Final Results and Scrip Dividend Alternative

RNS Number : 0681F

MTI Wireless Edge Limited

16 February 2018

 

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

16 February 2018

MTI Wireless Edge Ltd

("MTI" or the "Company")

Financial results for 2017

Declaration of final dividend with a scrip dividend alternative

MTI Wireless Edge Ltd. (MWE), a market leader in the manufacture of flat panel antennas for fixed wireless broadband and a wireless irrigation solution provider, today announces its audited results for the year ended 31 December 2017 (the "Period").

Highlights:

·      Earnings per share increased by 30% to 2.36 US cents (2016: 1.81 US cents)

·      Revenues increased by 13% during the Period to $26.4m (2016: $23.3m)

·      Gross profit increased by 12% during the Period to $9.5m (2016: $8.6m)

·      The Company generated $1.4m of cash from operation (2016: $1.2m)

·      Profit before tax increased by 35% during the Period to $1.6m (2016: $1.2m)

·      Shareholder's equity grew during the Period to $20.1m (31 December 2016: $18.9m)

·      Dividend of $0.02 per share (2016: $0.01 per share) declared with a scrip dividend alternative offered to all shareholders

Chairman's Statement

I am pleased to report on our audited results for the financial year ended 31 December 2017, during which we continued to experience growth of the business in both the antennas and wireless irrigation controls segments. In 2017, we continued to invest and strengthened our sales and marketing teams in key territories to lay the foundations to capitalize on the enormous opportunities and the future growth. 

As a result of Climate Change and droughts being experienced across the globe, water is becoming a critical natural resource and its management is becoming essential. These developments are providing opportunities for the Company to market and sell its solutions offered by Mottech from our offices around the world.

In the antenna segment, we experienced strong growth in 2017 centered on our commercial antenna products. Nevertheless, we continue to see good demand for our military antenna and, given the current backlog and pipeline of opportunities in this segment, we believe that the growth will continue in 2018 and beyond. In the broadband wireless access sector, we continue to progress with our millimeter wave (including 60 - 80 GHz and 5G) antenna solution and expanded our offering into dual band subsystem antenna solutions - this will increase our unit selling price while strengthening our relationship with customers.  We are confident that this will be part of MTI's growth in the future.

We believe the underlying drivers of our business, such as continued growth in data usage and increasing subscriber numbers, are part of long-term trends that we expect will continue for the foreseeable future. This, together with the requirement for efficient water management, provides us with confidence in both the Company's short and long-term growth prospects.

Following a review of the performance of the business, the Board decided to declare a final dividend of $0.02 per share. As it is in the interest of Shareholders to receive a yearly yield on their investment, while at the same time the Company manages its earnings and cash generation, it was decided to offer a scrip dividend alternative to Shareholders. The Board believes that the ability for qualifying shareholders to elect to receive dividends from the Company in the form of new Ordinary Shares or new Depositary Interests rather than cash is likely to benefit both the Company and Shareholders.  If qualifying shareholders do elect to receive scrip dividend shares, the Company will benefit from the ability to retain the cash which would otherwise have been paid out as dividends. A circular regarding the scrip dividend alternative will be issued to shareholders shortly.

I would like to thank our employees for their contribution to the Company and for their dedication and creativity, which has enabled us to achieve these results. I would also like to acknowledge with thanks the employees' families for their continued support.

Zvi Borovitz

Non-Executive Chairman

Chief Executive's review

I am happy to report that during 2017 we experienced double digit growth in both segments of the business resulting in 13% revenue growth which translated to 30% growth in earnings per share.

Our wireless controller segment grew by 11% in 2017 and we continue to see many opportunities to grow this business and remain focused on building our offering for various markets in the water management segment. Part of this effort is focused on China where we established a joint venture with our distributor in 2017 and we believe this market will be one of the fastest growing market for us in the near future. While investing in developing this business segment we were able to meet our long-term goal of having over 10% operating margin.   

In the antenna segment we grew by 16% in 2017 - this growth came from both the RFID and broadband access solutions. The military segment showed a small decline in revenues in 2017, mostly due to delays in orders that were received towards the end of the year but which are now expected to come to fruition at the beginning of 2018. The Company made progress in the military segment during 2017 and entered 2018 with large backlog and encouraging pipeline of opportunities including the new line of antennas for a disposable application which we believe will be part of our future growth in military antenna market. During 2017 we opened a new company in India (owned 49% by the Company) to meet the offset requirement the Israeli military industry has with the Indian government (totalling several billion of US Dollars) - we believe this represents a significant opportunity for us as we are well established in India and know the market very well.  Given the above we have strong belief that the growth will continue in 2018 and beyond.

Our RFID segment continued to grow for the fourth consecutive year showing growth of nearly 50% since 2014, and now represents 18% of the antenna segment. We see more applications that require the use of such solutions and our position in this market, still in its initial stages, remains strong. Our key future goal is to ensure that MTI remains well positioned in this market, to maximise the benefits of the continuing world-wide growth in the use of RFID technology.

In our key market of broadband wireless access, we had 30% revenue growth in 2017 primarily in the legacy segment that became more project oriented. We remain focused on the development of the millimeter wave (including 60 - 80 GHz and 5G) market as we see improvement in demand coupled with cost reduction initiatives of all players and believe this will be the next growth engine for the broadband antenna business. Our key advantage of flat antenna remains solid and we continue to develop a dual band dish solution together with our customers, to increase our part in the total solution.  

To achieve future growth, the Company aims to extend its leadership in the antenna markets and further develop Mottech's control offering to rapidly expedite its growth potential in this market and bring our customers added value. 

Dov Feiner

Chief Executive Officer

Declaration of final dividend with a scrip dividend alternative

The Board of MTI is pleased to announce a final dividend in respect of the year ended 31 December 2017 (the "2017 Dividend") of US$0.02 per ordinary share in the Company ("Ordinary Share"). It is intended that the 2017 Dividend will be paid on 5 April 2018 to holders of Ordinary Shares recorded on the register as at the close of business on 2 March 2018.

The Company will also be offering a scrip dividend alternative to the 2017 Dividend (the "Scrip Dividend Alternative") to certain qualifying shareholders ("Qualifying Shareholders"). Under the Scrip Dividend Alternative, Qualifying Shareholders may elect to receive new ordinary shares (or new depositary interests, as applicable) (the "Scrip Dividend Shares") in place of their cash dividend. Qualifying Shareholders may only elect to receive Scrip Dividend Shares in respect of their entire 2017 Dividend entitlement and may not split their 2017 Dividend entitlement between the two alternative options. A circular and form of election (the "Scrip Election Form") will be posted to Shareholders today to explain how Qualifying Shareholders may elect to take up the Scrip Dividend Alternative.  Scrip Election Forms or, for Shareholders with interests held through CREST, the CREST dividend election input message must be submitted and returned by the deadline of 5.00 p.m. on 22 March 2018.

