3rd Quarter Results

RNS Number : 0555W

MTI Wireless Edge Limited

12 November 2010

 



MTI WIRELESS EDGE LTD

 FINANCIAL RESULTS FOR THE NINE MONTHS ENDED

 30 SEPTEMBER 2010

MTI Wireless Edge Ltd., (ticker: MWE) ('MTI' or 'the Company'), a market leader in the manufacture of flat panel antennas for fixed wireless broadband, today announces its unaudited results for the nine months ended 30 September 2010.

Highlights

·     Third quarter revenues increase to $3.5m (Q3 2009: $3.4m)

·     Nine month revenues of $9.6m  (2009: $10.3m)

·     Nine month gross profit of $3.3m (2009: $3.6m)

·     Nine month gross margins of 34% (2009: 35%)

·     Cash and cash equivalents at $11.9m (Q3 2009: $13.5m)

Dov Feiner, Chief Executive Officer, commented:

"It is pleasing to report that the Company is continuing, quarter by quarter, to make progress. The improvement that we saw in the closing months of the half year has gathered momentum in the third quarter with revenues of $3.5m, some 2% higher than the comparable period of 2009, with gross margins for the nine month period virtually maintained.  This is the first time since 2008 that MTI has achieved quarterly revenue growth against the previous year. Third quarter sales are also 5% up on the second quarter of this year, which has been accomplished while increasing our backlog both for the fourth quarter and longer term.   

"Our largest division, where we are a market leader in manufacturing flat panel antennas for fixed wireless broadband, is demonstrating steady growth on the back of a moderately improving market and revenue for the nine months is now only 3% behind the 2009 level, a gap that I believe we can close in the final quarter of the year.  Our sales of antennas for RFID readers are continuing to demonstrate healthy growth and we have a strong order book for military products following last June's order for US$2.2m of equipment.

"Overall, we are making steady progress despite a challenging market and, supported by a strong balance sheet, the Board remains confident in MTI's long term prospects."

MTI Wireless Edge Ltd                                                                   + 972 3 900 8900

Moni Borovitz, Finance Director

Dov Feiner, CEO

Allenby Capital                                                                                   [phone]

Nick Naylor

Alex Price

Threadneedle Communications                                                       [phone]

Graham Herring

Terry Garrett

About MTI Wireless Edge

MTI designs and manufactures flat panel antennas, largely supplied to international OEMs of fixed broadband wireless access systems. With over 30 years of technical 'know-how', flexible high volume manufacturing capabilities and low failure rates, MTI's antennas now comprise approximately 25% of the global fixed broadband wireless antenna market. In addition, the Company has successfully developed products for new commercial applications as wireless systems become increasingly prevalent in new markets.

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	Nine months ended                    September 30				Year ended December 31,
	2010		2009		2009
	U.S. $ in thousands
	Unaudited				Audited
Revenues	9,649		10,292		13,453
Cost of sales	6,365		6,687		8,756
Gross profit	3,284		3,605		4,697
Research and development expenses	940		791		1,114
Selling and marketing expenses	1,515		1,466		2,050
General and administrative expenses	1,196		1,109		1,469
Profit (loss) from operations	(367)		239		64
Finance expense	172		113		128
Finance income	2		117		110
Profit (loss) before tax	(537)		243		46
Tax expense (income)	(2)		108		34
Net and comprehensive Income (loss)	(535)		135		12
Attributable to:
Owners of the parent	(547)		140		17
Non-controlling interest	12		(5)		(5)
	(535)		135		12
Earnings per share
Basic and Diluted (dollars per share)	(0.0106)		0.0026		0.0003
Weighted average number of shares outstanding
Basic and Diluted	51,571,990		51,571,990		51,571,990

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

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the nine months ended September 30, 2010:

	Attributed to owners of the parent
	Share capital		Additional paid-in capital		Employee equity benefits reserve		Retained earnings		Total		Non-controlling interest		Total equity
	U.S. $ in thousands
	Unaudited
Balance at January 1, 2010 (Audited)	109		14,945		88		4,433		19,575		-		19,575
Changes during the nine months ended September 30, 2010:
Total comprehensive loss for the period	-		-		-		(547)		(547)		12		(535)
Share based payment	-		-		35		-		35		-		35
Balance at September 30, 2010	109		14,945		109		3,886		19,063		12		19,075

The ac companying notes form an integral part of the financial statements.

