Financial results for Q1 2018

Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR)

 

14 May 2018

MTI Wireless Edge Ltd

("MTI" or the "Company")

Financial results for Q1 2018

 

MTI Wireless Edge Ltd. (AIM: MWE), a market leader in the manufacture of flat panel antennas for fixed wireless broadband and a wireless irrigation solutions provider, today announces its unaudited results for the three months ended 31 March 2018.

 

Highlights:

·     Revenues decreased by less than 1% year-on-year to $6.16m (Q1 2017: $6.21m)

·     Profit before tax decreased year-on-year to $166,000 (2017: $233,000)

·     Earnings per share doubled year-on-year to 0.91 US cents (2017: 0.43 US cents), due to a large tax income credit.

·     Cash flow from operations tripled to $1.6m (2017: $0.5m).

·     Shareholder's equity grew during the period to $20.6m (31 December 2017: $20.1m), equivalent to 27.5 pence per share*.

 

* Calculated at £/$ rate of 1.35

 

Dov Feiner, CEO of MTI Wireless, commented:

"During the first quarter of 2018 we continued to see good progress in meeting our internal goals in both segments of our business. In our wireless controller segment, via Mottech, we see opportunities to grow the business in the various geographical areas we are now focusing on, including North America and China. In the antenna segment we continue to see good demand in our military, RFID and Millimetre Wave solutions.  Given the current orderbook and pipeline of opportunities in both segments, we have a strong belief that our growth will continue in 2018 and beyond.

We finished the first quarter with operational profits below last year's equivalent profit, but this was due to us taking a calculated long term view of the business and increasing the investment in development and sales efforts.  We believe that during the reminder of the year we will achieve our goal of increasing revenue and profits year on year.    

Pleasingly our EPS has doubled in the first quarter due to large tax credit relating to future tax relief that we are entitled to in our operation in India.  This is a result of a change in the tax regime which has allowed us to reduce our tax liability.

We have recently announced a proposed amalgamation with MTI Computers & Software Services (1982) Ltd, our parent company, and are progressing this transaction.  We believe the transaction to be in the best interests of all shareholders and we are working to complete it as quickly as possible.  Further announcements about the merger will be made as appropriate".

 

For further information please contact:

MTI Wireless Edge Ltd Dov Feiner, CEO Moni Borovitz, Financial Director	http://www.mtiwe.com/ +972 3 900 8900
Nomad and Joint Broker Allenby Capital Limited Nick Naylor Alex Brearley	+44 20 3328 5656
Joint Broker Peterhouse Corporate Finance Limited Lucy Williams Eran Zucker	+44 20 7469 0930

 

About MTI Wireless Edge

MTI is engaged in the development, production and marketing of high quality, low cost, flat panel antennas for commercial and for military applications. Commercial applications include: WiMAX; wireless networking; RFID readers; and broadband wireless access. With over 40 years' experience  MTI supplies 100KHz to 90GHz antennas (including directional antennas and omni directional) for outdoor and indoor deployments, including smart antennas for WiMAX, Wi-Fi, public safety, RFID and  base stations and terminals for the utility market. Military applications includes a wide range of broadband, tactical and specialized communications antennas, antenna systems and DF arrays installed on numerous airborne, ground and naval, including submarine, platforms worldwide.

 

Via its subsidiary, Mottech Water Solutions Ltd ("Mottech"), MTI is also a leading provider of remote control solutions for water and irrigation applications based on Motorola IRRInet state of the art control, monitoring and communication technologies. Mottech, headquartered in Israel, is the global prime distributor of Motorola for the IRRInet remote control solutions serving its customers worldwide through its subsidiaries and a global network of local distributers and representatives. It utilizes over 25 years of experience in providing its customers with remote control and management systems which ensure constant, reliable and accurate water usage, while reducing operational costs and maintenance costly expenses. Mottech activities are focused in the market segments of agriculture, water distribution, municipal and commercial landscape and wastewater and storm water reuse.

 

 

 

 

MTI WIRELESS EDGE LTD.

