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WebTech Wireless Announces Third Quarter Results


Vancouver - June 13th, 2007 – WebTech Wireless Inc. (TSX: WEW). (the “Company”), a provider of location-based and fleet Telematics services, today announced results for the third quarter ended April 30, 2007. The Company reported gross revenues of $9.6 million, up 102% over third quarter revenues of the prior year.  Revenue for the nine months ended April 30, 2007 was $22.0 million, compared with $11.4 million for the comparable nine month period. The Company reported a loss of $0.36 per share for the nine month period, driven by $19.0 million in write offs from its Brazilian operations, compared with earnings per share of $0.01 for the prior comparable period.

The increase in revenues for the three and nine month periods was primarily due to delivery of locators to Crown Telecom, the Company’s value added reseller (“VAR”) in Brazil. Subsequent to the end of the quarter, the Company reported that the VAR was in default under its distribution and loan agreements and agreed to a cure period expiring July 20, 2007.  Due to the financial instability of the reseller, the Company has made provision for amounts relating to its business with the VAR as follows:

  • During the quarter, the Company made a full provision for a loan receivable owing by the VAR of $13.3 million, inclusive of accrued interest and incurred a bad debt of $1.6 million for accounts receivable owing; and 
  • During the quarter, the Company recorded a provision of $4.1 million to reflect potential inventory obsolescence.  The Company purchased long-lead inventory components and made purchase commitments to support the Brazil business, resulting in high inventory levels which are expected to result in low inventory turnover.

The Company is actively perfecting its security in Brazil in the event that the breaches are not cured and has commenced discussions with the VAR’s end customer (an automobile manufacturer) in Brazil to continue with its business by supplying the automobile manufacturer directly. It is important to note that the Company achieved a number of significant milestones in Brazil – the production, shipping and direct installation of record numbers of the Company’s product on the production line of a global automobile manufacturer among them. In addition, the Company has proven it has the logistical ability to fulfill such an order and provide monitoring and other value added services on a scale well above industry norms.

Also during the quarter, the Company reported a foreign exchange loss of $1.9 million, which was contributed to in large measure by foreign currency losses realized on the accounts receivable and loan balances provided for above.

Despite the write-offs taken for the Company’s Brazil business, working capital remains strong.  At April 30, 2007 the Company reported a net working capital balance of $38.2 million, compared with $18.8 million at the end of the most recently completed fiscal year.

The Company continues to pursue business under its personal automotive division.  Over the past six months the Company has signed up distributors in Central and South America that are expected to contribute both personal automotive and commercial fleet opportunities.

During the quarter the Company reported its exclusive contract with a Canadian GSM operator, and is in discussions with other GSM operators worldwide. The Company’s strategy of developing relationships with telecommunication carriers is ahead of schedule. Carrier relationships in Canada and Latin America are creating significant opportunities for both commercial fleet and personal automotive initiatives earlier than expected.

Commercial fleet business in North America was up 25% over the third quarter of the prior year. Growth in this core area of business for the Company continues to demonstrate the company’s ability to deliver industry-leading fleet Telematics products and services to transportation, service and government fleet segments.

The Company continues to develop new technology for commercial and transportation fleet applications.  During the quarter, the Company announced its new satellite solution, which is still on track for release in the summer of 2007. This dual-mode cellular and satellite asset tracking solution will be positioned to deliver reduced data transfer costs to organizations tracking vehicles that may not have continuous terrestrial cellular coverage.

Trials with large transportation fleets in North America are reaching promising levels of maturity. Investment of time, energy and resources into such trials has ensured positive feedback and successful completion of significant trial milestones. Although the sell-period is long for such large opportunities, success to-date has confirmed that this strategy will be an ongoing area of focus for the Company.

In Latin America, the Company’s distributor agreement in Mexico with Prolog, a leading Logistics Consulting and Systems Integration Company, has produced an order with a key Mexican government agency. This is a promising beginning to plans to further develop government contracts in the region. Prolog is also conducting trials with large commercial fleets, creating opportunities within the large transport sector in Latin America.

“Although we are disappointed with the performance of our VAR in Brazil, and its impact on our third quarter results, we remain financially strong with $38.2 million of net working capital” commented WebTech Wireless President and Chief Executive Officer, Anwar Sukkarié. “The capability of our manufacturing operation and the quality of our product has been proven and, as a result, we are seeing further opportunities in the consumer automotive market. In fact, our sales funnel has never been so promising, in both consumer and commercial markets. We continue to develop our technology to ensure that we maintain our position as an industry leader.”

A conference call to discuss the third quarter financial results is scheduled for today at 5:00pm Eastern Time. Interested parties may participate in the call by dialing 1-888-693-1085 (outside North America +1-212-231-2245). The conference call will be archived on the Company’s website within 24 hours of the call.