The Board believes that the Scrip Dividend Alternative is likely to benefit both the Company and shareholders. MTI will be able to retain the cash that otherwise would be paid out as cash dividends and re-invest into the Company. Qualifying Shareholders will be able, inter alia, to increase their interests in MTI without incurring dealing costs or paying stamp duty reserve tax.

The Scrip Dividend Alternative is conditional on:

(a)   admission of the Scrip Dividend Shares to trading on AIM; and

(b)   the Board not deciding to revoke its decision to offer Scrip Dividend Shares.

Each Qualifying Shareholder's entitlement to Scrip Dividend Shares is to be calculated based on the Scrip reference price per ordinary share, which will be calculated based on the mean closing mid-market price of an Ordinary Share between 1 March 2018 and 7 March 2018 (the "Scrip reference Price").   

Expected timetable

Event	Date
Record date	2 March 2018
Expected date for confirmation of the Scrip reference Price per Ordinary Share	8 March 2018
Final time and date for receipt of Scrip Election Forms (for Ordinary Shares held in certificated form) and dividend election input messages in CREST (for Depositary Interests)	5.00 p.m. on 22 March 2018
Posting of cheques for payment of cash dividends	4 April 2018
Dispatch of certificates for Scrip Dividend Shares that are to be held in certificated form	5 April 2018
CREST accounts credited with Depositary Interests in respect of Scrip Dividend Shares	5 April 2018
Expected date for admission of Scrip Dividend Shares to trading on the Alternative Investment Market	5 April 2018

For further information please contact:

MTI Wireless Edge Ltd Dov Feiner, CEO Moni Borovitz, Financial Director	http://www.mtiwe.com/ [phone]
Nomad and Joint Broker Allenby Capital Limited Nick Naylor Alex Brearley	[phone]
Joint Broker Peterhouse Corporate Finance Limited Lucy Williams Eran Zucker	[phone]

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.

 

M.T.I Wireless Edge Ltd.

Consolidated Statements of Comprehensive Income

			For the year ended December 31,
			2017		2016
	Note		$'000		$'000
Revenues	3, 5		26,376		23,276
Cost of sales			16,828		14,728
Gross profit			9,548		8,548
Research and development expenses			927		1,079
Distribution expenses			3,796		3,346
General and administrative expenses			3,216		2,640
loss from sale of property, plant and equipment			6		-
Profit from operations	4		1,603		1,483
Finance expense	6		216		334
Finance income	6		242		57
Profit before income tax			1,629		1,206
Income tax	7		320		222
Profit			1,309		984
Other comprehensive income (loss) net of tax:
Items that will not be reclassified to profit or loss:
Re measurements on defined benefit plans			12		(16)
			12		(16)
Items that may be reclassified to profit or loss:
Adjustment arising from translation of financial statements of foreign operations			61		121
			61		121
Total other comprehensive income			73		105
Total comprehensive income			1,382		1,089
Profit attributable to:
Owners of the parent			1,250		936
Non-controlling interest			59		48
			1,309		984
Total comprehensive income attributable to:
Owners of the parent			1,323		1,041
Non-controlling interest			59		48
			1,382		1,089
Earnings per share (dollars)
Basic	8		0.0236		0.0181
Diluted	8		0.0234		0.0178

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

M.T.I Wireless Edge Ltd.

Consolidated Statements of Changes in Equity

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
	$'000
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 1 thousand dollar

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

M.T.I Wireless Edge Ltd.

Consolidated Statements of Changes in Equity (Cont.) 

For the year ended December 31, 2016        :

	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
	$'000
Balance as at January 1, 2016	109	14,945	304	(77)	3,116	18,397	266	18,663
Changes during 2016:
Comprehensive income
Profit for the year	-	-	-	-	936	936	48	984
Other comprehensive income
Re measurements on defined benefit plans	-	-	-	-	(16)	(16)	-	(16)
Translation differences	-	-	-	121	-	121	-	121
Total comprehensive income for the year	-	-	-	121	920	1,041	48	1,089
Share issuance to non-controlling interest in subsidiary	-	(10)	-	-	-	(10)	10	-
Exercise of options to share capital	*	29	(1)	-	-	28	-	28
Dividend paid	-	-	-	-	(568)	(568)	-	(568)
Share based payment	-	-	20	-	-	20	-	20
Balance as at December 31, 2016	109	14,964	323	44	3,468	18,908	324	19,232

(*) less than 1 thousand dollar

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

M.T.I Wireless Edge Ltd.

Consolidated Statements of Financial Position

		As at December 31,		As at December 31,
		2017	2017	2016	2016
	Note	$'000	$'000	$'000	$'000
ASSETS
Non-current assets:
Goodwill		573		573
Property, plant and equipment	10	5,302		5,453
Investment property	11	609		630
Intangible assets	12	212		321
Deferred tax assets	13	582		500
Long-term prepaid expenses		34		48
Total non-current assets			7,312		7,525
Current assets:
Inventories	14	5,281		4,910
Current tax receivables		360		455
Trade and other receivables	15	9,838		8,865
Other current financial assets	16	2,011		-
Cash and cash equivalents	17	2,642		4,428
Total current assets			20,132		18,658
TOTAL ASSETS			27,444		26,183
LIABILITIES
Non-current liabilities:
Loans from banks, net of current maturities	18	935		1,664
Employee benefits, net	19	477		405
Total Non-current liabilities			1,412		2,069
Current Liabilities:
Current tax payables		114		3
Trade and other payables	20	4,561		4,077
Current maturities	21	848		802
Total current liabilities			5,523		4,882
Total liabilities			6,935		6,951
TOTAL NET ASSETS			20,509		19,232

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

 

M.T.I Wireless Edge Ltd.

Consolidated Statements of Financial Position (Cont.)

		As at December 31,		As at December 31,
		2017	2017	2016	2016
	Note	$'000	$'000	$'000	$'000
Capital and reserves attributable to    owners of the parent	24
Share capital		114		109
Additional paid-in capital		15,343		14,964
Capital reserve from share-based payment transactions		352		323
Translation differences		105		44
Retained earnings		4,212		3,468
			20,126		18,908
Non-controlling interests			383		324
TOTAL EQUITY			20,509		19,232

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

 

M.T.I Wireless Edge Ltd.

Consolidated Statements of Cash Flows

		For the year ended December 31,				For the year ended December 31,
		2017		2017		2016		2016
		$'000		$'000		$'000		$'000
Operating Activities:
Profit for the year		1,309				984
Adjustments for:
Depreciation and amortization		637				635
Gain from investments in financial assets		-				(57)
Equity settled share-based payment expense		29				20
Loss on disposal of property, plant and equipment		6				-
Finance expenses, net		162				122
Income tax		320				222
				2,463				1,926
Changes in working capital and provisions
Increase in inventories		(269)				(466)
Decrease (increase) in trade receivables		(879)				19
Decrease (increase) in other accounts receivables		(88)				572
Increase in trade and other payables		396				105
Increase in employee benefits, net		84				2
				(756)				232
Interest received		22				-
Interest paid		(109)				(122)
Income tax paid		(190)				(837)
				(277)				(959)
Net cash provided by operating activities				1,430				1,199

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

 

M.T.I Wireless Edge Ltd.