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the nine months ended September 30, 2009:

	Attributed to equity holders of the company
	Share capital		Additional paid-in capital		Employee equity benefits reserve		Retained earnings		Total		Minority interest		Total equity
	U.S. $ in thousands
	Unaudited
Balance at January 1, 2009 (Audited)	109		14,945		29		5,014		20,097		-		20,097
Changes during the nine months ended September 30, 2009:
Total comprehensive loss for the period	-		-		-		140		140		(5)		135
Issue of capital to minority in subsidiary	-		-		-		-		-		5		5
Dividends	-		-		-		(598)		(598)		-		(598)
Share based payment	-		-		44		-		44		-		44
Balance at September 30, 2009	109		14,945		73		4,556		19,683		-		19,683

The ac companying notes form an integral part of the financial statements.

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended December 31, 2009:

	Attributed to owners of the parent
	Share capital		Additional paid-in capital		Employee equity benefits reserve		Retained earnings		Total		Non-controlling interest		Total equity
	U.S. $ in thousands
	Audited
Balance at January 1, 2009	109		14,945		29		5,014		20,097		-		20,097
Changes during 2009:
Total comprehensive loss for the year	-		-		-		17		17		(5)	-	12
Issue of capital to minority in subsidiary	-		-		-		-		-		5		5
Dividends	-		-		-		(598)		(598)		-		(598)
Share based payment	-		-		59		-		59		-		59
Balance at December 31, 2009	109		14,945		88		4,433		19,575		-		19,575

The ac companying notes form an integral part of the financial statements.

INTERIM CONSOLIDATED STATMENT OF FINANCIAL POSITION

	30.9.2010		30.9.2009		31.12.2009
	U.S. $ in thousands
	Unaudited				Audited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	2,717		3,139		3,212
Other financial assets	9,185		10,325		10,346
Trade receivables, net	5,053		4,631		4,405
Other receivables	274		187		198
Current taxes receivables	51		-		-
Inventories	2,990		2,295		2,318
Total current assets	20,270		20,577		20,479
LONG TERM PREPAID EXPENSES	67		50		51
PROPERTY AND EQUIPMENT, NET	1,564		1,668		1,621
GOODWILL	406		406		406
DEFERRED TAX ASSETS	123		98		121
	22,430		22,799		22,678

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

INTERIM CONSOLIDATED STATMENTE OF FINANCIAL POSITION

	30.9.2010		30.9.2009			31.12.2009
	U.S. $ In thousands
	Unaudited				Audited
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables	2,293		1,798		1,974
Other accounts payables	713		742		633
Other financial liabilities	-		263		-
Tax liability	-		-		173
Total current liabilities	3,006		2,803		2,780
NON- CURRENT LIABILITIES:
Employee benefits	269		234		243
Provisions	80		79		80
Total non-current liabilities	349		313		323
EQUITY
Share capital	109		109		109
Additional paid-in capital	14,945		14,945		14,945
Employee equity benefits reserve	123		73		88
Retained earnings	3,886		4,556		4,433
Equity attributable to owners of the parent	19,063		19,683		19,575
Non-controlling interest	12		-		-
Total equity	19,075		19,683		19,575
	22,430		22,799		22,678

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

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

			Nine months ended      September 30						Year ended December 31,
		2010			2009			2009
		U.S. $ in thousands
		Unaudited			Unaudited			Audited
Cash Flows from Operating Activities:
Net profit (loss)		(535)			135			12
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		272			278			374
Loss (gain) from short-term investments		17			(132)			(71)
Equity settled share-based payment expense		35			44			59
Tax expense (Income)		(2)			108			34
Changes in operating assets and  liabilities:
Decrease (increase) in inventories		(672)			276			253
Decrease (increase) in trade receivables		(648)			1,267			1,493
Decrease (increase) in other accounts receivables for short and long term		(92)			29			17
Increase (decrease) in trade payables		324			(824)			(905)
Increase (decrease) in  other accounts payables		80			(225)			-
Increase (decrease) in provisions		-			52			11
Increase (decrease) in employee benefits		26			2			50
Income tax paid		(224)			(200)			(239)
Net cash (used in) provided by operating activities		(1,419)			810			1,088

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

 INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

		Nine months ended September 30					Year ended December 31,
		2010		2009			2009
		U.S. $ in thousands
		Unaudited				Audited
Cash Flows From Investing Activities:
Sale (purchase) of short-term investment, net		1,144		(666)			(748)
Purchase of property and equipment		(220)		(218)			(341)
Net cash (used in) provided by investing activities		924		(884)			(1,089)
Cash Flows From Financing Activities:
Dividend paid to the owners of the parent		-		(598)			(598)
Issue of capital to minority in subsidiary		-		5			5
Net cash used in financing activities		-		(593)			(593)
DECREASE IN CASH AND CASH EQUIVALENTS		(495)		(667)			(594)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		3,212		3,806			3,806
CASH AND CASH EQUIVALENTS AT END OF PERIOD		2,717		3,139			3,212

Appendix A - Non-cash activities:

		Nine months ended September 30				Year ended December 31,
		2010		2009			2009
		U.S. $ in thousands
		Unaudited				Audited
Purchase of property and equipment against trade payables		2		81			7

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

Note 1 - General:

M.T.I Wireless Edge Ltd. (hereafter - the Company) is an Israeli corporation. It 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) and commenced operations on July 1, 2000 and since March 2006, the Company's shares have been traded on the AIM 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.

