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BeWhere Holdings Inc. Management Reports 2020
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Management Reports
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BEWHERE HOLDINGS INC. MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2019
Set out below is a review of the activities, results of operations, and financial condition of BeWhere Holdings Inc. ("BEW", "BeWhere", or the "Company") for the year ended December 31, 2019.
The discussion below should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2019, and the accompanying notes, which were prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. All dollar figures included in the following Management Discussion and Analysis ("MD&A") are quoted in Canadian dollars unless otherwise indicated.
This MD&A has been prepared as at April 15, 2020.
The Company is a reporting issuer in the provinces of British Columbia, Ontario, and Alberta in Canada and is listed on the TSX Venture under the symbol BEW. Additional information related to the Company is available on SEDAR at www.sedar.com.
1. BACKGROUND AND OVERVIEW OF CORE BUSINESS – Generation of Smart Data
BeWhere is an Industrial Internet of Things ("IIoT") solutions company that designs, sells and manufacturers hardware with sensors and software applications to track real-time information on fixed and movable assets. The Company develops mobile applications, middle-ware, and cloud-based solutions that stand-alone or that can readily integrate with existing software. Its solutions are easy to implement, and the data generated give end-users a significant and easily accessible level of operational visibility to improve the management of their assets and delivery of services.
BeWhere M-IoT devices are small rugged devices, powered either by two long-life AA batteries or solar energy rechargeable batteries. As they are self-powered, they are simple and quick to install, without any additional electrical wiring. They are configured to report their internal and external sensor data and GPS location to BeWhere's servers via the M-IoT networks. Users can view and manage the information as well as set their reporting frequency to match their requirements through easy-to-understand dashboards. The solution also supports setting alarms and warnings to alert users in real-time.
These Cellular beacons are a disruptive and new innovative product that have quickly seen traction within the transportation and construction verticals where they are used to monitor the location, activity and conditions of mobile and fixed assets. Transport and construction equipment have been tracked for decades with limited market penetration due to the high cost factor but our price model overcomes that hurdle. Use for the beacons continues to expand to other industries including agriculture to monitor weather conditions, and smart-city applications to monitor water systems.
There are a number of features which uniquely position BeWhere for growth:
First, BeWhere is an early entrant launching new low-cost, low-powered, location-based data solutions.
Second, BeWhere partners with a growing network of developers and resellers, including some of the largest North American fleet management/telematics companies, wireless carriers, and enterprise software solution
providers. The advantage of working through partners, including telecommunication providers such as Bell, allows BeWhere to shorten the sales process and bring new product and application solutions to market more quickly. It also provides for an expanded customer base and allows for quick market penetration.
BeWhere also works with in-house developers of client firms, and third-party software providers to develop tailored solutions that may be cost-effective.
Third, is the level of flexibility and accessibility provided to clients. Our key innovation lies in the ability to allow manufacturers and clients to connect their own existing sensors to BeWhere's M-IoT devices, enabling them to use BeWhere solutions and dashboards which delivers data over the cellular network without having to design, or invest in, a separate cellular device. This will allow BeWhere to expand into an untapped market.
Fourth, the Company has an established client base in verticals such as transportation, construction, utilities and municipalities to which it can provide and expand its suite of services.
BeWhere Holdings Inc. (TSX-V: BEW, OTCQB: BEWFF) (the "Company" or "BeWhere") was incorporated on October 28, 2003 under the Ontario Business Corporations Act. The Corporation continued into British Columbia from Ontario on May 22, 2015 as evidenced by the Certificate of Continuation issued on that date and pursuant to the provisions of the Business Corporations Act (British Columbia).The primary office of the Company is located at 3264 Lakeshore Blvd. West Etobicoke, Ontario M8V 1M4.
2. SIGNIFICANT HIGHLIGHTS
The following were key aspects for the year ended December 31, 2019
Business update - Solutions
In October 2019, the Company attended GSMA's Mobile World Congress America in Los Angeles where it was selected to participate in its Innovation City demonstration project. Through a partnership with the City's Mayor's Office, BeWhere demonstrated its newly launched M-IOT connected sensor solutions focused on Smart City and Smart Agriculture ("Agritech") solutions. The Smart City application gathered real-time external air quality data and displayed it to attendees inside BeWhere's booth in GSMA's Innovation City. Los Angeles City is one of the most innovative cities in North America and as such very supportive of Innovation City, which selected BeWhere to offer the project to the City.
