10,846)
(28,369)
(377)
(973)
-
(40,565)
Balance at December 31, 2018
$
237
$
2,857
$
11
$
101
$
1,105
$
4,311
During the twelve months ended December 31, 2018, the Company disposed of assets with an original cost
of $141 (December 31, 2017 - $28) and a net book value of $Nil (December 31, 2017 - $Nil) and recognized
a gain of $7 (December 31, 2017 - $3) on those assets and received cash proceeds of $7 (December 31, 2017
- $3). Property and equipment additions for the year ended December 31, 2018 include $Nil (December 31,
2017 - $456) recorded to accounts payable and accrued liabilities.
7. Accounts payable and accrued liabilities:
December 31,
2018
December 31,
2017
Accounts payable
Accrued liablities
Other taxes payable
$
$
1,118
1,709
9
2,836
1,910
2,043
58
4,011
$
$
During the twelve months ended December 31, 2018, the Company reversed excess vendor payables of
$222 (December 31, 2017 - $Nil) and accrued liabilities of $223 (December 31, 2017 - $Nil) recorded in prior
years based on IFRS 9 derecognition of financial liabilities as the liabilities have expired.
2018 Annual Report | Consolidated Financial Statements
44
8. Financial liabilities:
The following table details the financial liabilities activity and balances at December 31, 2018 and 2017:
Notes
Payable
Liabilities
Project
Financing
Finance
Leases
Equity
Share
Capital
Total
Balance at December 31, 2016
$
27,701
$
1,382
$
73
$
196,686
$
225,842
Changes from financing activities:
Proceeds from issuance of common shares
Repayment of notes payable
Share issuance costs
Repayment of obligations under finance lease
Total changes from financing activities
Foreign exchange
Other changes:
Financing costs
Discount recognized on the note
LTIP issuance
Share-based compensation
-
(2,890)
-
-
(2,890)
-
2,431
(746)
-
-
-
-
-
-
-
12
100
-
-
-
-
-
-
(56)
(56)
-
-
-
-
7
2,890
-
(164)
-
2,726
2,890
(2,890)
(164)
(56)
(220)
-
12
-
-
162
60
2,538
(746)
162
60
Balance at December 31, 2017
$
26,496
$
1,494
$
24
$
199,634
$
227,648
Changes from financing activities:
Repayment of obligations under finance lease
Total changes from financing activities
Foreign exchange
Other changes:
Financing costs
Share-based compensation
-
-
-
2,569
-
-
-
(14)
108
-
(12)
(12)
-
-
2
-
-
-
(12)
(12)
(14)
-
283
2,679
283
Balance at December 31, 2018
$
29,065
$
1,588
$
14
$
199,917
$
230,584
a. Notes payable:
The following table details the liability and equity components of each note payable balance at
December 31, 2018:
Closing Date of Note
Proceeds from issuance of notes
Repayment
Note modification - 2016
Conversion to long-term note payable
Issuance of December 2016 note
Transaction costs
Discount on the note
Effective interest on note discount
December 14,
2016
December 14,
2016
Total
March 30, 2017
-
$
-
-
3,110
-
-
$
6,000
(2,890)
-
(3,110)
-
-
(746)
357
(158)
158
-
$
-
27,800
-
3,000
(168)
(8,880)
4,592
$
6,000
(2,890)
27,800
-
3,000
(168)
(9,784)
5,107
Long-term portion of notes payable
$
2,721
$
-
$
26,344
$
29,065
The following table details the liability and equity components of each note payable balance at
December 31, 2017:
Closing Date of Note
Proceeds from issuance of notes
Repayment
Note modification - 2016
Conversion to long-term note payable
Issuance of December 2016 note
Transaction costs
Discount on the note
Effective interest on note discount
December 14,
2016
December 14,
2016
Total
March 30, 2017
-
$
-
-
3,110
-
-
$
6,000
(2,890)
-
(3,110)
-
-
(746)
147
(158)
158
-
$
-
27,800
-
3,000
(168)
(8,880)
2,233
$
6,000
(2,890)
27,800
-
3,000
(168)
(9,784)
2,538
Long-term portion of notes payable
$
2,511
$
-
$
23,985
$
26,496
2018 Annual Report | Consolidated Financial Statements
45
i. December 14, 2016 note payable:
On December 14, 2016, the Company received $6,000 as a bridge loan from Vertex. The loan is
payable on the earlier of March 31, 2017 or the completion of the Rights Offering, which closed
on March 30, 2017 (see Note 12(b)). All the proceeds of the Rights Offering were to be used to pay
down this note payable, and any amounts which remain outstanding after the Rights Offering
will be converted into a term loan due September 1, 2020. The note is non-interest bearing, and
therefore the fair value at inception must be estimated to account for an imputed interest factor.