Consolidated Statements of Cash Flows (Cont.)

	For the year ended December 31,					For the year ended December 31,
	2017			2017		2016		2016
	$'000			$'000		$'000		$'000
Investing Activities:
Proceeds from sale of property	100					-
Sale (purchase) of investments in financial assets, net	(2,000)					2,142
Purchase of property, plant and equipment	(447)					(314)
Net cash provided by (used in) investing activities				(2,347)				1,828
Financing Activities:
Proceeds from exercise of share options	101					28
Dividend paid to the owners of the parent	(235)					(568)
Long term loan received from banks	60					87
Repayment of long-term loans from banks	(829)					(793)
Net cash used in financing activities				(903)				(1,246)
Increase (decrease) in cash and cash equivalents				(1,820)				1,781
Cash and cash equivalents at the beginning of the year				4,428				2,634
Exchange differences on balances of cash and cash equivalents				34				13
Cash and cash equivalents at the end of the year				2,642				4,428
Appendix A - Non-cash transactions:
						For the year ended December 31,
						2017		2016
						$'000		$'000
Purchase of property, plant and equipment with credit						3		5
Scrip dividend (Note 9)						283		-

1.             General description of the Group and its operations

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 are 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.

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.

The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated.

2.             Accounting policies

A.    Basis of preparation

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The financial statements have been prepared under the historical cost convention, as modified by the measurement of Employee benefit assets and certain financial assets and financial liabilities at fair value through profit or loss.

The Company has elected to present the statement of comprehensive income using the function of expense method.

B.     Estimates and assumptions

The preparation of the financial statements requires management to make estimates and assumptions that have an effect on the application of the accounting policies and on the reported amounts of assets, liabilities, revenues and expenses. These estimates and underlying assumptions are reviewed regularly. Changes in accounting estimates are reported in the period of the change in estimate and thereafter.

The key assumptions made in the financial statements concerning uncertainties at the end of the reporting period and the critical estimates used by the the Company and its subsidiaries (hereafter - the Group) that may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

-               Deferred tax assets: Deferred tax assets are recognized for unused carryforward tax losses and deductible temporary differences to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the estimated timing and level of future taxable profits together with future tax planning strategies.

C.     Revenue recognition

Revenues are recognized in profit or loss when the revenues can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the Company and the costs incurred or to be incurred in respect of the transaction can be measured reliably. In cases where the Company acts as an agent or as a broker without being exposed to the risks and rewards associated with the transaction, its revenues are presented on a net basis. Revenues are measured at the fair value of the consideration received or receivables less any trade discounts, volume rebates and returns.

Following are the specific revenue recognition criteria which must be met before revenue is recognized:

1.     Revenues from services are recognized as follows:

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

-       In fixed fee contracts - according to IAS 11 "Construction Contracts" pursuant to which 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 Group's management.

2.     Revenues from the sale of goods are recognized when all the significant risks and rewards of ownership of the goods have passed to the buyer and the seller no longer retains continuing managerial involvement. The delivery date is usually the date on which risks and rewards pass.

D.    Customer discounts

Customer discounts given at year end in respect of which the customer is not obligated to comply with certain targets, are recognized in the financial statements as the sales entitling the customer to said discounts are made.

Customer discounts for which the customer is required to meet certain targets, such as a minimum amount of annual purchases (either quantitative or monetary), an increase in purchases compared to previous periods, etc. are recognized in the financial statements in proportion to the purchases made by the customer during the year that qualify for the target, provided that it is expected that the targets will be achieved and the amount of the discount can be reasonably estimated. 

E.     Basis of consolidation

The Group controls an investee if and only if the Group has:

-       Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee).

-       Exposure, or rights, to variable returns from its involvement with the investee, and

-       The ability to use its power over the investee to affect its returns.

E.     Basis of consolidation (cont.)

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over the investee, including: the contractual arrangement with the other vote holders of the investee, the Group's potential voting rights.

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control over the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. All intra-group assets and liabilities, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it (i) derecognises the assets (including goodwill) and liabilities of the subsidiary, the carrying amount of any non-controlling interests and the cumulative translation differences recorded in equity. (ii) Recognises the consideration received at fair value, recognises any investment retained at fair value of and recognises any surplus or deficit in profit or loss. (iii) reclassifies the parent's share of components previously recognised in OCI to profit or loss or retained earnings, as appropriate, as would be required if the Company had directly disposed of the related assets or liabilities.

F.     Consolidated financial statements

Where relevant, the accounting policy in the financial statements of the subsidiaries is changed to confirm with the policy applied in the financial statements of the Group.

G.    Goodwill

Goodwill represents the excess of the cost of a business combination over the interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired. Cost of a business combination comprises the fair values of assets given, liabilities assumed and equity instruments issued. Any costs of acquisition are charged to profit or loss (if the costs of acquisition are related to the issue of debt or equity, they charged to equity or liability respectively).

Goodwill is recognized as an intangible asset with any impairment in carrying value being charged to profit or loss. Goodwill is not systematically amortized and the company reviews goodwill for impairment once a year or more frequently if events or changes in circumstances indicate that there may be an impairment.

H.    Intangible assets

Separately acquired intangible assets are measured on initial recognition at cost including directly attributable costs. Intangible assets acquired in a business combination are measured on initial recognition at fair value at the acquisition date. Expenditures relating to internally generated intangible assets, excluding capitalized development costs, are recognized in profit or loss when incurred.

Intangible assets with a finite useful lives are amortized over their useful lives and reviewed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset are reviewed at least at each year end.

Intangible assets with indefinite useful lives are not systematically amortized and are tested for impairment annually or whenever there is an indication that the intangible asset may be impaired. The useful lives of these assets are reviewed annually to determine whether such assessment continues to be supportable. If the events and circumstances do not continue to support the assessment, the change in the useful lives assessment from indefinite to finite is accounted for prospectively as a change in accounting estimate and on that date the intangible asset is tested for impairment.

I.      Impairment of non-financial assets

Impairment tests on goodwill and infinite useful lives assets are undertaken annually on December 31 or sooner when there are indicators of impairment. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of the non-financial asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to dispose), the asset is written down and impairment charge is recognized accordingly in the profit or loss. Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is performed on the asset's cash-generating level (i.e. the smallest Group of assets to which the asset belongs that generates cash inflow that are largely independent of cash inflows from other assets). Goodwill is allocated at initial recognition to each of the Group's cash-generating units that are expected to benefit from the synergies of the business combination giving rise to the goodwill. An impairment loss is recognized if the recoverable amount of the cash-generating unit (or group of cash-generating units) is lower than the carrying amount of the cash-generating unit (or group of cash-generating units). Any impairment loss is allocated first to goodwill. Impairment losses allocated to goodwill cannot be reversed in subsequent periods.

An impairment loss allocated to asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, is limited to the lower of the carrying amount of the asset that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and the assets recoverable amount. The reversal of impairment loss of an asset is recognized in profit or loss.

Impairment charges are included in general and administrative expenses line item in the statement of comprehensive income. During the years 2016 and 2017 no impairment charges of non-financial assets were recognized.