At the Congress the Company also demonstrated soil moisture monitoring, leaf wetness sensors and water detection. Each of the demonstrations generated real-time data using the newly launched M-IOT connected sensor solutions. Attendees were shown how such data can contribute to smart city and smart agriculture initiatives to improve quality of life and services.
In the second quarter, the Company successfully launched four M-IOT connected sensor solutions, including soil moisture monitoring, leaf wetness monitoring, water pressure sensors and flood detection. These target green-
field opportunities where the competition is either non-existent, or require very large orders which are not cost effective for certain users or applications. At this time, the Company is conducting several live pilots with clients testing these solutions and expects positive outcomes. We are confident the result will lead to new orders over the next several quarters. The solutions being piloted provide BeWhere's partners and distributors additional opportunities to serve their existing clients and attract new clients.
Additionally, the Company continues to invest in the development of next generation devices and solutions. The Company expects these new solutions to both improve product margin, enhance functionality and reduce price points ensuring continued leadership in the M-IOT asset tracking and connected sensor markets.
In February, the Company attended the Mobile World Congress 2019 in Barcelona where BeWhere's Intelligent Water solution was featured at GSMA's Innovation City exhibit. CNBC interviewed the Chief Operating Officer at the exhibit which was aired on CNBC's program 'The Edge'. BeWhere's Intelligent Water solution is part of the Company's continuous efforts to break in new use cases using its 'Connected Sensors' offering. BeWhere's Connected Sensors consist of adding sensors to its existing products for emerging markets such as Smart Agriculture and Smart Cities.
The Chief Executive officer of the Company participated in a panel discussion at GSMA's 8th Annual M-IOT Summit in Barcelona along with three other panel members represented by Nokia, Ericsson and T-Systems to discuss the value proposition of M-IOT for network infrastructure providers, mobile network operators and solution providers.
The Company continues to focus on its strategies of enabled growth by working on developing contracts and business opportunities with fleet management companies and service providers in North America. Our strategy of working with companies, who have existing relationships with the end users, is already paying off as it greatly diminishes the sales cycle. This strategy allows BeWhere to expand its marketing reach with a minimum sales force and therefore keep overheads low.
On May 22, 2019, the Company signed an agreement with T-Mobile, under which BeWhere's M-IoT devices and platform will be bundled with T-Mobile's network connectivity to form the Solution which will be sold to T-Mobile's customers in the US.
On August 6, 2019, the Company signed an agreement with AT&T under which BeWhere's next generation Connected Sensor devices will be sold as part of AT&T's bundled service.
After successfully testing a pilot, a large North-American distributor purchased over 500 M-IoT devices in September 2019 with a follow up order in October 2019. This purchase order was from the first distribution center. The Company expects to have this implemented across all distribution centers of this corporation in the new near future.
On October 29, 2019, the Company announced the partnership to offer M-IoT devices on Tenna's One-Platform solution. Tenna LLC is a leading solution provider of construction technology. After successfully using 1,000 devices for three months on their own equipment, they placed an order of 10,000 M-IoT devices to be offered on their One-Platform.
The Company has similar pilot in testing phase with other fortune 500 companies and expects positive results which may result in purchase orders in the near future.
Financing
On February 15, 2019, the Company closed its private placement for gross proceeds of $4,025,000 at a price of $0.19 per Unit. Each Unit consists of one common share in the capital of the Company and one-half of one Common Share purchase warrant. Each Warrant will entitle the holder thereof to purchase one Common Share at an exercise price of $0.35 for a period of five years following the closing of the Private Placement. The Agent was paid a cash commission. The Agent and members of its selling group also received 1,022,368 broker warrants. Each broker warrant entitles the holder to purchase a Common Share at $0.19 per Common Share for a period of five years following the closing of the Private Placement.
Governance
On February 25, 2019, the Company appointed Nauby Jacob, Vice president of Products and Services at Bell Mobility, to the Board of Directors. BeWhere looks forward to his insights and perspective on the Internet of Things and Smart City technologies.