(An Israeli Corporation)

 

 

INTERIM CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME

 

	Three month period ended March 31,				Year ended December 31,
	2018		2017		2017
	U.S. $ in thousands
	Unaudited
Revenues	6,156		6,211		26,376
Cost of sales	3,826		3,754		16,828
Gross profit	2,330		2,457		9,548
Research and development expenses	294		249		927
Distribution expenses	1,018		948		3,796
General and administrative expenses	769		814		3,216
loss from sale of property, plant and equipment	-		-		6
Profit from operations	249		446		1,603
Finance expense	86		220		216
Finance income	3		7		242
Profit before income tax	166		233		1,629
Tax (income) expense	(308)		13		320
Profit	474		246		1,309
Other comprehensive income net of tax:
Items that will not be reclassified to profit or loss:
Re-measurement of defined benefit plans	-		-		12
	-		-		12
Items that may be reclassified to profit or loss:
Adjustment arising from translation of financial statements of foreign operations	23		242		61
	23		242		61
Total other comprehensive income	23		242		73
Total comprehensive income	497		488		1,382
Profit attributable to:
Owners of the parent	486		224		1,250
Non-controlling interest	(12)		22		59
	474		246		1,309
Total comprehensive income attributable to:
Owners of the parent	509		466		1,323
Non-controlling interest	(12)		22		59
	497		488		1,382
Earnings per share (dollars)
Basic	0.0091		0.0043		0.0236
Diluted	0.0090		0.0042		0.0234
Weighted average number of shares outstanding
Basic	53,624,318		51,837,468		52,866,352
Diluted	54,076,697		52,679,854		53,309,196

 

 

The accompanying notes form an integral part of the financial statements.

 

 

 

INTERIM CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY

 

For the three month period ended March 31, 2018 (Unaudited):

 

	Attributed to owners of the parent
	Share capital	Additional paid-in capital	Capital Reserve for share-based payment transactions	Adjustment arising from translation of financial statements of foreign operations	Retained earnings	Total attributable to owners of the  parent	Non-controlling interest	Total equity
	U.S. $ in thousands
Balance at January 1, 2018	114	15,343	352	105	4,212	20,126	383	20,509
Changes during the Three month period     ended March 31, 2018:
Comprehensive income
Profit for the period	-	-	-	-	486	486	(12)	474
Other comprehensive income
Translation differences	-	-	-	23	-	23	-	23
Total comprehensive income for the period	-	-	-	23	486	509	(12)	497
Share based payment	-	-	6	-	-	6	-	6
Balance at March 31, 2018	114	15,343	358	128	4,698	20,641	371	21,012

(*) less than one thousand dollars

 

 

The accompanying notes form an integral part of the financial statements.

 

 

 

INTERIM CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY (CONT.)

For the three month period ended March 31, 2017 (Unaudited):

 

	Attributed to owners of the parent
	Share capital	Additional paid-in capital	Capital Reserve for share-based payment transactions	Adjustment arising from translation of financial statements of foreign operations	Retained earnings	Total attributable to owners of the  parent	Non-controlling interest	Total equity
	U.S. $ in thousands
Balance at January 1, 2017	109	14,964	323	44	3,468	18,908	324	19,232
Changes during the three months     ended March 31, 2017:
Comprehensive income
Profit for the period	-	-	-	-	224	224	22	246
Other comprehensive income
Translation differences	-	-	-	242	-	242	-	242
Total comprehensive income for the period	-	-	-	242	224	466	22	488
Exercise of options to share capital	*	7	(*)	-	-	7	-	7
Share based payment	-	-	7	-	-	7	-	7
Balance at March 31, 2017	109	14,971	330	286	3,692	19,388	346	19,734

 (*) less than one thousand dollars

 

 

The accompanying notes form an integral part of the financial statements.

 

 

 

INTERIM CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY (CONT.)