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 Financial Reporting Standard IAS 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 a 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 31 December 2009 was approved by the board on 25 February 2010. The report of the auditors on those financial statements was unqualified. The interim consolidated financial statements as of 30 September 2010 have not been audited.

The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2009 are applied consistently in these interim consolidated financial statements, except for the impact of the adoption of the Standards and Interpretations described below.

-        IFRS 3 (Revised) - Business Combinations and IAS 27 (Revised) - Consolidated and Separate Financial Statements:

These standards have been applied prospectively from 1 January 2010. The implementation of these standards will affect future acquisitions and transactions with non-controlling interests.

The principal changes following the adoption of these Standards are:

                                       (a)          IFRS 3 previously prescribes that goodwill, as opposed to the acquiree's other identifiable assets and liabilities, should  be measured as the excess of the cost of the acquisition over the acquirer's share in the fair value of the identifiable assets, net on the acquisition date. According to the Revised Standards, goodwill can be measured at its full fair value and not only based on the acquired part, this in respect of each business combination transaction measured separately.

                                      (b) A contingent consideration in a business combination is measured at fair value and changes in the fair value of the contingent consideration, which do not represent adjustments to the acquisition cost in the measurement period, should not be simultaneously recognized as goodwill adjustment. Normally, the contingent consideration is considered a financial derivative within the scope of IAS 39 and presented at fair value through profit or loss.

          (c) Direct acquisition costs attributed to a business combination transaction is recognized in the comprehensive income statement as incurred as opposed to the previous requirement of  carrying them as part of the consideration of the cost of the business combination, which has been removed.

          (d) A minority transaction, whether a sale or an acquisition, will be accounted for as an equity transaction and will therefore not be recognized in the statement of income or have any effect on the amount of goodwill, respectively.

          (e) A subsidiary's losses, although resulting in the subsidiary's deficiency, is allocated between the parent company and non-controlling interests, even if the non-controlling interests has not guaranteed or has no contractual obligation of sustaining the subsidiary or carrying out another investment.

          (f) On the loss of control of a subsidiary, the remaining investment in the subsidiary, if any, is revalued to fair value against gain and loss from the sale and this fair value will represent the cost basis for the purpose of subsequent treatment.

-        Amendments to IFRS 2 - Group Cash-settled Share-based Payment Transactions

In June 2009 the International Accounting Standards Board amended IFRS 2 to clarify its scope and the accounting for group cash-settled share-based payment transactions in the separate or individual financial statements of the entity receiving the goods or services when that entity has no obligation to settle the share based payment transaction. The amendments also incorporate the guidance contained in the following Interpretations:

• IFRIC 8 Scope of IFRS 2

• IFRIC 11 IFRS 2-Group and Treasury Share Transactions.

The implementation of Amendments to IFRS 2 has had no impact on the reported results or financial position of the Company.

-        Improvements to International Financial Reporting Standards 2009

-    IAS 7 - Statement of Cash Flows: Explicitly states that only expenditure that results in recognizing an asset can be classified as a cash flow from investing activities.   

-    IAS 36 - Impairment of Assets: The amendment to IAS 36 defines the required accounting unit to which goodwill will be allocated for impairment testing of goodwill. Pursuant to the amendment, the largest unit permitted for impairment testing of goodwill acquired in a business combination is an operating segment as defined in IFRS 8, "Operating Segments" before the aggregation for reporting purposes.

The initial adoption of these Standards did not have any material effect on the consolidated financial statements.

The following new standards, new interpretations and amendments to standards and interpretations have been issued but are not effective for the financial year beginning 1 January 2010 and have not been early adopted:

-    IFRS 9, 'Financial instruments', In November 2009, the IASB issued IFRS 9, "Financial Instruments", which represents the first phase of a project to replace IAS 39, "Financial Instruments: Recognition and Measurement". IFRS 9 focuses mainly on the classification and measurement of financial assets and it applies to all financial assets within the scope of IAS 39.

According to IFRS 9, upon initial recognition, all the financial assets (including hybrid contracts with financial asset hosts) will be measured at fair value. In subsequent periods, debt instruments can be measured at amortized cost if both of the following conditions are met:

-         The asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows.