Revenue
Total Revenues for the twelve months ended December 31, 2019 were $6,096,602 which is an increase of $2,487,926 from $3,608,676 of the same period in 2018, an increase of 69%. For three months ended December 31, 2019 total revenues were $1,158,529 which is a decrease of $252,748 or 18% from $1,411,277 of the same period in 2018.
Total Revenue is lower as compared to three months ended September 30, 2019 which decreased by $765,138 or of 40% from $1,923,667. This is mainly due to the delay in receipt of some purchase orders.
Recurring revenues for the twelve months ending December 31, 2019 were $2,159,010 compared to $1,234,491 for the same period in 2018: an increase of $924,519 or 75%. Recurring Revenues for the three months ended December 31, 2019 were $690,530 compared to $330,878 for the same period in 2018: an increase of $359,652 or 109%.
This annual increase reflects the ramping up on sales efforts and activities directly related to delivery of technology solutions on previously announced customer wins.
Gross profit
Gross profit for twelve months ended December 31, 2019, was $853,328 compared to $690,999 for the same period in 2018, an increase of $162,329 or 23%. For the three months ended December 31, 2019 gross profit was $291,903 which increased by $110,131 or 61% from $181,772 of the same period in 2018. This increase was mainly due to planned manufacturing and shipping of newly launched MIOT devices for existing orders at hand.
Operating expenses
Operating expenses, which does not include Share-based compensation expenses, for twelve months ended December 31, 2019 were $2,027,417, an increase of $215,851 or 12% from $1,811,566 for the same period of 2018. For the three months ended December 31, 2019 the operating expenses were $420,450 which is a slight improvement of $3,094 or 1% from $423,544 of the same period in 2018. This was mainly due to increased marketing initiatives including attendance at trade shows and related travel, as the Company launched new cellular devices.
Working capital balance
The Company continued its focus on managing the efficient use of its capital, including its cash on hand balances. Cash balance was $2,392,265 and working capital balance of $4,177,841 on December 31, 2019.
Non-IFRS Measures
Adjusted EBITDA is a non-IFRS measure and does not have standardized meaning as it relates to performance measures and may not be comparable to other issuer disclosures of similar performance measures. The Company has provided a reconciliation of Adjusted EBITDA to IFRS loss in the following table. Adjusted EBITDA is defined as earnings before interest income, taxes, depreciation and amortization, share-based compensation, and other nonrecurring gains and losses. Management believes that Adjusted EBITDA is a useful measure that facilitates period to period operating comparisons. Adjusted EBITDA should not be considered superior to IFRS net income (loss).
| Three months ended | Twelve months ended | |||
|---|---|---|---|---|
| December 31, 2019 | December 31, 2018 | December 31, 2019 | December 31, 2018 | |
| Comprehensive loss | $(100,293) | $(314,971) | $(1,229,945) | $(1,407,523) |
| Foreign exchange gain | (15,540) | (15,026) | (24,242) | (13,890) |
| Interest income | (25,424) | - | (25,424) | - |
| Interest expense | 221 | - | 1,662 | - |
| Taxes | - | - | - | - |
| Amortization for Internally developed | ||||
| technology | 101,918 | 57,963 | 441,983 | 231,855 |
| Amortization & depreciation | 26,744 | 69,488 | 102,464 | 54,847 |
| Share-based compensation | 12,847 | 88,226 | 103,860 | 300,846 |
| Adjusted EBITDA | $113 | $(114,320) | $(629,643) | $(833,865) |
The Company recorded its lowest quarterly Comprehensive loss in the company's history leading to a positive
adjusted EBITDA for the quarter ended December 31, 2019.