The financial statements and management’s discussion and analysis will be posted on the Company’s website prior to the conference call.  Further information on the Company may be viewed at www.sedar.com.

-Ends-

About WebTech Wireless Inc.
WebTech Wireless Inc. (TSX: WEW) is a global Telematics, location-based services provider that develops, manufactures, and delivers turnkey wireless solutions designed to improve productivity and profitability. WebTech products include wireless hardware and software services running on cellular and satellite networks, and include Automatic Vehicle Location, Mapping, Reporting, Vehicle Maintenance, Driver Status, In-vehicle Telemetry, Messaging, In-vehicle Navigation, and wireless application and Internet connectivity. WebTech is currently providing devices and services worldwide in eight languages to over forty-one countries covering five continents. WebTech’s scalable solutions are used by a broad range of small, medium, Fortune 500 companies and governments. For more information, please visit www.webtechwireless.com.

For further information on WebTech Wireless, please contact:

Press / Media Contact:
Corey Grant / WebTech Wireless
(+1) 604-628-5194 cgrant@webtechwireless.com

Investor Relations Contact:
R. Joe Dhami / Pacific Orca Capital
(+1) 877-811-4518 ext. 236, jdhami@shawcable.com


The Toronto Stock Exchange does not accept responsibility for the
adequacy or accuracy of this release.

 

WEBTECH WIRELESS INC.
CONSOLIDATED BALANCE SHEET
(amounts in 000's)
           
           
     
April 30, 2007
 
July 31, 2006
     
(unaudited)
 
(audited)
           
   
ASSETS
     
Current        
  Cash & cash equivalents  
$28,863
 
$10,640
  Accounts receivable, net of allowance (Note 3)  
4,183
 
7,015
  Inventory, net of allowance (Note 3)  
4,442
 
2,849
  Prepaid expenses and deposits  
3,318
 
800
           
     
40,806
 
21,304
           
Capital Assets  
1,070
 
738
Intangible assets (Note 2 (b) & 4)  
342
 
292
Loan Receivable (Note 5)  
-   
 
-   
         
   
$42,218
 
$22,334
         
         
 
LIABILITIES
     
Current  
 
 
 
  Accounts payable and accrued liabilities  
$2,151
 
$2,198
  Deferred revenue  
423
 
294
           
     
2,574
 
2,492
           
   
SHAREHOLDERS' EQUITY

   
Share capital (Note 7)  
60,005
 
21,105
Contributed surplus (Note 8)  
515
 
574
Deficit  
(20,875)
 
(1,837)
           
     
39,644
 
19,842
           
     
$42,218
 
$22,334
           
Subsequent Events (Note 13)        
           
           
  APPROVED BY THE DIRECTORS:        
           
           
 
"Anwar Sukkarie"
"Cameron Fraser"
         

 

WEBTECH WIRELESS INC.
CONSOLIDATED STATEMENT OF OPERATIONS 
 (Prepared by Management without audit) 
                 
    Three Months
Ended
  Three Months
Ended
  Nine Months
Ended
  Nine Months
Ended
    30-Apr-07   30-Apr-06   30-Apr-07   30-Apr-06
    (000's)   (000's)   (000's)   (000's)
                 
                 
Sales (Note 11)  $               9,583    $              4,734    $             22,046    $            11,353
                 
Cost of goods sold                   5,734                    2,361                   13,159                    5,670
                 
Gross profit 3,849   2,373   8,887   5,683
                 
                 
Expenses              
  Administration (Note 10)                   1,285                      511                     2,510                    1,242
  Amortization                     106                        92                       271                      209
  Bad debt - Crown Telecom (Note 3)                   1,633                         -                       1,633                         -  
  Marketing and sales                   1,102                      746                     3,113                    1,991
  Research and development (Note 10)                   1,000                      543                     2,510                    1,504
                 
                 
    5,126   1,892   10,037   4,946
                 
Income (loss) before other items                  (1,277)                      481                    (1,150)                      737
                 
Other items              
  Interest income (expenses)                     447                        16                       622                        20
  Foreign exchange gain (loss) (Note 12)                  (1,935)                         (5)                    (1,167)                     (262)
  Inventory impairment (Note 3)                  (4,063)                         -                      (4,063)                         -  
                 
Income (loss) before impairment of loan receivable                  (6,828)                      492                    (5,758)                      495
                 
  Impairment of loan receivable (Note 3 & 5)                (13,280)                         -                    (13,280)                         -  
                 
Net income (loss) for the period  $            (20,108)    $                 492    $            (19,038)    $                 495
                 