 

For the year ended December 31, 2017    :

 

 

	Attributable to owners of the parent
	Share capital	Additional paid-in capital	Capital Reserve from share-based payment transactions	Translation differences	Retained earnings	Total attributable to owners of the  parent	Non-controlling interest	Total equity
	U.S. $ in thousands
Balance as at January 1, 2017	109	14,964	323	44	3,468	18,908	324	19,232
Changes during 2017:
Comprehensive income
Profit for the year	-	-	-	-	1,250	1,250	59	1,309
Other comprehensive income
Re measurements on defined benefit plans	-	-	-	-	12	12	-	12
Translation differences	-	-	-	61	-	61	-	61
Total comprehensive income for the year	-	-	-	61	1,262	1,323	59	1,382
Exercise of options to share capital	2	99	(*)	-	-	101	-	101
Dividend	3	280	-	-	(518)	(235)	-	(235)
Share based payment	-	-	29	-	-	29	-	29
Balance as at December 31, 2017	114	15,343	352	105	4,212	20,126	383	20,509

(*) less than one thousand dollars

 

 

The accompanying notes form an integral part of these financial statements.

 

 

 

INTERIM CONSOLIDATED STATEMENT OF

FINANCIAL POSITION

 

	31.03.2018		31.03.2017		31.12.2017
	U.S. $ in thousands
	Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	3,963		4,926		2,642
Other current financial assets	2,021		-		2,011
Trade receivables	7,932		9,122		8,988
Other receivables	389		630		850
Current tax receivables	307		540		360
Inventories	4,963		4,151		5,281
	19,575		19,369		20,132
NON-CURRENT ASSETS:
Long term prepaid expenses	22		39		34
Property, plant and equipment	5,288		5,340		5,302
Investment property	603		625		609
Deferred tax assets	603		597		582
Intangible assets	185		294		212
Goodwill	573		573		573
	7,274		7,468		7,312
Total assets	26,849		26,837		27,444

 

 

The accompanying notes form an integral part of the financial statements.

 

 

 

INTERIM CONSOLIDATED STATEMENT OF

FINANCIAL POSITION

 

	31.03.2018		31.03.2017			31.12.2017
	U.S. $ In thousands
	Unaudited
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current maturities and short term bank credit and loans	840		994		848
Trade payables	1,832		2,036		2,239
Other accounts payables	1,936		2,071		2,322
Current tax payables	8		56		114
	4,616		5,157		5,523
NON- CURRENT LIABILITIES:
Loans from banks, net of current maturities	737		1,505		935
Employee benefits, net	484		441		477
	1,221		1,946		1,412
Total liabilities	5,837		7,103		6,935
EQUITY
Equity attributable to owners of the parent
Share capital	114		109		114
Additional paid-in capital	15,343		14,971		15,343
Capital reserve from share-based payment transactions	358		330		352
Translation differences	128		286		105
Retained earnings	4,698		3,692		4,212
	20,641		19,388		20,126
Non-controlling interest	371		346		383
Total equity	21,012		19,734		20,509
Total equity and liabilities	26,849		26,837		27,444

 

 

May 13, 2018
Date of approval of financial statements	Moshe Borovitz Chief Finance Director	Dov Feiner Chief Executive Officer	Zvi Borovitz Non-executive Chairman

 

 

The accompanying notes form an integral part of the financial statements.

 

 

 

INTERIM CONSOLIDATED STATEMENTS OF

CASH FLOWS

 

		Three months period ended March 31,						Year ended December 31,
		2018		2017			2017
		U.S. $ in thousands
		Unaudited
Cash Flows from Operating Activities:
Profit for the period		474		246		1,309
Adjustments for:
Depreciation and amortization		145		164		637
Loss (gain) from investments in financial assets		(16)		77		-
Loss from sale of property, plant and equipment		-		-		6
Equity settled share-based payment expense		6		7		29
Finance expenses, net		17		28		162
Income tax expense (benefit)		(308)		(13)		320
Changes in operating assets and  liabilities:
Decrease (increase) in inventories		330		870		(269)
Decrease (increase) in trade receivables		1,062		(839)		(879)
Decrease (increase) in other accounts receivables and prepaid expenses		472		121		(88)
Increase (decrease) in trade and other accounts payables	4	(782)		(51)		396
Increase in employee benefits, net		7		35		84
Interest received		-		-		22
Interest paid		(17)		(28)		(109)
Income tax received (paid)		233		(114)		(190)
Net cash provided by operating activities		1,623		503		1,430

 

The accompanying notes form an integral part of the financial statements.