3. SELECTED FINANCIAL INFORMATION
3.1 Annual Information
The following table represents selected financial information of the Company for the recent three years audited financial statements:
| 2019 | 2018 | 2017 | |
|---|---|---|---|
| $ | $ | $ | |
| Total revenue | 6,096,602 | 3,608,676 | 1,686,708 |
| Loss and comprehensive loss for the year | (1,229,945) | (1,407,523) | (1,808,394) |
| Total assets | 6,989,004 | 4,827,438 | 4,608,325 |
| Total liabilities | 1,006,129 | 1,465,576 | 417,742 |
| Basic loss per common share | (0.01) | (0.02) | (0.03) |
3.2 Results of operations for the three and twelve months ended December 31, 2019 and 2018
Revenue:
Revenues for twelve months ended December 31, 2019 the revenues were $6,096,602 which is an increase of $2,487,926 from $3,608,676 an increase of 69%. For the three months ended December 31, 2019 were $1,158,529 compared to $1,411,277 for the same period in 2018, a decrease of $252,748 or 18% as receipts of some purchase order was delayed. Annual Revenue increased primarily as a result of adding new customers and the continuing roll out of previously announced customer wins and including recurring service revenues.
Major components of revenues are as follows:
| Three months ended | Twelve | months ended | ||||||
|---|---|---|---|---|---|---|---|---|
| December 31, | December31, | December 31, | December31, | |||||
| 2019 | 2018 | 2019 | 2018 | |||||
| Product sales | $438,485 | $ | 1,023,228 | $ | 3,592,102 | $ | 2,243,516 | |
| Service fees | 29,514 | 57,171 | 345,490 | 130,669 | ||||
| Recurring fees | 690,530 | 330,878 | 2,159,010 | 1,234,491 | ||||
| $1,158,529 | $ | 1,411,277 | $ | 6,096,602 | $ | 3,608,676 |
Our new mobile-IoT (M-IoT) devises generate both one-time and recurring revenue. Revenue from recurring fees has increased due to expansion of the existing solutions with Brinks Inc. and addition of new subscribers as more mobile-IOT devices are sold.
Gross profit:
Gross profit for twelve months ended December 31, 2019, was $853,328 compared to $690,999 for the same period in 2018, an increase of $162,329 or 23%. For the three months ended December 31, 2019 gross profit was $291,903 compared to $181,772 for the three months ended December 31, 2018, which is an increase of $110,131 or 68%. The increase is primarily as a result of increased volume of product and solution deliveries.
Total expenses:
Total expenses, which include Share-based compensation expense, for twelve months ended December 31, 2019 were $2,131,277, an slight increase of $18,865 or 1% from $2,112,412 for the same period of 2018. For the three months ended December 31, 2019 total expenses were $432,937 compared to $511,770 for the same period in 2018, an improvement of $78,833 or 15%.
Net loss:
Net loss for the twelve months ended December 31, 2019 was $1,229,945 compared to $1,407,523 for the same period of 2018 which is an improvement of $177,578 or 13%. For the three months ended December 31, 2019 net loss was $100,291 compared to $314,971 for the three months ended December 31, 2018 which is an improvement of $214,680 or 68%. This was primarily due to planned and controlled expenses along with general increase of gross profit and in part offset by an increase of planned marketing related expenses in Q1. The Company is following a managed growth strategy and continues to build its team count in line with customer wins and new technology development requirements.
3.3 Cash flows for the period ended December 31, 2019 compared to 2018
Cash used in operating activities amounted to $1,187,679 compared to $1,500,345 used in operating activities for the comparative twelve months ended December 31, 2018 as the Company managed its accounts receivable and payable balances, while it increased its inventories on hand.
Cash used in investing activities amounted to $898,597 compared to $1,252,082 used in the comparative twelve months in 2018. The Company used $753,228 (2018 - $1,033,569) for the development costs on technology related to its unique next generation IoT sensors and solution. The Company continued to incur costs related to the development of its unique next generation IoT sensors and solution.
Cash provided by financing activities in twelve months ended December 31, 2019 was $3,747,098 compared to $277,956 for the same period in 2018. The Company received net cash of $3,592,863 from private financing and $154,235 from exercising of warrants.