J.      Foreign currency transactions

Transactions denominated in foreign currency (other than the functional currency) are recorded on initial recognition at the exchange rate as of the date of the transaction. After initial recognition, monetary assets and liabilities denominated in foreign currency are translated at the end of each reporting period into the functional currency at the exchange rate as of that date. Exchange differences, other than those capitalized to qualifying assets are recognized in profit or loss. Non-monetary assets and liabilities measured at cost are translated at the exchange rate of initial recognition. Non-monetary assets and liabilities denominated in foreign currency and measured at fair value are translated into the functional currency using the exchange rate prevailing at the date in which the fair value was determined.

K.     Financial assets

The Group classifies its financial assets into one of the following categories, depending on the purpose for which the asset was acquired. The Group's accounting policy for each category is as follows:

Fair value through profit or loss: This category comprises only marketable securities. These assets are carried at fair value with changes in fair value recognized in profit or loss.

Loans and receivables: Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. these assets initially recognized at fair value plus directly attributable transaction costs. After initial recognition, loans and receivables are measured using the effective interest method and less any impairment losses.

L.     Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

A.     In the principal market for the asset or liability, or

B.     In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

Classification by fair value hierarchy:

Assets and liabilities presented in the statement of financial position at fair value are grouped into classes with similar characteristics using the following fair value hierarchy which is determined based on the source of input used in measuring fair value:

Level 1	-	Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2	-	Inputs other than quoted prices included within Level 1 that are observable either directly or indirectly.
Level 3	-	Inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observable market data).

M.   Financial Liabilities

The Group classifies its financial liabilities as follows:

Financial liabilities at fair value through profit or loss: Financial liabilities at fair value through profit or loss include financial liabilities classified as held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.

Other financial liabilities: Other financial liabilities include the following items:

•              Bank borrowings are initially recognized at fair value less any transaction costs directly attributable to the issue of the instrument. Such interest bearing liabilities are subsequently measured at amortized cost using the effective interest method, which ensures that any interest expense over the period is at a constant interest rate on the balance of the liability carried in the statement of financial position. Interest expense in this context includes initial transaction costs, as well as any interest or coupon payable while the liability is outstanding.

Trade payables and other short-term monetary liabilities, which are initially recognized at fair value and subsequently measured at amortized cost using the effective interest rate method.

N.    De-recognition of financial instruments

Financial assets: A financial asset is derecognized when the contractual rights to the cash flows from the financial asset expire or the Group has transferred its contractual rights to receive cash flows from the financial asset or assumes an obligation to pay the cash flows in full without material delay to a third party and has transferred substantially all the risks and rewards of the asset, or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Financial liabilities: A financial liability is derecognized when it is extinguished, that is when the obligation is discharged or cancelled or expires. A financial liability is extinguished when the creditor.

·      discharges the liability by paying in cash, other financial assets, goods or services; or

·      is legally released from the liability.

Where an existing financial liability is exchanged with another liability from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is accounted for as an extinguishment of the original liability and the recognition of a new liability. The difference between the carrying amounts of the existing liability and new liability is recognized in profit or loss.

O.    Impairment of financial assets

The Group assesses at the end of each reporting period whether there is any objective evidence of impairment of a financial asset or group of financial assets as follows.

Financial assets carried at amortized cost:

There is objective evidence of impairment of loans and receivables if one or more loss events have occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows. Evidence of impairment may include indications that the debtor is experiencing financial difficulties, including liquidity difficulty and default in interest or principal payments.

The amount of the loss recorded in profit or loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not yet been incurred) discounted at the financial asset's original effective interest rate (the effective interest rate at initial recognition). The carrying amount of the asset is reduced through the use of an allowance account. In a subsequent period, the amount of the impairment loss is reversed if the recovery of the asset can be related objectively to an event occurring after the impairment was recognized. The amount of the reversal, which is limited to the amount of any previous impairment, is recognized in profit or loss.

P.     Government grants

grants received from the Israel-U.S. Bi-national Industrial Research and Development Foundation (henceforth "BIRD") as support for a research and development projects include an obligation to pay back royalties conditional on future sales arising from the project. Grants received from BIRD, are accounted for as forgivable loans, in accordance with IAS 20 (Revised), pursuant to the provisions of IAS 39. Accordingly, when the liability for the loan is first recognized, it is measured at fair value using a discount rate that reflects a market rate of interest. The difference between the amount of the grants received and the fair value of the liability is accounted for upon recognition of the liability as a grant and recognized in profit or loss as a reduction of research and development expenses. After initial recognition, the liability is measured at amortized cost using the effective interest method. Changes in the projected cash flows are discounted using the original effective interest and recorded in profit or loss in accordance with the provisions of IAS 39.

At the end of each reporting period, the Group evaluates, based on its best estimate of future sales, whether there is reasonable assurance that the liability recognized, in whole or in part, will not be repaid. If there is such reasonable assurance, the appropriate amount of the liability is derecognized and recorded in profit or loss as an adjustment of research and development expenses. If the estimate of future sales indicates that there is no such reasonable assurance, the appropriate amount of the liability that reflects expected future royalty payments is recognized with a corresponding adjustment to research and development expenses.

Q.    Deferred tax

Deferred taxes are computed in respect of temporary differences between the carrying amounts of assets and liabilities in the financial statements and the amounts attributable for tax purposes. Deferred taxes are recognized in other comprehensive income or directly in equity if the tax relates to those items.

Deferred taxes are measured at the tax rates that are expected to apply in the period when the temporary differences are reversed in profit or loss, other comprehensive income or equity, based on tax laws that have been enacted or substantively enacted at the end of the reporting period. Deferred taxes in profit or loss represent the changes in the carrying amount of deferred tax balances during the reporting period, excluding changes attributable to items recognized in other comprehensive income or directly in equity.

Deferred tax assets are reviewed at the end of each reporting period and reduced to the extent that it is not probable that they will be utilized. In addition, temporary differences (such as carryforward losses) for which deferred tax assets have not been recognized are reassessed and deferred tax assets are recognized to the extent that their recoverability is probable. Any resulting reduction or reversal is recognized on "income tax" within the statement of comprehensive income. Taxes that would apply in the event of the disposal of investments in investees have not been taken into account, as long as the disposal of such investments is not expected in the foreseeable future and the group has control over such disposal. In addition, deferred taxes that would apply in the event of distribution of dividends have not been taken into account, if distributions of dividends involve an additional tax liability; the Group's policy is not to initiate distribution of dividends that triggers an additional tax liability. All deferred tax assets and liabilities are presented in the statement of financial position as non-current items. Deferred tax assets are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred tax liabilities relate to the same taxpayer and the same taxation authority.

R.     Current taxes:

The current tax liability is measured using the tax rates and tax laws that have been enacted or substantively enacted by the reporting date as well as adjustments required in connection with the tax liability in respect of previous years.

S.     Inventories

Inventories are measured at the lower of cost and net realizable value. Cost is calculated according to weighted average model.