The value at inception was determined to be $5,842. The estimated discount rate was 9.21% and
is subject to estimation uncertainty. The discount of $158 was recognized in contributed surplus
and was amortized over the term of the note using the effective interest method. The note was
subject to prepayment provisions, if the Company’s aggregate cash balance exceeds $10.0 million
at the end of any calendar quarter, 50% of the balance greater than $10.0 million must be pre-paid
against the outstanding notes payable.
ii. December 14, 2016 note modification:
On December 14, 2016, the Company and Vertex restructured its September 15, 2016 note
payable of $25,800 and July 8, 2016 note payable of $2,000. The original notes, bearing interest
at 15% per annum each, were extended to mature on September 1, 2020 and the interest
was eliminated. In addition, a promissory note payable for $3,000 was issued in exchange for
the termination of the royalty agreement, executed on February 23, 2015, and the amending
agreement, which established the cash sweep requirement, executed on April 28, 2015. The
restructured notes were treated as an extinguishment for accounting purposes, and given they
require for zero interest payments, the fair value at inception must be estimated to account for an
imputed interest factor. The value of the remaining promissory notes ($25,800, $2,000 and $3,000)
at inception was determined to be $21,752, net of transaction costs of $168. The estimated
discount rate was 9.21% and is subject to estimation uncertainty. The discount to the note payable
will be amortized over the term of the note using the effective interest method. For the twelve
months ending December 31, 2018, $2,359 (twelve months ending December 31, 2017 - $2,233)
was recognized in financing costs. The note is secured by a first priority lien on all the assets of
the Company and is subject to prepayment provisions, if the Company’s aggregate cash balance
exceeds $10.0 million at the end of any calendar quarter, 50% of the balance greater than $10.0
million must be pre-paid against the outstanding notes payable.
iii. March 30, 2017 note payable:
On March 30, 2017, the Company executed an amended and restated promissory note with
Vertex One Asset Management (Vertex), for $3,110 due September 1, 2020. The note represents
the balance remaining from the December 14, 2016 bridge loan, following the completion of the
Rights Offering (See Note 12(b)) and repayment of $2,890. The note is non-interest bearing, and
therefore the fair value at inception must be estimated to account for an imputed interest factor.
The value at inception was determined to be $2,364, based on the estimated discount rate of
8.05%, and is subject to estimation uncertainty. The resulting discount of $746 was recognized in
contributed surplus as a gain on the modification of debt at March 30, 2017 and will be amortized
over the term of the note using the effective interest method. For the twelve months ending
December 31, 2018, $210 (twelve months ended December 31, 2017 - $147) was recognized in
financing costs. The note is secured by a first priority lien on all the assets of the Company and is
subject to prepayment provisions, if the Company’s aggregate cash balance exceeds $10.0 million
at the end of any calendar quarter, 50% of the balance greater than $10.0 million must be pre-paid
against the outstanding notes payable.
2018 Annual Report | Consolidated Financial Statements
46
b. Project financing:
Project financing 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,
2018, the balance of the note is $1,411. While the note is classified as a current liability on the balance
sheet, the Company has disputed the amount owed and therefore has not committed to cash payments.
Additionally, the project financing balance includes reimbursable project development funds provided
by a corporation designed to enable the development and commercialization of geomatics solutions in
Canada. The funding is repayable upon the completion of a specific development project and the first
sale of any of the resulting product(s). Repayment is to be made in quarterly installments equal to the
lesser of 20% of the funding amount or 25% of the prior quarter’s sales.
Promissory note payable
Reimbursable project funding
Less current portion
December 31,
2018
December 31,
2017
$
1,411
177
$
1,303
191
1,588
(1,411)
1,494
(1,303)
Long-term portion of project financing
$
177
$
191
9. Obligations under finance leases:
Finance lease liabilities are payable as follows:
Decem ber 31, 2018
December 31, 2017
Future
m inim um
lease
Present
value of
Future
m inim um minimum
lease
lease
Present
value of
minimum
lease
paym ents Interest (1) paym ents
payments
Interest (1)
payments
Less than one year
(current portion)
Betw een one and f ive years
(long-term portion)
$
12
$
1
$
11
$
12
$
2
$
10
$
3
15
-
$
1
$
3
14
$
15
27
1
$
3
$
14
24
(1) Interest rate ranging from 7.48% to 9.65%.