 

 

 

 INTERIM CONSOLIDATED STATEMENTS OF

CASH FLOWS (cont.)

 

		Three months period ended March 31,						Year ended December 31,
		2018		2017				2017
		U.S. $ in thousands
		Unaudited
Cash Flows From Investing Activities:
Purchase of investments in financial assets, net		-		-				(2,000)
Proceeds from sale of property, plant and equipment		-		-				100
Purchase of property, plant and equipment		(100)		(8)				(447)
Net cash used in investing activities		(100)		(8)				(2,347)
Cash Flows From Financing Activities:
Proceeds from exercise of share options		-		7				101
Dividend paid to the owners of the parent		-		-				(235)
Short term loan received from banks		-		166				-
Long term loan received from banks		10		-				60
Repayment of long-term loan from banks		(210)		(210)				(829)
Net cash used in financing activities		(200)		(37)				(903)
Increase (decrease) in cash and cash equivalents during the period		1,323		458				(1,820)
Cash and cash equivalents  at the beginning of the period		2,642		4,428				4,428
Exchange differences on balances of cash and   cash equivalents		(2)		40				34
Cash and cash equivalents  at the end of the period		3,963		4,926				2,642

 

 

Appendix A - Non-cash transactions:

			Three months period ended March 31,				Year ended December 31,
			2018		2017		2017
			U.S. $ in thousands
		Unaudited
Purchase of property, plant and equipment against trade payables		3			6		3
Scrip dividend		-			-		283

 

The accompanying notes form an integral part of the financial statements.

 

 

 

MTI WIRELESS EDGE LTD.

(An Israeli Corporation)

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1 - General:

 

Corporate information:

M.T.I Wireless Edge Ltd. (hereafter - the "Company") is an Israeli corporation. The Company was incorporated under the Companies Act in Israel on December 30, 1998 as a wholly- owned subsidiary of M.T.I Computers and Software Services (1982) Ltd. (hereafter - the Parent Company), commenced operations on July 1, 2000 and since March 2006 the Company's shares have been traded on the AIM market of the London Stock Exchange.

 

The formal address of the company is 11 Hamelacha Street, Afek industrial Park, Rosh-Ha'Ayin, Israel.

 

The Company is engaged in the development, design, manufacture and marketing of antennas and accessories.

Via its subsidiary, Mottech Water solutions Ltd., MTI is also a leading provider of remote control solutions for water and irrigation applications based on Motorola IRRInet state of the art control, monitoring and communication technologies.

 

Certain operational and administrative services are provided by the Parent Company.

 

 

Note 2 - Significant Accounting Policies:

 

The interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for the preparation of financial statements for interim periods, as prescribed in International Accounting Standard No. 34 ("Interim Financial Reporting").

The interim consolidated financial information set out above does not constitute full year-end accounts within the meaning of Israeli Companies Law. It has been prepared on the going concern basis in accordance with the recognition and measurement criteria of the International Financial Reporting Standards (IFRS). Statutory financial information for the financial year ended December 31, 2017 was approved by the board on February 15, 2018. The report of the auditors on those financial statements was unqualified.

The interim consolidated financial statements as of March 31, 2018 have not been audited.

The interim consolidated financial information should be read in conjunction with the annual financial statements as of December 31, 2017 and for the year then ended and with the notes thereto. The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2017 are applied consistently in these interim consolidated financial statements, except for the adoption of new standards effective as of 1 January 2018.

New IFRSs adopted  in the period

1.   IFRS 9 Financial Instruments

IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting.