T.     Property, plant and equipment

Items of property, plant and equipment are initially recognized at cost including directly attributable costs. Depreciation is calculated on a straight line basis, over the useful lives of the assets at annual rates as follows:

	Rate of depreciation	Mainly %
buildings	3 - 4 %	3.13
Machinery and equipment	6 - 20 %	10
Office furniture and equipment	6 - 15 %	6
Computer equipment	10 - 33 %	33
Vehicles	15 %

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss.

U.    Investment property

An investment property is property (land or a building or both) held by the owner (lessor under an operating lease) or by the lessee under a finance lease to earn rentals or for capital appreciation or both rather than for use in the production or supply of goods or services, for administrative purposes or for sale in the ordinary course of business.

Investment property is measured initially at cost plus costs directly attributable to the acquisition. After initial recognition, investment property is measured at cost, less accumulated depreciation and accumulated impairment losses and accounted for similarly to  property, plant and equipment measured at cost. Investment property is depreciated on a straight-line basis at annual rates of 3.13%.

Investment property is derecognized on disposal or when the investment property ceases to be used and no future economic benefits are expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss in the period of the disposal.

V.     Cash and cash equivalents

Cash equivalents are considered by the Group to be highly-liquid investments, including, inter alia, short-term deposits with banks, the maturity of which do not exceed three months at the time of deposit and which are not restricted.

W.   Provision for warranty

The Group generally offers up to three years warranties on its products. Based on past experience, the Group does not record any provision for warranty of its products and services.

X.     Share-based payments

Where equity settled share options are awarded to employees, the fair value of the options calculated at the grant date is charged to the statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted.

Y.     Employee benefits

1.             Short-term employee benefits: Short-term employee benefits are benefits that are expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social security contributions and are recognized as expenses as the services are rendered. A liability in respect of a cash bonus or a profit-sharing plan is recognized when the Group has a legal or constructive obligation to make such payment as a result of past service rendered by an employee and a reliable estimate of the amount can be made.

2.             Post-employment benefits: The plans are normally financed by contributions to insurance companies and classified as defined contribution plans or as defined benefit plans.

The Group has defined contribution plans pursuant to Section 14 to the Severance Pay Law since 2004 under which the Group pays fixed contributions to a specific fund and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient amounts to pay all employee benefits relating to employee service in the current and prior periods. Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense simultaneously with receiving the employee's services and no additional provision is required in the financial statements except for the unpaid contribution. The Group also operates a defined benefit plan in respect of severance pay pursuant to the Severance Pay Law. According to the Law, employees are entitled to severance pay upon dismissal retirement and several other events prescribed by that Law. The liability for post employment benefits is measured using the projected unit credit method. The actuarial assumptions include rates of employee turnover and future salary increases based on the estimated timing of payment. The amounts are presented based on discounted expected future cash flows using a discount rate determined by reference to yields on high quality corporate bonds with a term that matches the estimated term of the benefit plan. In respect of its severance pay obligation to certain of its employees, the Company makes deposits into pension funds and insurance companies ("plan assets"). Plan assets comprise assets held by a Long-term employee benefits fund or qualifying insurance policies. Plan assets are not available to the Group's own creditors and cannot be returned directly to the Group. The liability for employee benefits presented in the statement of financial position presents the present value of the defined benefit obligation less the fair value of the plan assets.

Z.     Earnings per Share (EPS)

Earnings per share is calculated by dividing the net profit or loss attributable to owners of the parent by the weighted number of ordinary shares outstanding during the period. Basic earnings per share only include shares that were actually outstanding during the period. Potential ordinary shares (convertible securities such as employee options) are only included in the computation of diluted earnings per share when their conversion decreases earnings per share or increases loss per share from continuing operations. Further, potential ordinary shares that are converted during the period are included in the diluted earnings per share only until the conversion date, and since that date they are included in the basic earnings per share. The Company's share of earnings of investees is included based on the earnings per share of the investees multiplied by the number of shares held by the Company.

AA.  Segment reporting

An operating segment is a component of the Group that meets the following three criteria:

1.             Is engaged in business activities from which it may earn revenues and incur expenses;

2.             Whose operating results are regularly reviewed by the Group's chief operating decision maker to make decisions about allocated resources to the segment and assess its performance; and

3.             For which separate financial information is available.

Segment revenue and segment costs include items that are attributable to the relevant segments and items that can be allocated to segments. Items that cannot be allocated to segments include the Group's financial income and expenses and income tax.

BB.  New IFRSs in the period prior to their adoption

-       IFRS 9 Financial Instruments:

IFRS 9 replaces the multiple classification and measurement models in IAS 39 Financial instruments: Recognition and measurement with a single model that has initially only two classification categories: amortised cost and fair value.

Classification of debt assets will be driven by the entity's business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. A debt instrument is measured at amortised cost if: a) the objective of the business model is to hold the financial asset for the collection of the contractual cash flows, and b) the contractual cash flows under the instrument solely represent payments of principal and interest.

All other debt and equity instruments, including investments in complex debt instruments and equity investments, must be recognised at fair value.

All fair value movements on financial assets are taken through the statement of profit or loss, except for equity investments that are not held for trading, which may be recorded in the statement of profit or loss or in reserves (without subsequent recycling to profit or loss).

For financial liabilities that are measured under the fair value option entities will need to recognise the part of the fair value change that is due to changes in the their own credit risk in other comprehensive income rather than profit or loss. The new hedge accounting rules (released in December 2013) align hedge accounting more closely with common risk management practices. As a general rule, it will be easier to apply hedge accounting going forward. The new standard also introduces expanded disclosure requirements and changes in presentation.

In December 2014, the IASB made further changes to the classification and measurement rules and also introduced a new impairment model. With these amendments, IFRS 9 is now complete. The changes introduce:

-      a third measurement category (FVOCI) for certain financial assets that are debt instruments

-      a new expected credit loss (ECL) model which involves a three-stage approach whereby financial assets move through the three stages as their credit quality changes. The stage dictates how an entity measures impairment losses and applies the effective interest rate method. A simplified approach is permitted for

New IFRSs in the period prior to their adoption (cont.)

financial assets that do not have a significant financing component (e.g. trade receivables). On initial recognition, entities will record a day-1 loss equal to the 12 month ECL (or lifetime ECL for trade receivables), unless the assets are considered credit impaired.

IFRS 9 is to be applied for annual periods beginning on January 1, 2018.

IFRS 9 will not have a material impact on the financial statements.

-       IFRS 15 -Revenue from Contracts with Customers (hereafter - IFRS 15)

IFRS 15 shall replace other IFRS provisions relating to revenue recognition.

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.

IFRS 15 provides guidance about various issues related to the application of the said model, including: recognition of revenue from variable consideration set in the contract, adjustment of the price of transaction set in the contract in order to reflect the effect of the time value of money and costs to obtain or fulfill a contract.

IFRS 15 extends the disclosure requirements regarding revenue and requires, among other things, that entities disclose qualitative and quantitative information about significant judgments made by management in determining the amount and timing of the revenue.