3.4 Summary of quarterly results
The following table shows information for each of the eight most recent quarters. The quarterly information has derived from our interim consolidated financial statements which have been prepared on a basis consistent with the annual audited consolidated financial statements.
| Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 | Q4 2018 | Q3 2018 | Q2 2018 | Q1 2018 | |
|---|---|---|---|---|---|---|---|---|
| $ | $ | $ | $ | $ | $ | $ | $ | |
| Revenue | 1,158,529 | 1,923,667 | 1,580,478 | 1,433,928 | 1,411,277 | 1,052,087 | 610,698 | 534,614 |
| Gross Profit | 291,903 | 271,337 | 102,085 | 188,003 | 181,772 | 148,913 | 201,267 | 159,047 |
| Comprehensive loss | (100,291) | (212,777) | (410,274) | (506,603) | (314,970) | (308,850) | (329,114) | (454,588) |
| Basic loss per share | (0.01) | (0.01) | (0.01) | (0.01) | (0.02) | (0.00) | (0.00) | (0.01) |
Revenues during the three months ended December 31, 2019 were $1,158,529 with Gross profit of $291,903. Total expenses were $432,937 including Stock-based compensation expense of $12,487 resulting in Comprehensive loss of $100,291.
4. FINANCIAL POSITION, LIQUIDITY, AND CAPITAL RESOURCES
At December 31, 2019, the Company's working capital balance amounted to $4,177,841 including cash of $2,392,265. This compares with the working capital balance of $1,918,741 including cash of $731,443 at December 31, 2018. The Company invested $753,228 in its Internally generated technology of MIOT devices and development costs.
The Company maintains a Revolving demand facility of $250,000. During the year the Company incurred no interest expense. At December 31, 2019 the Company had not drawn against the credit facility. The Revolving demand facility is secured by a first ranking security interest in all personal property of the Company. The Revolving demand facility has no financial or non-financial covenants.
The non-cash component of working capital amounted to $1,785,576 at December 31, 2019 as compared to $1,187,297 at December 31, 2018, an increase of $598,279, primarily due to increase in revenues and related accounts receivable, and inventory, as the Company commercializes its technology and its sales and marketing efforts continued to result in new customer wins.
The business model of the Company comprises of sale of hardware as well as the provision of application fees. Recurring monthly fees have started to generate a constant stream of revenue which is expected to grow as more units are deployed.
The Company's continued development is contingent upon its ability to raise sufficient financing both in the short and long-term, successfully execute its business plan, generate sufficient cash flows, and achieve profitable operations as it continues to scale. There are no guarantees that additional sources of funding will be available to the Company however, management is committed to pursuing all possible sources of financing and to continue to execute its business plan.
5. OUTSTANDING SHARE DATA
The Company is authorized to issue an unlimited number of Common Shares without nominal or par value. At December 31, 2019, there were 87,888,039 Common Shares outstanding.
| Exercisable warrants | Exercise price $ | Expiry date |
|---|---|---|
| 10,592,105 | 0.35 | February 15, 2024 |
| 1,022,368 | 0.19 | February 15, 2024 |
| 11,614,473 |
At December 31, 2019, 11,614,473 share purchase warrants were outstanding.
During the period subsequent to December 31, 2019 and up to the date of this MD&A, no warrants were exercised.
Employees, directors, officers, and consultants have been granted options to purchase common shares under the Company's stock option plan. As of the period ended, December 31, 2019, there were 2,488,250 exercisable stock options outstanding. During the period subsequent to December 31, 2019 and up to the date of this MD&A, no options were exercised.
6. OFF-BALANCE SHEET ARRANGEMENTS
At December 31, 2019, the Company had no material off-balance sheet arrangements such as guarantee contracts, contingent interest in assets transferred to an entity, derivative instruments obligations, or any obligations that trigger financing, liquidity, market or credit risk to the Company.
7. PROPOSED TRANSACTIONS
There are no proposed transactions as at the date of this report that have not been disclosed.
8. SUBSEQUENT EVENTS
On March 23, 2020, the Company announced that it intends, subject to regulatory acceptance, to purchase by way of a Normal Course Issuer Bid up to an aggregate of 4,394,400 of its Common Shares over the 12-month period following receipt of regulatory acceptance, which number of Common Shares represents approximately 5% of the issued and outstanding Common Shares of the Company.
Since December 31, 2019, the outbreak of the novel strain of coronavirus, specifically identified as "COVID-19", has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused material disruption to businesses globally resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 outbreak is unknown at this time, as is the efficacy of the government and central bank interventions. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Company and its operations in future periods.
9. RELATED PARTY TRANSACTIONS
The Company entered into the following transactions with related parties:
- a. For the twelve months ended December 31, 2019, paid $203,673 salaries to the CEO of the Company (2018 - $153,461).