The details of new significant accounting policies and the nature and effect of the changes to previous accounting policies are set out below:

 

(a)  Classification and measurement

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 as a whole is assessed for classification.

 

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at fair value through profit or loss ("FVTPL"):

-     it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

-     its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

-    

A debt investment is measured at fair value through other comprehensive income ("FVOCI") if it meets both of the following conditions and is not designated as at FVTPL:

 

-     it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

-     its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment's fair value in OCI. This election is made on an investment-by-investment basis.

 

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

A financial asset (unless it is a trade receivable without a significant financing component that is initially measured at the transaction price) is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition.

 

The following accounting policies apply to the subsequent measurement of financial assets.

 

Financial assets at FVTPL: These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

 

Financial assets at amortized cost: These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses (see b below). Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

 

Debt investments at FVOCI: These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.

 

Equity investments at FVOCI: These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in OCI and are never reclassified to profit or loss.

The Company has implemented the classification and measurement requirements of IFRS 9 retrospectively on the basis of the facts and circumstances that existed as of January 1, 2018 by recognizing the cumulative effect of the retrospective application as an adjustment to the opening balance of retained earnings and other components of equity as of January 1, 2018.

 

(b)  Impairment

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.

 

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 at an amount equal to lifetime ECLs.

 

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when 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 the Company's historical experience and informed credit assessment and including forward-looking information.

 

The Company considers a debt security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of 'investment grade'.

 

The maximum period considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk.

 

Trade receivables

Exposures within each Company were segmented based on common credit risk characteristics such as credit risk grade, geographic region and industry - for wholesale customers; and delinquency status, geographic region, age of relationship and type of product purchased - for other customers.

 

Actual credit loss experience was adjusted by scalar factors to reflect differences between economic conditions during the period over which the historical data was collected, current conditions and the Company's view of economic conditions over the expected lives of the receivables.

 

Changes in accounting policies resulting from the adoption of IFRS 9 have been applied retrospectively, on the basis of the facts and circumstances that existed as of January 1, 2018 by recognizing the cumulative effect of the retrospective application as an adjustment to the opening balance of retained earnings and other components of equity as of January 1, 2018.

 

The adoption of IFRS 9 did not have an impact on the financial statements.

 

2.     IFRS 15 Revenue from Contracts with Customers

IFRS 15 supersedes IAS 11 Construction Contracts, IAS 18 Revenue and related Interpretations and it applies to all revenue arising from contracts with customers, unless those contracts are in the scope of other standards. The core principle of IFRS 15 is that an entity will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

 

IFRS 15 sets out a single revenue recognition model, according to which the entity shall recognize revenue in accordance with the said core principle by implementing a five-step model framework:

 

1.   Identify the contract(s) with a customer.

2.   Identify the performance obligations in the contract.

3.   Determine the transaction price.

4.   Allocate the transaction price to the performance obligations in the contract.

5.   Recognize revenue when the entity satisfies a performance obligation.

 

Below are the significant accounting policies and judgments applied by the Company in recognizing revenue from customer contracts in detail according to the Company's main activities:

 

(a)  Sale of goods

The Company's contracts with customers for the sale of goods generally include one performance obligation. The Company has concluded that revenue from sale of goods should be recognized at the point in time when control of the asset is transferred to the customer, generally on delivery of the equipment.

 

Variable consideration

Under IFRS 15, volume rebates give rise to variable consideration. The variable consideration is estimated at contract inception and constrained until the associated uncertainty is subsequently resolved. The application of the constraint on variable consideration increases the amount of revenue that will be deferred.

 

Under IFRS 15, retrospective volume rebates give rise to variable consideration. To estimate the variable consideration to which it will be entitled, the Company applied the 'most likely amount method' for contracts with a single volume threshold and the 'expected value method' for contracts with more than one volume threshold. The selected method that best predicts the amount of variable consideration was primarily driven by the number of volume thresholds contained in the contract. The Company then applies the requirements on constraining estimates of variable consideration.