10. Revenue:
Details of revenue are as follows:
For the twelve months ended December 31,
2018
2017
Acquisition services
Value-added data
Software and solutions
Primary geographical market
United States
Asia/Pacific
Europe
Timing of revenue recognition
Upon delivery
Services overtime
$
$
$
$
8,699
4,735
2,386
15,820
10,636
3,368
1,816
15,820
5,168
10,652
15,820
$
$
$
$
$
$
$
$
14,926
2,837
1,541
19,304
6,925
10,987
1,392
19,304
3,142
16,162
19,304
2018 Annual Report | Consolidated Financial Statements
47
Changes in the unbilled revenue balance are as follows:
For the twelve months ended December 31,
2018
2017
Unbilled revenue, beginning of period
Increase in unbilled revenue recognized
Amounts invoiced included in the
beginning balance
Amounts invoiced in the current period
Foreign exchange
Unbilled revenue, end of period
Changes in the unearned revenue balance are as follows:
$
65
6,056
$
30
62
(65)
(5,634)
(1)
421
$
(30)
(2)
5
65
$
For the twelve months ended December 31,
2018
2017
Unearned revenue, beginning of period
Recognition of unearned revenue included in the
beginning balance
Recognition of unearned revenue in the current period
Amounts invoiced and revenue unearned
Foreign exchange
Unearned revenue, end of period
$
1,604
$
469
(1,604)
(3,668)
4,298
(4)
626
$
(469)
(15,906)
17,500
10
1,604
$
The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if the
expected benefit of those costs is longer than one year. The Company determined that certain commissions
paid to sales employees meet the requirement to be capitalized. Total capitalized cost included in prepaid
expenses and other assets to obtain contracts at December 31, 2018 was $16 (2017 – $21).
11. Operating and non-operating costs:
a. Operating costs:
For the twelve months ended December 31,
2018
2017
Personnel
Purchased services & materials (1)
Travel
Facilities and other expenses
$
8,198
3,885
471
1,565
14,119
$
$
8,580
5,391
597
2,260
16,828
$
(1) Purchased services and materials include aircraft costs, project costs, professional and consulting fees, and selling and
marketing costs.
b. Restructuring costs:
During the twelve months ended December 31, 2018, the Company continued organizational
restructuring to lower on-going operating costs. As a result, the company recorded $478 of workforce
reduction restructuring costs (twelve months ended December 31, 2017 - $244).
c.
Financing costs:
For the twelve months ended December 31,
2018
2017
Accretion of discounts recognized on
notes payable
Interest on project financing
Interest on finance lease
$
$
2,569
108
2
2,679
2,431
100
7
2,538
$
$
2018 Annual Report | Consolidated Financial Statements
48
12. Share capital:
a. Authorized:
The authorized share capital of the Company consists of an unlimited number of Class A common
shares and an unlimited number of Class A participating preferred shares. There are no Class A
participating preferred shares outstanding.
b.
Issued:
December 31, 2018
Number of
December 31, 2017
Number of
Class A common shares
Shares
Amount
Shares
Amount
Balance, beginning of period:
Issuance of common shares from
Rights offering
Issuance costs
LTIP Issuance
Share-based compensation
Share consolidation rounding
Balance, end of period:
16,396,289
$
199,634
10,134,458
$
196,686
-
-
-
872,183
-
17,268,472
-
-
-
283
-
199,917
$
6,011,273
-
149,293
101,250
16
16,396,289
2,890
(164)
162
60
-
199,634
$
On June 28, 2018, 872,183 Class A common shares were issued to directors of the Company as
compensation for services. Compensation expense of $283 for these Class A common shares is
included in operating costs.
On December 1, 2017, the Company completed a previously approved share consolidation on a 10 for
1 basis. No partial shares were issued in the consolidation and quantities were either rounded up or
down to the nearest share. As a result, sixteen additional shares were issued due to rounding. The share
quantities and per share prices in these Consolidated Financial Statements for 2017 and forward have
been adjusted to reflect the share consolidation for comparative purposes.
On June 20, 2017, 101,250 Class A common shares were issued to directors and employees of the
Company as compensation for services. Compensation expense of $60 for these Class A common
shares is included in operating costs.
On April 12 and June 29, 2017, the Company issued a total of 149,293 Class A common shares that
were earned under the LTIP Plan.