- b. For the twelve months ended December 31, 2019, paid $203,673 salaries to the CEO of the Company (2018 - $153,461).
- c. For the twelve months ended December 31, 2019, paid $174,360 professional fees to the CFO of the Company (2018 - $100,000).
- d. Paid $nil professional fees to the former CFO of the Company for the period ended December 31, 2019 (2018 - $22,383).
- e. Paid $nil professional fees to the former Director of the Company for the period ended December 31, 2019 (2018 - $30,000).
- f. Paid $27,000 and accrued $27,000 of salaries for Independent Directors of the Company for the twelve months ended December 31, 2019 (2018 - $49,500) which was recognized as accounts payable and accrued liabilities in the annual consolidated statement of financial position.
- g. During the year ended, the CEO of the Company subscribed to the Company's private placement for 210,100 shares at $0.19 per share.
- h. During the year ended December 31, 2019, the COO of the Company subscribed to the Company's private placement for 184,200 shares at $0.19 per share.
- i. During the year ended, the CFO of the Company subscribed to the Company's private placement for 263,210 shares at $0.19 per share.
- j. During the year ended, three independent Directors of the Company subscribed to the Company's private placement for 525,900 shares at $0.19 per share.
10. CRITICAL ACCOUNTING ESTIMATES
Critical accounting estimates
- i. Share-based payments is subject to estimation of the value of the award at the date of grant using pricing models such as the Black-Scholes Option Valuation Model. The Option Valuation Model requires the input of highly subjective assumptions including the expected stock price volatility. Because the Company's stock options have characteristics significantly different from those of traded options and because the subjective input assumptions can materially affect the calculated fair value, such value is subject to measurement uncertainty.
- ii. The determination of income tax is inherently complex and requires making certain estimates and assumptions about future events. While income tax filings are subject to audits and reassessments, the Company has adequately provided for all income tax obligations and estimates that there are no taxes payable resulting from the financial results for the year ended December 31, 2019. However, changes in facts and circumstances as a result of income tax audits, reassessments, jurisprudence, and any new legislation may result in an increase or decrease in our provision for income taxes. At this time, the Company is not recording any deferred income tax asset balances related to its tax loss carryforward balance.
- iii. Impairment exists when the carrying amount of a cash-generating unit ("CGU") exceeds it recoverable amount, which is the higher of its fair value less costs to sell or its value in use. The Company measures the recoverable amount for each CGU by using a fair value less costs to sell ('market') approach. The market approach assumes that companies operating in the same industry will share similar characteristics and that Company values will correlate to those characteristics.
- iv. In valuing inventories at the lower of cost and net realizable value, the Company makes estimates in determining the net realizable price of products.
11. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Financial instruments are agreements between two parties that result in promises to pay or receive cash or financial instruments. The Company classifies its financial instruments in the following categories: at fair value through profit and loss ("FVTPL"), at fair value through other comprehensive income (loss) ("FVTOCI") or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company's business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or if the Company has opted to measure them at FVTPL. Cash, trade receivables and accounts payable are classified at amortized cost. The company does not have any other financial instruments classified in other categories. The carrying value of these instruments approximates their fair values due to their short term to maturity.
The Company has exposure to the following risks from its use of financial instruments:
- Credit risk;
- Liquidity risk; and
- Market risk.
a) Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company's cash is held in a Canadian financial institution. The Company does not have any asset-backed commercial paper.
The carrying amounts of cash and accounts receivable on the consolidated financial position represent the Company's maximum credit exposure at December 31, 2019. The Company reduces its credit risk on cash by placing cash with institutions of high credit worthiness and by monitoring customers creditworthiness on an ongoing basis. The amounts disclosed in the consolidated financial statements for accounts receivable are net of allowance for doubtful accounts, estimated by management based on its assessment of the current economic environment.
b) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company currently settles its financial obligations out of cash. The ability to do this relies on the Company collecting its accounts receivable in a timely manner and by maintaining sufficient cash in excess of anticipated needs. At December 31, 2019 the Company's accounts payable and accrued liabilities were $899,834 (December 31, 2018 - $1,329,525). The Company maintained cash at December 31, 2019 in the amount of $2,392,265 (December 31, 2018 - $731,443).
c) Market risk
Market risk is the risk that changes in market prices, such as interest rates and foreign exchange, will affect the Company's income or the value of its holdings of financial instruments. At December 31, 2019 the Company carried no debt.