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

Subsequent measurement of all other debt instruments and financial assets will be at fair value.

Financial assets that are equity instruments will be measured in subsequent periods at fair value and the changes will be recognized in the statement of income or in other comprehensive income (loss), in accordance with the election of the accounting policy on an instrument-by-instrument basis. Nevertheless, if the equity instruments are held for trading, they must be measured at fair value through profit or loss. This election is final and irrevocable. When an entity changes its business model for managing financial assets it shall reclassify all affected financial assets. In all other circumstances, reclassification of financial instruments is not permitted.

The Standard will be effective starting January 1, 2013. Earlier application is permitted. Early adoption will be made with a retrospective restatement of comparative figures, subject to the reliefs set out in the Standard.

The Company is evaluating the possible effect of the adoption of the new Standard on the consolidated financial statements but is presently unable to assess such effect, if any.

-    Revised IAS 24, 'Related party disclosures', issued in November 2009. It supersedes IAS 24, 'Related party disclosures', issued in 2003. The revised IAS 24 is required to be applied from 1 January 2011. Earlier application, in whole or in part, is permitted.

-    'Classification of rights issues' (Amendment to IAS 32), issued in October 2009. For rights issues offered for a fixed amount of foreign currency, current practice appears to require such issues to be accounted for as derivative liabilities. The amendment states that if such rights are issued pro rata to all the entity's existing shareholders in the same class for a fixed amount of currency, they should be

The following new standards, new interpretations and amendments to standards and interpretations have been issued but are not effective for the financial year beginning 1 January 2010 and have not been early adopted(Cont.):

classified as equity regardless of the currency in which the exercise price is denominated. The amendment should be applied for annual periods beginning on or after 1 February 2010. Earlier application is permitted.

Note 3 - SEGMENTS:

The following table's present revenue and profit information regarding the Group's operating segments for the nine months ended 30 September 2010 and 2009, respectively.

Nine months ended September 30, 2010 (Unaudited)
		Commercial		Military		Total
		$'000
Revenue
External		7,604		2,045		9,649
Total		7,604		2,045		9,649
Results
Segment Profit (loss) from operations		(437)		90		(367)
Other
Depreciation and other non-cash expenses		178		94		272

Nine months ended September 30, 2009 (Unaudited)
		Commercial		Military		Total
		$'000
Revenue
External		7,698		2,594		10,292
Total		7,698		2,594		10,292
Results
Segment Profit (loss) from operations		(15)		254		239
Other
Depreciation and other non-cash expenses		180		98		278

 (*) The Group cannot distinguish between Commercial and Military assets and liabilities, due to the fact that some of the assets and liabilitiesare used by both segments.

Note 4 -TRANSACTIONS WITH RELATED PARTIES:

The Parent Group and other related party provides certain services to the Group as follows:

		Nine months ended September 30				Year ended December 31,
		2010		2009			2009
		U.S. $ in thousands
		Unaudited				Audited
Purchased Goods		137		97			127
Management Fee		174		167			227
Services Fee		120		120			160
Lease		256		238			317
Total		687		622			831

All Transactions are made on market value.

As of September 30, 2010 the parent group and related party owes to the Group US $41,000. On 30 September 2009 the Group owed to the parent group and related party US $159,000.

NOTE 5 - SIGNIFICANT EVENTS:

1.   On June 15, 2010, the Company has received a US$2.2m order from an existing client for the development and manufacture of Military antennas. Deliveries will be over a two year period. 

2.   On June 15, 2010 the company has received a US$0.7m order from an existing client for fixed broadband wireless antennas. Deliveries of the order will be over an 18 month period.

NOTE 6 - SUBSEQUENT EVENTS:

On October 20, 2010 the Company announced that it has reached agreement in principle with its largest   shareholder, MTI Computers & Software Services (1982) Ltd. ("MTI Computers"), to acquire the leasehold interest of its head office located at 11 Hamelacha St., Afek Industrial Park, Rosh-Ha'Ayin, 48091, Israel (the "Property").

The purchase price to be paid by the Company is NIS 18,800,000 (approximately US$ 5.2 Million) plus 5 per cent purchase tax (the "Purchase Price"), and this has been calculated on the basis an independent valuation report dated 26 September 2010 prepared by Haushner & Co (the "Appraisal Report").

The Company intends to fund approximately US$ 2.9 million of the Purchase Price from its existing cash resources and the remainder of the Consideration, together with any applicable taxes (approximately US$2.5 million in aggregate) will be financed via a bank loan secured on the Property.

The transaction is subject to the approval of the shareholders of the company and an extra ordinary meeting to approve the transaction was called and will take place on November 24, 2010.

 

END

 

 

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