Basic and fully diluted earnings per share  $                (0.38)    $                0.01    $                (0.36)    $                0.01
                 
                 
                 
WEBTECH WIRELESS INC.
CONSOLIDATED STATEMENT OF DEFICIT
(Prepared by Management without audit)
                 
                 
    Three Months
Ended
  Three Months
Ended
  Nine Months
Ended
  Nine Months
Ended
    30-Apr-07   30-Apr-06   30-Apr-07   30-Apr-06
    (000's)   (000's)   (000's)   (000's)
                 
Deficit, beginning of the period  $                 (767)    $             (2,937)    $              (1,837)    $             (2,941)
Income for the period                (20,108)                      492                  (19,038)                      495
Adjustment to Prior Year Retained Earnings, Note 2 (c )                        -                           -                            -                           -  
                 
                 
Deficit, end of period  $            (20,875)    $             (2,445)    $            (20,875)    $             (2,445)
                 
                 
                 

 

 

WEBTECH WIRELESS INC.    
CONSOLIDATED STATEMENT OF CASH FLOWS    
 (Prepared by Management without audit)     
                             
            Three Months
Ended
  Three Months
Ended
  Nine Months
Ended
  Nine Months
Ended
  6 Months
            30-Apr-07   30-Apr-06   30-Apr-07   30-Apr-06   Jan 31 07
                             
Operating Activities                      
  Net income for the period    $      (20,108)    $            492    $      (19,038)    $            495    $    1,070
  Add items not affecting cash:                    
    Stock based compensation (Note 2(d))                   98                   43                  271                  116    $        173
    Amortization                    106                          -                    271                          -      $        165
      Intangibles                   10                          -                     31                          -      
      Other                     96                          -                    240                          -      
    Currency loss on loan receivable                  870                          -                    870                          -      $           -  
    Accounts receivable provision - Crown Telecom (Note 3)             1,633                          -                 1,633                          -      
    Inventory impairment (Note 3)               4,063                          -                 4,063                          -      
    Impairment of loan receivable (Note 3 & 5)             13,280                   92             13,280                  209    
                             
                           (58)                  627               1,350                  820        1,408
Changes in non-cash working capital items related to operations:                    
  Accounts receivable (Note 3)                  663              (1,106)              (4,432)              (2,709)    $  (5,095)
  Scientific research tax credits receivable                    -                      -                      -                      -      
  Inventory (Note 3)                (1,899)                  155              (5,656)                 (273)    $  (3,757)
  Prepaid expense and deposits               1,529                  (99)              (2,518)                 (421)    $  (4,047)
  Accounts payable and accrued liabilities                 (829)                 (222)                  (47)                       469    $        782
  Deferred Revenue                (5,252)                   61              (6,003)                  143    $      (751)
                             
            -5,846   -584   -17,306   -1,971   -11,460
                             
Financing Activities                      
  Common shares issued, net of costs (Note 7)                  376               9,256             38,570                 12,822    $  38,194
  Due to directors                      -                      -                      -          
                             
                           376               9,256             38,570             12,822       38,194
                             
Investing Activities                        
  Purchase of intangible assets (Note 4)   -27   -28   -81   -89   -54
  Purchase of capital assets   -151   -161   -572   -430   -422
  Cash advanced under loan receivable (Note 3 & 5)                          -                            -     -2,387                          -     -2387
                             
            -178   -190   -3,040   -518   -2,863
                             
Net increase (decrease) in cash during the period              (5,648)               8,482             18,224             10,333       23,871
                             
Cash, beginning of period               34,511               2,923             10,640               1,072    $  10,640
                             
Cash, end of period      $       28,863    $       11,405    $       28,863    $       11,405    $ 34,511
                             
                             
Cash paid for interest      $                    -      $                    -      $                    -      $                    -      
                             
                             
Cash paid for income taxes      $                    -      $                    -      $                    -      $                    -      
                             
                             
Cash and cash equivalents consist of:                    
  Cash        $           28,863    $                 655    $           28,863    $                 655    
  Term deposits                      -                   10,750                    -                   10,750    
                             
             $           28,863    $           11,405    $           28,863    $           11,405    
                             
Net non-cash transactions                      
                             
  Loan Receivable      $                    -      $                    -      $        (14,150)    $                    -      
  Customer deposits                      -      `                    6,132                          -      
  Payout of accounts receivable                    -                      -                     5,631                          -      
                             
  Cash advanced under loan receivable    $                    -      $                    -      $           (2,387)    $                    -    
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Webtech Wireless®, InterFleet®, NextBus®, Quadrant® and Telematics for the Planet®, are registered trademarks of Webtech Wireless Inc.