Interest rate risk
As of December 31, 2019, the Company does not have any financial instruments subject to this risk.
Foreign exchange risk
Foreign currency exchange risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because they are denominated in currencies that differ from the respective functional currency. The
Company has financial assets and liabilities denominated in the American dollar. The Company does not hedge its exposure to fluctuations in foreign exchange rates.
The following is an analysis of Canadian dollar equivalent of financial assets and liabilities that are denominated in American dollars:
| December 31, 2019 | December 31, 2018 | |
|---|---|---|
| Financial assets | ||
| Cash | $291,471$ | 329,600 |
| Trade receivable | 1,139,967 | 703,566 |
| 1,431,438 | 1,033,166 | |
| Financial liabilities | ||
| Accounts payable | 720,545 | 1,141,284 |
| $720,545$ | 1,141,284 |
12. RISK FACTORS
Prior to making an investment decision, investors should consider the investment risks set out below and those described elsewhere in this document, which are in addition to the usual risks associated with an investment in a business at an early stage of development. The directors of the Company consider the risks set out below to be the most significant to potential investors in the Company, but these are not all of the risks associated with an investment in securities of the Company. If any of these risks materialize into actual events or circumstances, or other possible additional risks and uncertainties of which the management are currently unaware, or which they consider not to be material in relation to the Company's business, actually occur, the Company's assets, liabilities, financial condition, results of operations (including future results of operations), business, and business prospects, are likely to be materially and adversely affected. In such circumstances, the price of the Company's securities could decline, and investors may lose all or part of theirinvestment.
Potential Acquisitions and Investments
The Company expects to continue acquiring or investing in businesses, products and technologies that expand or complement the Company's current business, products, and services. Such acquisitions or investments may involve significant commitments of financial or other resources of the Company. There can be no assurance that any such acquisition or investment can be satisfactorily financed or, if acquired, will generate revenue, income or other returns for the Company, or that financial or other resources committed to such activities will not be lost. Such activities could also place additional strains on the Company's administrative and operational resources and its ability to manage growth.
Financial Condition, Liquidity, and Requirements Outlook
The Company's cash balance and working capital position are not adequate to sustain the Company's existing operations. If the Company is unable to continue to raise capital from issuances of shares, loans, or by other means, its cash and working capital position could be affected.
Major Contracts
The Company has, and may enter into, major contracts that are complex and have several delivery milestones. These contracts are often subject to delay, change, revision and renewal. There is no guarantee that the Company can complete all activities on time and on budget and that the funding available will be adequate to meet adjustments to the contract. Failure by the Company to fulfill such contracts on a timely basis is a significant risk to the Company.
Risk to Reputation
Reputation is a critical asset in the investment industry. Potential damage to that reputation is a significant risk for the Company. Any of the risks identified herein could damage the Company's reputation, which in turn, could result in a lack of client or employee confidence, legal liability, and difficulties in raising capital.
Risks Related to Investments
The Company intends to expand its operations and business by investing in additional businesses, products or technologies. Investments may involve a number of special risks, including diversion of management's attention, failure to retain key personnel, unanticipated events or circumstances, and legal liabilities. In addition, there can be no assurance that the businesses, products or technologies, if any, will achieve anticipated revenues and income. Investments could also result in potentially dilutive issuances of equity securities. The failure of the Company to manage its investment and acquisition strategy successfully could have a material adverse effect on the Company's business, results of operations and financial condition.
Dependence on Key Personnel
The success of the Company is largely dependent on the performance of its key senior management employees. Failure to retain key employees and to attract and retain additional key employees with necessary skills could impact the Company's growth and profitability. The Company's progress to date in commercializing its proprietary products has been dependent, to a significant extent, on the skills of its senior management. The departure or death of certain members of the executive team could have an adverse effect on the Company. The Company has experienced changes in its management personnel and further changes may occur in the future. The Company may face transitional difficulties in connection with these changes, and there can be no assurance that the Company will be able to attract and retain highly skilled and qualified personnel to replace employees who leave the Company.