On February 24, 2017, the Company announced its plans to proceed with the previously announced
Rights Offering. The Rights Offering Notice was mailed on March 2, 2017 to all shareholders of record as
of March 1, 2017. Pursuant to the Rights Offering, one right was issued for each common share of the
Company held and each right entitles the holder to subscribe for one common share of the Company
upon the payment of the subscription price of C$0.60 or US$0.50 per common share. An aggregate
of 10,134,458 rights were issued pursuant to the Rights Offering, and the rights expired on March 27,
2017. On March 30, 2017, the Company issued 6,011,273 Class A common shares, with total proceeds
of $2,890 and issuance costs of $164. All proceeds were used to reduce the $6,000 bridge loan, and the
remaining balance of $3,110 was converted to a term note due on September 1, 2020, bearing zero
interest (see Note 8(a(iii))).
c. Contributed surplus:
Balance, beginning of period
Gain on modification of notes payable (Note 7(a))
Share-based compensation
LTIP issuance
Deferred tax effect of notes payable
Balance, end of period
December 31,
2018
December 31,
2017
$
25,242
-
137
-
-
$
24,497
746
314
(115)
(200)
$
25,379
$
25,242
2018 Annual Report | Consolidated Financial Statements
49
d. Loss per share:
The calculation of 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, they are not
included in the calculation of diluted loss per share. The Company has incurred a net loss for each
period presented and the inclusion of the outstanding options and warrants in the loss per share
calculation are anti-dilutive and are therefore not included in the calculation.
The weighted average number of shares have been retrospectively adjusted for the bonus element of a
1.14 factor because of the rights issued pursuant to the Rights Offering (Note 12(b)).
The underlying Class A common shares pertaining to 1,284,077 outstanding share options, 430,200
restricted share units (RSUs) and 546,456 outstanding warrants could potentially dilute earnings.
e. Director’s share compensation plan:
The Company had a director’s share compensation plan which allowed for the issuance of the
Company’s Class A common shares to non-employee directors of the Company as part of their annual
compensation. At the Annual General and Special Meeting of the Shareholders on June 8, 2016, 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 240,000 to 440,000. As of December
31, 2017, 78,581 Class A common shares remain available under the plan. Compensation expense for
issued shares was included in operating costs. This plan was replaced by the omnibus plan during 2018
(see Note 12(i)).
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. At the Annual General and Special Meeting of the Shareholders on June 8,
2016, 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 800,000 to 1,000,000. As of
December 31, 2017, 730,189 Class A common shares remained available for issuance under the plan.
Compensation expense for issued shares was included in operating costs. This plan was replaced by
the omnibus plan during 2018 (see Note 12(i)).
g. Share option plan:
The Company established a share option plan to provide long-term incentives to attract, motivate, and
retain certain key employees, officers, directors, and consultants providing services to the Company.
The plan permitted granting options to purchase up to 10% of the outstanding Class A common shares
of the Company. The share option plan was replaced at the Annual General Meeting on March 15, 2018
(see Note 12(i), and all options issued and outstanding at that time will remain until such time they
are exercised, expired or forfeited. As of December 31, 2018, 1,284,077 share options are issued and
outstanding. No additional options will be issued under this plan.
The following tables summarize information regarding share options outstanding:
December 31, 2018
December 31, 2017
Number of
shares
under option
Weighted
average
exercise
price (CDN)
Number of
shares
under option
Weighted
average
exercise
price (CDN)
Options outstanding,
beginning of period
Granted
Expired
Forfeitures
Options outstanding, end of period
1,396,079
-
(56,752)
(55,250)
1,284,077
$
$
1.09
-
2.26
0.89
1.04
924,991
905,214
(423,126)
(11,000)
1,396,079
2.48
0.70
3.26
2.78
1.09
$
$
Options exercisable, end of period
931,487
$
1.13
766,944
$
1.26
2018 Annual Report | Consolidated Financial Statements
50
Exercise
Price
(CDN$)
0.70
0.80
1.70
2.30
2.70
2.90
4.40
Options
outstanding
830,214
291,732
2,500
12,381
38,500
59,750
49,000
1,284,077
Weighted average
remaining
contractual life
Options
exercisable
8.28 years
7.88 years
1.62 years
2.63 years
3.38 years
1.22 years
0.20 years
7.34 years
496,874
291,732
2,500
12,381
19,250
59,750
49,000
931,487
During the twelve months ended December 31, 2018 and 2017, the estimated forfeiture rate was
10.36%. During the twelve months ended December 31, 2018, the Company recognized $98 (twelve
months ended December 31, 2017 – $274) of non-cash compensation expense related to the share
option 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-
based payments plan, based on the average stock price of the Company during the last quarter of the
year ended December 31, 2015, and included the award of up to 239,800 common shares to be issued
as equity-settled share-based compensation and up to 359,700 common shares to be settled in either
cash or common shares, at the discretion of the Board of Directors. At December 31, 2017, all shares
under the plan have been issued or forfeited.