The standard shall be applied retrospectively for annual reporting periods starting on January 1, 2018 or thereafter,

IFRS 9 will not have a material impact on the financial statements.

3.             Revenues

			For the year ended December 31,
			2017		2016
Revenues arises from:			$'000		$'000
Sale of goods			21,271		17,314
Rendering of services			2,492		2,449
Projects			2,613		3,513
			26,376		23,276

4.             Profit from operations

			For the year ended December 31,
			2017		2016
This has been arrived at after charging:			$'000		$'000
Wages and salaries			9,372		7,962
Depreciation and amortization			637		635
Material and subcontractors			11,825		10,279
Operating lease expense			84		81
Plant, Machinery and Usage			1,015		1,024
Travel and Exhibition			481		474
Advertising and Commissions			383		417
Consultants			406		274
Others			570		647
			24,773		21,793

5.             Operating segments

1.     Segment information

		For the year ended December 31, 2017
		Antennas		Water Solutions		Total
		$'000
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

5.             Segments (cont.)

1.     Segment information (cont.)

		For the year ended December 31, 2016
		Antennas		Water Solutions		Total
		$'000
Revenue
External		11,427		11,849		23,276
Total		11,427		11,849		23,276
Segment profit (loss)		(108)		1,591		1,483
Unallocated corporate expenses
Finance expense, net						(277)
Profit before income tax						1,206
Other
Depreciation and amortization		591		44		635

2.             Entity wide disclosures External revenue by location of customers.

	For the year ended December 31,
	2017		2016
	$'000		$'000
Israel	13,889		10,856
North America	4,155		4,299
Europe	4,050		4,038
Africa	1,867		1,819
Asia	1,201		645
Other	1,214		1,619
	26,376		23,276

3.             Additional information about revenues:

Revenues from major customers each of whom amount to 10% or more of total revenues reported in the financial statements:

	For the year ended December 31,
Revenues	2017		2016
	$'000		$'000
Customer A - Antennas segment	2,476		2,424
Others (non-major customers)	23,900		20,852
	26,376		23,276

6.             Finance expense and income

	For the year ended December 31,
	2017	2016
	$'000	$'000
Finance expense
Interest on bank loans	109	122
Net Foreign exchange loss	-	51
Interest and bank fees	107	161
	216	334
Finance income
Interest from bank deposits	22	-
Net Foreign exchange gain	220	-
Gains from financial assets classified as held for trading	-	57
	242	57
	(26)	277

7.             Income Tax

A.            Tax Laws in Israel

1.             Amendments to the Law for the Encouragement of Capital Investments, 1959 (the "Encouragement Law"):

In December 2010, the "Knesset" (Israeli Parliament) passed the Law for Economic Policy for 2011 and 2012 (Amended Legislation), 2011 ("the Amendment"), which prescribes, among others, amendments to the Law. The Amendment became effective as of January 1, 2011. According to the Amendment, the benefit tracks in the Law were modified and a flat tax rate applies to the Company's entire preferred income. Commencing from the 2011 tax year, the Group will be able to opt to apply (the waiver is non-recourse) the Amendment and from the elected tax year and onwards, it will be subject to the amended tax rates that are: 2014 and thereafter will be 16% (in development area A - 9%).

The Group applied the Amendment effectively from the 2011 tax year.

2.             Tax rates:

On December 29, 2016, the Law Economic Efficiency (Legislative Amendments for Achieving the Budgetary Goals for 2017-2018) was published in Reshumot (the Israeli government official gazette), which enacts, among other things, the following amendments:

-  Decreasing the corporate tax rate to 24% in 2017 and to 23% in 2018 and thereafter (instead of 25%).

- Commencing tax year 2017 and thereafter the tax rate on the income of preferred enterprises of a qualifying Company in Development Zone A as stated in the Encouragement of Capital Investment Law, shall decrease to 7.5% (instead of 9%) and for companies located in zones other than Zone A the rate shall remain 16%.

- In addition, the tax rate on dividends distributed on January 1, 2014 and thereafter originating from preferred income under the Encouragement Law will be raised to 20% (instead of 15%).

7.             Income Tax (cont.)

Therefore the applicable corporate tax rate for 2014 and thereafter is 16%. The real capital gains tax rate and the real betterment tax rate for the years 2014-2015 -26.5% and 25%, 24% in 2016 and 2017 respectively.

B.             The principal tax rates applicable to the subsidiaries whose place of incorporation is outside Israel are:

A company incorporated in India - The statutory tax rate is 36% and the company was in exempt zone until end of March 2013. Nevertheless in the absence of taxable income the Indian regulation states that the company had to pay Minimum Alternate tax rate which is 50% of the tax rate (the 36%) out of the accounting profit paid as an advanced for future years, if the Company becomes tax liable.

A company incorporated in Switzerland - The weighted tax rate applicable to a company operating in Switzerland is about 25% (composed of Federal, Cantonal and Municipal tax). Provided that the company meets certain conditions, the weighted tax rate applicable to its income in Switzerland will not exceed 10%.

A company incorporated in South Africa - The statutory tax rate is 28%

A company incorporated in Australia - The statutory tax rate is 30%

A company incorporated in United States of America - The statutory tax rate is 21%.

C.             Income tax assessments

The Company has tax assessments considered as final up to and including the year 2012.

	For the year ended December 31,
	2017	2017	2016	2016
	$'000	$'000	$'000	$'000
Current tax expense
Income tax on profits for the year	402		329
		402		329
Deferred tax income
Origination and reversal of temporary  differences	(82)		(107)
		(82)		(107)
Total tax expense		320		222

The adjustments for the difference between the actual tax charge for the year and the standard rate of corporation tax in Israel applied to profits for the year are as follows:

	For the year ended December 31,
	2017	2016
	$'000	$'000
Profit before income tax	1,629	1,206
Tax computed at the corporate rate in Israel of 16%	261	193
Un deductible expenses (Income not subject to tax)	3	20
Taxes resulting from different tax rates applicable to foreign and other subsidiaries	54	40
Other	2	(31)
Total income tax expense	320	222

8.             Earnings per share

Net earnings per share attributable to equity owners of the parent

	For the year ended December 31,
	2017		2016
	$'000		$'000
Net Earnings used in basic EPS	1,250		936
Net Earnings used in diluted EPS	1,250		936
Weighted average number of shares used in basic EPS	52,866,325		51,687,853
Effects of:
Employee options	442,871		887,740
Weighted average number of shares used in diluted EPS	53,309,196		52,575,593
Basic net EPS (dollars)	0.0236		0.0181
Diluted net EPS (dollars)	0.0234		0.0178

The employee options have been included in the calculation of diluted EPS as the weighted average share price during the year greater than their exercise price (i.e. they are in-the-money) and therefore it would be advantageous for the holders to exercise those options. The total number of options in issue is disclosed in note 25.