 

Warranty obligations

The Company generally provides warranties for general repairs of defects that existed at the time of sale, as required by law. As such, most warranties are assurance-type warranties under IFRS 15, which the Company accounts for under IAS 37 Provisions, Contingent Liabilities and Contingent Assets, consistent with its practice prior to the adoption of IFRS 15.

 

Financing components

The Company does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Company does not adjust any of the transaction prices for the time value of money.

 

(b)  Rendering of services

Provided the amount of revenue can be measured reliably and it is probable that the Company will receive any consideration, revenue from services is recognized in the period in which they are rendered.

 

(c)  Revenues from Construction Contracts

Revenues are reported by the "percentage of completion" method. The percentage of completion is determined by dividing actual completion costs incurred to date by the total completion costs anticipated. 

 

When a loss from a contract is anticipated, a provision is made in the period in which it first becomes evident, for the entire loss anticipated, as assessed by the company's management.

 

The Company recognizes income from construction contracts over time, since the Company's performance does not create an asset with alternative use to the Company and the Company has the right to enforce payment for performance completed up to that date.

 

The payment terms in the projects are based on milestones set at the date of signing the contract and are based mainly on the rate of progress. For this reason, the Company is not expected to recognize assets in respect of contracts and liabilities in respect of contracts in significant amounts in relation to these contracts.

 

Causes of uncertainty in material estimates

Measuring the progress of long-term performance commitments - the Company is required to estimate the total cost of completing each project based on estimates of material costs, labor costs, subcontractor performance, and more.

 

First time application

The Company elected to apply IFRS 15 retrospectively for the first time by recognizing the cumulative effect of the retroactive application as an adjustment to the opening balance of retained earnings as at January 1, 2018.

 

The adoption of IFRS 15 did not have an impact on the financial statements.

 

 

Note 3 - REVENUES:

		Three months period ended      March 31,				Year ended December 31,
		2018		2017			2017
		U.S. $ in thousands
		Unaudited
Revenues arises from:
Sale of goods		4,603		4,957			21,271
Rendering of services		725		546			2,492
Projects		828		708			2,613
		6,156		6,211			26,376

 

 

Note 4 - operating SEGMENTS:

The following table's present revenue and profit information regarding the Group's operating segments for the Three months period ended March 31, 2018 and 2017 respectively and for the year ended December 31, 2017.

Three months period ended March 31, 2018 (Unaudited)
		Antennas		Water Solutions		Total
		U.S. $ in thousands
Revenue
External		3,054		3,102		6,156
Total		3,054		3,102		6,156
Segment profit		102		147		249
Finance expense, net						(83)
Profit before income tax						166
Other
Depreciation and amortization		135		10		145

 

 

Three months period ended March 31, 2017 (Unaudited)
		Antennas		Water Solutions		Total
		U.S. $ in thousands
Revenue
External		3,129		3,082		6,211
Total		3,129		3,082		6,211
Segment profit		166		280		446
Finance expense, net						(213)
Profit before income tax						233
Other
Depreciation and amortization		147		17		164

 

Year ended December 31, 2017
		Antennas		Water Solutions		Total
		U.S. $ in thousands
Revenue
External		13,267		13,109		26,376
Total		13,267		13,109		26,376
Segment profit		67		1,536		1,603
Unallocated corporate expenses
Finance income, net						26
Profit before income tax						1,629
Other
Depreciation and amortization		586		51		637

 

 

Note 5 -TRANSACTIONS AND BALANCES WITH RELATED PARTIES:

The following transactions occurred with the Parent Company and other related parties:

 

		Three months period ended      March 31,				Year ended December 31,
		2018		2017			2017
		U.S. $ in thousands
		Unaudited
Purchased Goods		57		60			252
Management Fee		117		116			498
Services Fee		72		65			259
Lease income		(18)		(18)			(72)

 

 

Compensation of key management personnel of the Group:

 

		Three months period ended      March 31,				Year ended December 31,
		2018		2017			2017
		U.S. $ in thousands
		Unaudited
Short-term employee benefits *)		203		201			920

 

*) Including Management fees for the CEO, Directors, Executive Management and other related parties.