The fair value of the awards is subject to estimation uncertainty and was calculated using a Monte
Carlo simulation model with the following assumptions at the grant date: expected dividend yield 0%,
risk-free interest rate of 1.02%, volatility of 94.35%, grant date of August 8, 2014 and expiration date of
December 31, 2015. Volatilities were 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 was charged to
non-cash compensation expense over the service period, which ended March 31, 2016, with a
corresponding charge to contributed surplus.
The grant date fair value of the optional settlement portion of the LTIP was $169, with payment
timing subject to predetermined working capital thresholds, and was determined using a discount
rate of 8.97%. The fair value of the amount estimated to be payable to employees under the optional
settlement portion of the LTIP is charged to non-cash compensation expense with a corresponding
increase in liabilities, over the service period, and is re-measured to the current fair value at each
reporting date. Any changes in the liability were recognized in profit or loss over the service period.
The fair value of the awards was subject to estimation uncertainty and at December 31, 2016 a liability
of $100 was recorded representing the fair value of the optional settlement portion of the LTIP. During
the twelve months ended December 31, 2017, 149,293 Class A common shares were issued with a
value of $47, 22,659 Class A common shares with a value of $12 were forfeited and a gain of $41 was
charged to non-cash compensation expense.
i. Omnibus plan:
The omnibus plan was approved by the shareholders at the Annual General Meeting on March 15,
2018 and replaces the share option plan, the employee share compensation plan and the director’s
share compensation plan. The omnibus plan permits the issuance of options, stock appreciation rights,
restricted share units and other share based awards under one single plan.
2018 Annual Report | Consolidated Financial Statements 51
The maximum number of common shares reserved under the omnibus plan is 3,363,631. Any common
shares reserved under the predecessor share option plan related to awards that expire or forfeit will
be rolled into the omnibus plan. As of December 31, 2018, 1,284,077 share options and 430,200 RSUs
are issued and outstanding. In addition, 872,183 Class A common shares were issued (see Note 12(b))
under the plan, leaving 777,171 awards remain available for future issuance. Under the omnibus
plan, there are no restrictions on the maximum number or percentage of common shares that can be
awarded to one individual or all insiders.
During the twelve months ended December 31, 2018, 481,700 RSUs were issued at a weighted average
grant date fair value of C$0.37 per share During the twelve months ended December 31, 2018, the
Company recognized $39 (twelve months ended December 31, 2017 - $Nil) of non-cash compensation
expense related to the RSUs. During the twelve months ended December 31, 2018, 51,500 RSUs were
forfeited.
j.
Share-based compensation expense:
Non-cash compensation expense has been included in operating costs with respect to the share
options, LTIP, RSUs and shares granted to employees and non-employees as follows:
For the twelve months ended December 31,
2018
2017
Employees
Directors and advisors
Non-cash compensation
$
137
283
$
159
153
$
420
$
312
13. Class A common share purchase warrants:
The warrant amounts and prices have been adjusted because of the December 2017 share consolidation
(see Note 12(b)). The following table details the number of Class A common share purchase warrants
outstanding at each balance sheet date:
Grant Date Expiry Date
Exercise
Price
Granted
Number of
Warrants
Outstanding
Anti-dilution December
Adjustment
31, 2017
1/14/2015
4/1/2015
4/1/2015
5/1/2015
1/21/2018 C$ 0.80
4/1/2018 US$ 0.70
9/1/2020 US$ 0.70
5/1/2018 US$ 0.60
146,983
458,919
458,907
453,017
28,041
87,550
87,549
86,424
175,024
546,469
546,456
539,441
Number of
Warrants
Outstanding
December
31, 2018
-
-
Expired
(175,024)
(546,469)
-
546,456
(539,441)
-
1,517,826
289,564
1,807,391
(1,260,934)
546,456
Each warrant entitles its holder to purchase one Class A common share. The 546,456 outstanding warrants
denominated in United States dollars are recognized as part of share capital. At December 31, 2018 $385 is
included in share capital related to these warrants. As the exercise prices are denominated in U.S. dollars, the
Company’s functional currency, the warrants are not considered a derivative liability and are not required to
be recorded as a financial liability and revalued at each balance sheet date.