9.             Dividends

	For the year ended  December 31,
	2017		2016
	$'000		$'000
Dividend paid	235		568
Scrip dividend	283		-
	518		568

On January 12, 2016, following the approval of its shareholders, the Company adopted a change to its article of association allowing the Company the ability to pay dividends by way of scrip, meaning the board would be able to announce a dividend which could be paid in cash or through the issue of new shares in the Company (the "Scrip Dividend Policy").Under the Scrip Dividend Policy, shareholders could, in the future, be given the option to elect to receive dividends in new shares of the Company rather than in cash. The default arrangement will be for the payment of dividends in cash, and if the shareholder prefers to receive their dividends in new shares of the Company, then they would have to make an election. There would be no ability to make mixed elections and each shareholder would be able to choose either cash or new shares but not both. The decision to offer shareholders a scrip dividend alternative for future dividend payments will be at the sole discretion of the Board.

Dividend of 1 cents (1.1 cents) per ordinary share proposed and paid during the year relating to the previous year's results.  In 2017 a scrip option offered to shareholders, which was partially accepted.

10.          Property, plant and equipment

	Building	Machinery & equipment	Office furniture & equipment	Computer equipment	Vehicles	Total
	$'000	$'000	$'000	$'000	$'000	$'000
Cost:
Balance as of January 1, 2017	5,200	4,902	314	1,500	476	12,392
Acquisitions	5	95	9	45	293	447
Disposals	-	-	-	-	(214)	(214)
Exchange differences	-	6	2	5	18	31
Balance as of December 31, 2017	5,205	5,003	325	1,550	573	12,656
Accumulated Depreciation:
Balance as of January 1, 2017	959	4,164	280	1,354	182	6,939
Additions	136	213	17	71	72	509
Disposals	-	-	-	-	(108)	(108)
Exchange differences	-	5	1	3	5	14
Balance as of December 31, 2017	1,095	4,382	298	1,428	151	7,354
Net book value as of December 31, 2017	4,110	621	27	122	422	5,302

	Building	Machinery & equipment	Office furniture & equipment	Computer equipment	Vehicles	Total
	$'000	$'000	$'000	$'000	$'000	$'000
Cost:
Balance as of January 1, 2016	5,186	4,805	302	1,387	387	12,067
Acquisitions	14	97	8	108	74	301
Exchange differences	-	-	4	5	15	24
Balance as of December 31, 2016	5,200	4,902	314	1,500	476	12,392
Accumulated Depreciation:
Balance as of January 1, 2016	814	3,924	261	1,289	136	6,424
Additions	145	239	17	65	35	501
Exchange differences	-	1	2	-	11	14
Balance as of December 31, 2016	959	4,164	280	1,354	182	6,939
Net book value as of December 31, 2016	4,241	738	34	146	294	5,453

11.          Investment Property

Composition and movement of Rental properties:

		2017		2016
		$'000		$'000
Cost:
Balance at January 1 and December 31		828		828
Accumulated depreciation:
Balance at January 1		198		172
Additions during the year:
Depreciation		21		26
Balance at December 31		219		198
Depreciated cost at December 31		609		630

On December 2011 the Company acquired from its controling shareholder, MTI Computers & Software Services (1982) Ltd. ("MTI Computers"), the leasehold interest of its head office located at 11 Hamelacha St., Afek Industrial Park, Rosh-Ha'Ayin, 48091, Israel (the "Property").

The Company occupies approximately 75 percent of the Property; therefore it had entered into a lease agreement with MTI Computers (which can sub lease part of the area) occupying approximately 1,100 square meters of the Property. The term of the lease is for an initial period of 5 years, with an option to extend the lease for an additional 5 year period (the "Option Period"). The rent for the leased area is US$ 10,000 per month throughout the initial period and will be increased by an amount of 10 percent for the Option Period.

In addition to the monthly rental payments, the tenants will pay to the Company a monthly management payment of US$ 7,150 per month as a contribution towards certain expenses (including insurance, the use of the car park, maintenance services, rates, water and electricity). This amount will be increased by 3 percent on a yearly basis. Since the acquisition of Mottech and movement of its facility to the Property the Company entered into an agreement with Mottech instead of MTI Computers for about 40% of the area used by MTI Computers and therefore the lease with MTI Computers was reduced to $6,000 per month and $4,290 per month as a contribution towards certain expenses.

The Group estimates that the fair value does not differ from the carrying amount as at December 31, 2017 and 2016.

12.          Intangible assets

		2017		2016
		$'000		$'000
Cost:
Balance at January 1 and December 31		483		483
Accumulated depreciation:
Balance at January 1		162		54
Additions during the year:
Amortization charge		109		108
Balance at December 31		271		162
Depreciated cost at December 31		212		321

13.          Deferred Tax Assets

                Deferred tax is calculated on temporary differences under the liability method using the tax rate at the year the deferred tax assets are recovered.

                The movement in the deferred tax asset is as shown below:

		2017		2016
		$'000		$'000
At January 1		500		393
Charge to other comprehensive income		5		1
Charge to profit or loss		77		106
At December 31		582		500

Deferred tax assets have been recognized in respect of all differences giving rise to deferred tax assets because it is probable that these assets will be recovered.

                Composition:

		31.12.2017		31.12.2016
		$'000		$'000
Accrued severance pay		65		58
Other provisions and employee-related obligations		73		70
Research and development expenses deductible over 3 years		171		170
Depreciable intangibles		(37)		(53)
Carry forward tax losses		310		255
		582		500

Deferred tax assets relating to carry forward capital losses of the Group total approximately $853 and $841 thousand as of December 31, 2017 and 2016 respectively were not recognized in the financial statements because their utilization in the foreseeable future is not probable.

14.          Inventories

		31.12.2017		31.12.2016
		$'000		$'000
Raw materials and consumables		4,069		3,713
Work-in-progress		81		99
Finished goods and goods for sale		1,131		1,098
		5,281		4,910

15.          Trade and other receivables

		31.12.2017		31.12.2016
		$'000		$'000
Trade receivables		8,988		8,159
Other receivables		850		706
		9,838		8,865

15.          Trade and other receivables (cont.)

                Trade receivables:

		31.12.2017		31.12.2016
		$'000		$'000
Trade receivables (*)		7,030		5,227
Unbilled receivables - Projects		1,762		2,751
Notes receivable		356		315
Allowance for doubtful accounts		)160)		(134)
		8,988		8,159

(*)           Trade receivables are non-interest bearing. They are generally on 60-90 day terms.

As at 31 December 2017 trade receivables of $ 940K (2016 - $535K) were past due but not impaired.

They relate to the customers with no default history. The aging analysis of these receivables is as follows:

		31.12.2017		31.12.2016
		$'000		$'000
Up to 3 months		818		514
3 to 6 months		117		13
6 to 12 months		5		8
		940		535

Unbilled receivables:

		31.12.2017			31.12.2016
		$'000			$'000
Actual completion costs		2,776			3,022
Profit recognised		976			1,608
Billed revenue		(1,990)			(1,879)
Total Unbilled receivables - Projects			1,762			2,751

Other receivables:

		31.12.2017		31.12.2016
		$'000		$'000
Prepaid expenses		398		127
Advances to suppliers		102		74
Employees		64		73
Tax authorities - V.A.T		111		86
Other receivables		175		346
		850		706

16.          Other current financial assets

		31.12.2017		31.12.2016
		$'000		$'000
Deposits with banks		2,011		-

                The deposits are not linked and bears interest of 2% as of December 31, 2017.