All Transactions were made at market value.

 

Balances with related parties:

	As at
	31.03.2018		31.03.2017		31.12.2017
	U.S. $ in thousands
	Unaudited
Other accounts payables	105		243		467

 

 

Note 6 - SIGNIFICANT AND SUBSEQUENT EVENTS:

 

1.   During March 2018 the Company announced that it is in preliminary discussions with its majority shareholder, MTI Computers & Software Services (1982) Ltd ("MTIC"), regarding a potential merger between the two companies (the "Proposed Transaction"). MTIC, whose shares are listed on the Tel Aviv Stock Exchange, currently holds 53.2% of the Company's issued ordinary shares. Following the announcement on March 2018, on May 1, 2018 the Company announced that it had entered into a merger agreement (the "Merger Agreement") with its majority shareholder, MTIC and the Company together being the "Merging Companies", according to which, and in accordance with the provisions of Sections 350-351 of the Israeli Companies Law, 5759-1999 (the "Companies Law"), as a court approved scheme of arrangement between the Company, MTIC and their shareholders (the "Scheme of Arrangement"), MTIC will be merged into the Company in a statutory merger, so that MTIC will be dissolved and all of its activities, assets and liabilities, subject to certain qualifications, will be transferred to the Company in consideration for the allotment of new ordinary shares of the Company and the transfer of MTIC's existing holdings in the Company, to all of MTIC's shareholders (the "Merger").

 

As consideration for the Merger, the Company will allocate to the shareholders of MTIC 31,600,436 new ordinary shares in the Company, subject to a Conversion Ratio Mechanism (as defined below). In addition, MTIC's existing holdings in the Company will also be transferred to all of the shareholders in MTIC, pro rata to their holdings of shares in MTIC.

 

On the date of record for the Merger the Company will allocate to the shareholders of MTIC (the "Date of Record for the Merger" and the "Shareholders of MTIC" respectively) 31,600,436 new ordinary shares in the Company, according to the Conversion Ratio (as defined below) as of the date of the Merger Agreement, subject to the Conversion Ratio Mechanism (as defined below) (the "Allotted Shares") and will transfer them, together with MTIC's Holdings in the Company (the "Sold Shares"), to all of the shareholders in MTIC, pro rata to their holdings of shares in MTIC on the Date of Record for the Merger, according to the Conversion Ratio. With respect to the Merger Agreement, the "Conversion Ratio" - a ratio of 5.2689055 Sold Shares for each share in MTIC as of the date of entry into the Merger Agreement, which has been determined according to a valuation of the business activities of MTIC and the Company, on the basis of the consolidated and audited financial statements for the year ended 31 December 2017 of each company as valued by an independent appraiser (the "Appraiser"), which is subject to updates, as necessary, according to the Conversion Ratio Mechanism (as defined below). According to the aforesaid valuation, which constitutes part of the Merger Agreement (the "Valuation"), the equity ratio as of 31 December 2017, between the value of MTIC excluding MTIC's holdings in the Company (approximately US$10.7 million as of 31 December 2017) when compared with the value of the Company (approximately US $18.8 million as at 31 December 2017) is approximately 1.75: in favor of the Company. Following completion of the Merger, assuming the Conversion Ratio is not adjusted in accordance with the Conversion Ratio Mechanism (as defined below) and provided none of the options granted by the Company are exercised, the issued share capital of the Company will be 87,038,724 ordinary shares.

 

The completion of the Merger pursuant to the terms of the Merger Agreement is contingent upon the fulfillment of the conditions precedent (the "Conditions Precedent") by 30 August 2018, unless such date is extended by the Merging Companies, explicitly and in writing.

 

2.   On April 5, 2018 the company paid a dividend of US 2 cents per share totaling approximately US$396,000 and in addition 1,813,970 new ordinary shares were issued to qualifying shareholders that chose the scrip dividend alternative.