During January 2018, 175,024 warrants (146,983 warrants issued on January 14, 2015 adjusted for anti-
dilution provisions on March 30, 2017) naturally expired.
The expiry date for the warrants issued on April 1, 2015 was extended to September 1, 2020 by approval of
the shareholders at the Annual General Meeting on March 15, 2018.
During April 2018, 546,469 warrants (458,919 warrants issued on April 1, 2015 adjusted for anti-dilution
provisions on March 30, 2017) naturally expired.
During May 2018, 539,441 warrants (453,017 warrants issued on May 1, 2015 adjusted for anti-dilution
provisions on March 30, 2017) naturally expired.
2018 Annual Report | Consolidated Financial Statements
52
The following table details the number and value of the non-broker Class A common share purchase
warrants denominated in Canadian dollars that are outstanding and included in warrant liability at each
balance sheet date.
Balance at December 31, 2017
Expired
Balance at December 31, 2018
14. Income Taxes:
a. Current tax (expense) recovery:
December 31
Current period
Adjustment for prior periods
b. Deferred tax recovery
Number of
non-broker warrants
Warrant
liability
175,024
$
-
(175,024)
-
-
$
-
2018
2017
$
(6)
-
$
(51)
-
$
(6)
$
(51)
Origination and reversal of temporary differences
$
-
$
200
During 2018, the Company recognized $Nil (2017 - $200) in deferred tax expense related to the notes
payable directly in equity.
c. Reconciliation of effective tax rate:
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:
December 31,
Losses, excluding income tax
Tax rate
Expected Canadian income tax recovery
Decrease resulting from:
Change in unrecognized temporary differences
Change in US statutory rate
Difference between Canadian statutory rate and those
applicable to U.S. and other foreign subsidiaries
Non-deductible expenses and non-taxable income
Adjustment for prior years income tax matters
Tax losses expiring during the year
Other
2018
2017
$
(2,812)
$
(1,304)
27.0%
27.0%
$
760
$
352
(242)
-
21,735
(22,263)
5
(143)
(414)
-
28
(6)
$
35
(580)
114
751
5
149
$
d. Recognized deferred tax assets and liabilities:
Deferred income taxes reflect the impact of temporary differences between amounts of assets and
liabilities for financial reporting purposes and such amounts as measured by tax laws. Deferred tax
assets and liabilities recognized at December 31, 2018 and 2017, are as follows:
December 31,
Property and equipment
Note payable
Tax loss carryforwards
Tax (assets) liabilities
Set off of tax
Net tax (assets) liabilities
Assets
Liabilities
Net
2018
2017
2018
2017
.
2018
2017
-
$
-
(200)
$
224
1,309
-
$
200
-
$
224
1,309
(1,533)
$
-
200
(200)
(1,533)
$
(1,533)
$
(200)
$
1,533
$
200
$
-
$
-
1,533
$
-
200
$
-
(1,533)
$
-
(200)
$
-
-
$
-
-
$
-
2018 Annual Report | Consolidated Financial Statements
53
e. Unrecognized deferred tax assets:
Deferred tax assets have not been recognized in respect of the following items:
December 31
Deductible temporary differences
Tax loss carryforwards
2018
2017
$
20,046
216,891
$
19,891
215,222
$
236,937
$
235,113
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 respect to these items
due to the uncertainty of future Company earnings.
Loss carry forwards:
At December 31, 2018, approximately $222,647 of loss carry forwards and $2,598 of tax credits were
available in various jurisdictions. At December 31, 2018 $5,756 of loss carry forwards were recognized
as a deferred tax asset. A summary of losses by year of expiry are as follows:
Twelve months ended December 31,
2019
2021
2022-2038
$
3,115
2,812
216,720
222,647
$
f. Movement in deferred tax balances during the year:
Balance at
December 31, 2017
Recognized in
Profit and Loss
Recognized
in Equity
Balance at
December 31, 2018
Property and equipment
Note payable
Tax loss carryforwards
-
$
2,000
(2,000)
$
224
(691)
467
$
224
1,309
(1,533)
Net tax (assets) liabilities
$
-
$
-
$
-
$
-
15. 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:
2019
2020
$
$
429
226
655
During the twelve months ended December 31, 2018, the Company recognized $855 (twelve months
ended December 31, 2017 - $915) in operating lease expense for office space.