Industry Growth
There can be no assurance that the market for the Company's existing products will continue to grow or that the Company will be successful in independently establishing markets for its products. If the markets in which the Company's products compete fail to grow or grow more slowly than the Company currently anticipates, or if the Company is unable to establish markets for its new products, the Company's operating results and financial condition could be adversely affected.
Economic Slowdown
From time to time markets have witnessed the weakening of global macro-economic conditions. This weakness could have adverse effects on the investments of the Company's ability to continue as a going concern.
Management of Future Growth and Expansion
Planned expansion of the Company's business and its future success will depend on its ability to manage growth as it expands its products and marketing capacities, which may place a significant strain on the Company's management resources, employees, and operations, as well as its ability to finance such growth. To manage growth effectively, the Company will be required to continue to implement changes in certain aspects of its business, expand its operations, and develop, train, manage and assimilate an increasing number of management-level and other employees. If management is unable to manage growth effectively, the Company's business, prospects, financial condition, and operating results could be affected. The Company can give no assurance that it will produce revenue, operate profitably, or provide a return on investment in the future.
Legislative, Insurance, Compliance Costs, Regulatory Action and Environment
To comply with various increasing and complex regulatory reporting and standards involves significant cost. Changes to securities regulatory standards, account policy, and compliance reporting could place an additional expense burden on the Company. Insurers may increase premiums as the Company's business continue to grow so future premiums for the Company's insurance policies, including directors' and officers' insurance policies, could be subject to increase.
13. CAUTIONARY NOTE REGARDING FORWARD LOOKING INFORMATION
Forward-looking information typically contains statements including words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information in this MD&A includes, but is not limited to, expectations regarding future revenues, earnings, capital expenditures, operating and other costs; business strategy and objectives; market trends; acquisition and disposition plans; the sufficiency of cash and working capital for future operations; and the timing and the completion of various development projects.
Forward-looking information is based on a number of assumptions, which may prove to be incorrect. In addition to other assumptions identified in this MD&A, assumptions have been made regarding, among other things, the Company's transition to new products and releases; a continuing increase in the number of customer relationships; the length of the sales cycles; the competitive environment; the ability to maintain or accurately forecast revenue from the Company's products or services; the ability of the Company to identify, hire, train, motivate, and retain qualified personnel; the ability of the Company to develop, introduce, and implement new products as well as enhancements or improvements for existing products that respond in a timely fashion to customer/product requirements and rapid technological change; risks associated with operations; the impact of any changes in the laws and regulations in the jurisdictions in which the Company operates; and the effect of new accounting pronouncements or guidance.
Although the Company believes that the expectations reflected in such forward-looking information are reasonable, undue reliance should not be placed on forward-looking information because the Company can give no assurance that such expectations will prove to be correct. The forward-looking information contained herein is based on BeWhere's current expectations, estimates, and projections, and is subject to a number of significant risks and uncertainties that could cause actual results to differ materially from those anticipated. Such risks and uncertainties include, among others; general business and economic conditions; the overall performance of stock markets; actions of competitors and partners; the regulatory environment; the corporate governance environment and regulatory reporting requirements for BeWhere's clients; product capability and acceptance; the Company's ability to generate sufficient cash flow from operations to meet its current and future obligations; and the Company's ability to access external sources of financing, if required.
A more detailed assessment of the risks that could cause actual results to materially differ from current expectations is contained in the Risk Factors section of this MD&A, and in the Annual Information Form filed by the Company on November 13, 2018. The foregoing list is not exhaustive and other risks are detailed from time to time in other continuous disclosure filings of the Company.
Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forwardlooking information prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, or expected. Forward-looking information contained herein is based on estimates and opinions of management at the date the statements are made. Except as required by law, BeWhere does not undertake any obligation to update forward-looking information even if management's estimates or opinions should change. The Company uses future-oriented financial information for budgeting and planning purposes and the information may not be appropriate for other purposes. Future-oriented financial information and financial outlooks, as with forward-looking information generally, are, without limitation, based on the assumptions and subject to the risks set out above.
This Management's Discussion and Analysis was approved by the Audit Committee and the Board for release on April 15, 2020.