16. Segmented information:
The operations of the Company are in one industry segment: digital mapping and related services. Revenue
by geographic segment is included in Note 10.
Property and equipment of the Company are located as follows:
December 31, 2018 December 31, 2017
United States
Canada
Europe
Asia/Pacific
$
$
3,528
691
21
71
4,311
4,191
194
4
71
4,460
$
$
2018 Annual Report | Consolidated Financial Statements
54
A summary of sales to major customers that exceeded 10% of total sales during each period are as follows:
Year ended December 31,
2018
2017
Customer A
Customer B
Customer C
$
$
8,709
-
1,800
10,509
5,631
9,270
-
14,901
$
$
17. 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 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 67 percent of the Company’s revenue is attributable to transactions with two key
customers (year ended December 31, 2017 – 77 percent of the revenue was attributable to two
key customers), approximately 54 percent of the Company’s trade receivables at year end are
attributable to customers located in Asia/Pacific (December 31, 2017 – approximately 20 percent), and
approximately 7 percent of the Company’s trade receivables at year end are attributable to customers
located in Europe (December 31, 2017 – approximately 67 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.
i.
Trade receivables
Expected credit losses are made on a customer-by-customer basis. All write downs against
receivables are recorded within sales, general and administrative expense in the statement of
operations. The Company is exposed to credit-related losses on sales to customers outside North
America due to potentially higher risks of collectability.
2018 Annual Report | Consolidated Financial Statements
55
Trade receivables as of December 31, 2018, and December 31, 2017, consist of:
Trade receivables
Other miscellaneous receivables
Trade receivables by geography consist of:
United States
Europe
Canada
Asia/Pacific
An aging of the Company’s trade receivables are as follows:
Current
31-60 days
61-90 days
Over 91 days
December 31, December 31,
2017
2018
$
3,207
14
$
519
2
$
3,221
$
521
December 31, December 31,
2017
2018
$
907
230
350
1,720
$
67
349
-
103
$
3,207
$
519
December 31, December 31,
2017
2018
$
3,062
118
17
10
$
344
49
-
126
$
3,207
$
519
The balance of the past due amounts relates to reoccurring customers and are considered
collectible.
ii.
Investments in securities
The Company manages its credit risk surrounding cash by dealing solely with what management
believes to be reputable banks and financial institutions and limiting the allocation of excess
funds into financial instruments that management believes to be highly liquid, low risk
investments. The balance at December 31, 2018, is held in cash at banks within the United States,
Canada, Europe, 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 interest rates,
will affect the Company’s income or the value of its holding of financial instruments.
i.
Foreign exchange risk
The Company operates internationally and is exposed to foreign exchange risk from various
currencies, primarily the Canadian dollar, Euro, British pound, Indonesian rupiah, Czech Republic
koruna, Malaysian ringgit and Australian dollar. Foreign exchange risk arises from sales and
purchase transactions as well as 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 most its subsidiaries.
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 management monitors exposure
to such fluctuations, it does not employ any external hedging strategies to counteract the foreign
currency fluctuations.
2018 Annual Report | Consolidated Financial Statements
56
The balances in foreign currencies at December 31, 2018, are as follows:
(in USD)
Cash
Trade receivables
Accounts payable and
accrued liabilities
Australian
Dollar
Canadian
Dollar
Euro
British
Pound
Indonesian
Rupiah
$
1
-
-
$
12
1
-
$
39
-
$
100
(549)
(31)
-
$
3
-
139
Czech
Republic
Koruna
$
28
87
(139)
$
1
$
(536)
8
$
$
100
$
142
$
(24)
The balances in foreign currencies at December 31, 2017, are as follows:
(in USD)
Cash
Trade receivables
Accounts payable and
accrued liabilities
Australian
Dollar
Canadian
Dollar
Euro
British
Pound
Indonesian
Rupiah
Czech
Republic
Koruna
-
$
99
$
246
4
-
$
43
-
$
33
$
9
-
$
(2)
117
(54)
(730)
(197)
(3)
(239)
(172)
$
45
$
(480)
$
(154)
$
30
$
(230)
$
(57)
Based on the net exposures at December 31, 2018 and 2017, and if all other variables remain
constant, a 10% depreciation or appreciation of the United States dollar against the following
currencies would result in an increase / (decrease) in net earnings by the amounts shown below:
December 31, 2018
United States dollar:
Depreciates 10%
Appreciates 10%
December 31, 2017
United States dollar:
Depreciates 10%
Appreciates 10%
ii.
Interest rate risk
Australian
Dollar
Canadian
Dollar
Euro
British
Pound
Indonesian
Rupiah
Czech
Republic
Koruna
-
$
-
$
54
(54)
$
(1)
1
$
(10)
10
$
14
(14)
2
$
(2)
Australian
Dollar
Canadian
Dollar
Euro
British
Pound
Indonesian
Rupiah
Czech
Republic
Koruna
$
(5)
5
$
26
(26)
$
15
(15)
$
(3)
3
$
23
(23)
6
$
(6)
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 does not have any debt instruments outstanding with variable interest
rates at December 31, 2018, or December 31, 2017.
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 principal 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.
2018 Annual Report | Consolidated Financial Statements
57
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, 2018, the
Company has a cash balance of $1,284 (December 31, 2017 – $6,363) and working capital of positive
$576 (December 31, 2017 –positive $348).
The following are the contractual maturities of the undiscounted cash flows of financial liabilities as of
December 31, 2018:
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
2,597
-
1,411
3
72
-
-
3
167
-
-
6
-
33,914
177
3
-
-
-
-
Accounts payable
and accrued liabilities
Notes Payable
Project financing
Obligations under
finance leases
$
4,011
$
75
$
173
$
34,094
$
-
The following are the contractual maturities of the undiscounted cash flows of financial liabilities as of
December 31, 2017:
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
3,279
-
1,303
3
22
-
-
3
706
-
-
6
4
-
191
12
-
33,914
-
3
$
4,585
$
25
$
712
$
207
$
33,917
Accounts payable
and accrued liabilities
Notes Payable
Project financing
Obligations under
finance leases
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’ deficiency, long-term notes payable, long-term portion of project
financing and long-term portion of obligations under finance leases in the definition of capital. Total capital
at December 31, 2018, was positive $4,823 (December 31, 2017 – positive $4,688). To maintain or adjust the
capital structure, the Company may issue new shares, issue new debt with different characteristics, acquire
or dispose of assets, or adjust the amount of cash and short-term investment balances held.
The Company has established a budgeting and planning process with a focus on cash, working capital,
and operational expenditures and continuously assesses its capital structure considering current economic
conditions and changes in the Company’s short-term and long-term plans. Neither the Company nor any
of its subsidiaries are subject to externally imposed capital requirements.
2018 Annual Report | Consolidated Financial Statements
58
18. Fair values:
a. Fair value:
Set out below is a comparison by class of the carrying amounts and fair value of the Company’s
financial instruments that are carried in the Consolidated Balance Sheet:
December 31, 2018
Carrying
Amount
Fair
Value
December 31, 2017
Carrying
Amount
Fair
Value
Financial assets
Loans and receivables:
Cash
Trade receivables
Financial liabilities
Other financial liabilities:
Notes payable
Accounts payable and accrued liabilities
$
$
1,284
3,221
4,505
$
$
1,284
3,221
4,505
$
$
6,363
521
6,884
6,363
521
6,884
$
$
29,065
2,836
31,901
$
28,024
2,836
30,860
$
26,496
4,011
30,507
$
27,136
4,011
31,147
$
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, trade receivables, accounts payable and accrued liabilities and provisions approximate their
carrying amounts largely due to the short-term maturities of these instruments.
Notes payable are evaluated by the Company based on parameters such as interest rates and the
risk characteristics of the instrument.
19. 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 considering business achievement, fulfillment of individual objectives and
overall job performance. Executive officers participate in the Company’s omnibus plan (Note 12(i)).
The compensation of non-employee directors consists of a cash component and a share component.
Directors participate in the Company’s omnibus plan (Note 12(i)).
The following summarizes key management personnel and directors’ compensation for the years ended
December 31, 2018 and 2017:
Year ended December 31,
Compensation and benefits
Post-employment benefits
Share-based payments
LTIP
2018
2017
$
$
2,024
43
226
-
2,293
1,839
202
260
(33)
2,268
$
$
The following summarizes key management personnel and directors share ownership of the Company as of
December 31, 2018, and 2017:
December 31,
Number of Class A Common shares held
Percentage of total Class A Common shares issued
2018
657,488
3.81%
2017
377,871
2.30%
2018 Annual Report | Consolidated Financial Statements
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