17.          Cash and cash equivalents

		31.12.2017		31.12.2016
		$'000		$'000
In U.S. dollars		2,102		3,514
In NIS		140		300
In South African Rand		161		185
In other currencies		239		429
		2,642		4,428

18.          Loans from banks

		31.12.2017		31.12.2016
		$'000		$'000
US Dollars - unlinked		813		1,063
NIS		888		1,343
South African Rand		82		60
Less - current maturities		(848)		(802)
		935		1,664

In 2011 the Company received US$ 2.5 Million loan for the purchase of the company building in Rosh ha'ayin, Israel, secured by a mortgage on the said asset. The loan is for 10 years, the repayment on a quarterly basis from April 2011 until January 2021 and bears interest at a fixed rate of 4.9%.

On August 2016, the Company received NIS 100,000 (approximately US$ 29 thousand) loan respectively for purchase of car. The loan is for 4 years with a monthly repayment starting August 2016 and bears interest of Prime +0.6% (2.2% as of December 31, 2017). This bank loan is secured by a fixed lien on the car. 

On June 2015 the Company received NIS 8 Million (approximately US$ 2.08 Million) loan for funding the acquisition of Mottech. The loan is for 4 years, the repayment on a quarterly basis from September 2015 until June 2019 and bears interest at a fixed rate of 3.5%.

During 2017 Mottech South Africa had entered into loan agreement of approximately US$ 37 thousand for purchase of cars payable in 60 months on a monthly basis. Interest rate is linked to the South Africa prime lending rate.

At December 31 2017		First year		Second year		Third  year		Fourth year		Fifth year and thereafter
		$'000
Long-term loan		848		568		273		79		15

19.          Employee benefits

A.            Composition:

	As at December  31
	2017		2016
	$'000		$'000
Present value of the obligations	1,123		977
Fair value of plan assets	(646)		(572)
	477		405

B.             Movement in plan assets:

	As at December  31
	2017		2016
	$'000		$'000
Year begin	572		596
Foreign exchange gain	63		8
Interest income	17		11
Contributions	4		13
Benefit paid	(19)		(50)
Re measurements gain (loss)
Actuarial profit (loss) from financial assumptions	2		(1)
Return on plan assets (excluding interest)	7		(5)
Year end	646		572

C.             Movement in the liability for benefit obligation:

	As at December  31
	2017		2016
	$'000		$'000
Year begin	977		983
Foreign exchange loss	107		15
Interest cost	36		30
Current service cost	37		17
Benefits paid	(31)		(78)
Re measurements loss (gain)
Actuarial loss (gain) from financial assumptions	35		(16)
Adjustments (experience)	(38)		26
Year end	1,123		977

19.          Employee benefits (cont.)

Supplementary information

1.     The Group's liabilities for severance pay retirement and pension pursuant to Israeli law and employment agreements are recognized by full - in part by managers' insurance policies, for which the Group makes monthly payments and accrued amounts in severance pay funds and the rest by the liabilities which are included in the financial statements.

2.     The amounts funded displayed above include amounts deposited in severance pay funds with the addition of accrued income. According to the Severance Pay Law, the aforementioned amounts may not be withdrawn or mortgaged as long as the employer's obligations have not been fulfilled in compliance with Israeli law.

3.     Principal nominal actuarial assumptions:

		As at December 31,
		2017		2016
Discount rate on plan liabilities		3.02%		3.31%
Expected increase in pensionable salary		2%		2%

4.     Sensitivity test for changes in the expected rate of salary increase or in the discount rate of the plan assets and liability:

	Change in defined benefit obligation
	As at December 31,
	2017	2016
	$'000	$'000
The change as a result of:
Salary increase of 1 %	58	66
Salary decrease of 1 %	(49)	(54)
The change as a result of:
Increase of 1% in discount rate	(47)	(50)
Decrease of 1% in discount rate	56	63

	Year ended December 31,
	2017	2016
	$'000	$'000
Expenses in respect of defined contribution plans	352	325

20.          Trade and other payables

		As at December 31,
		2017		2016
		$'000		$'000
Trade payables		2,239		2,285
Employees' wages and other related liabilities		1,062		776
Advances from trade receivables		21		28
Accrued expenses		431		534
Government authorities		101		20
Others		707		434
		4,561		4,077

21.          Current maturities

			As at December 31,
	Interest rate as at December 31, 2017		2017		2016
	%		$'000		$'000
Current maturities In NIS	Prime+0.6		7		15
Current maturities In NIS	3.5		577		520
Current maturities In SA ZAR	10		14		17
Current maturities In US $	4.9		250		250
Total Current maturities and short-term bank loans			848		802

Changes in liabilities arising from financing activities

Reconciliation of the changes in liabilities for which cash flows have been, or will be classified as financing activities in the statement of cash flows

	Loans and borrowings
	$'000
At 1 January 2017	2,466
Changes from financing cash flows:
Proceeds from long term loan received from banks	60
Repayment of long-term loans from banks	(829)
Total changes from financing cash flows	(769)
Effects of foreign exchange	86
At 31 December 2017	1,783

22.          Financial instruments - Risk Management

                The Group is exposed through its operations to the following financial risks:

              Foreign currency risk

              Liquidity risk

              Credit risk

Foreign currency risk

Foreign exchange risk arises when Group companies enter into transactions denominated in a currency other than their functional currency. Management mitigates that risk by holding some cash and cash equivalents and deposit accounts in NIS. The company also purchases from time to time some forwards on the NIS/$ exchange rate to hedge part of the salaries costs. As of December 2017 no such transactions were open.

Since the purchase of Mottech the Group has an additional currency risk due to its subsidiaries activity.

Liquidity Risk

Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances profitability, but can also increase the risk of insufficient liquid means to fulfil its immediate obligations. The Group's objective is to maintain a balance between continuity of funding and flexibility. The Group have sufficient availability of cash including the short-term investment of cash surpluses and the raising of loans to meet its obligations by cash management, subject to Group policies and guidelines.

The table below summarizes the maturity profile of the Group's financial liabilities based on contractual undiscounted payments (including interest payments):

December 31, 2017		Less than one year		1 to 2 years		2 to 3 years		3 to 4 years		> 4 years		Total
		$'000
Loans from banks		907		607		300		63		-		1,877
Trade payables		2,239		-		-		-		-		2,239
Payables		1,138		-		-		-		-		1,138
		4,284		607		300		63		-		5,254

December 31, 2016		Less than one year		1 to 2 years		2 to 3 years		3 to 4 years		> 4 years		Total
		$'000
Loans from banks		889		862		566		261		64		2,642
Trade payables		2,285		-		-		-		-		2,285
Payables		968		-		-		-		-		968
		4,142		862		566		261		64		5,895

Credit risks

Financial instruments which have the potential to expose the Group to credit risks are mainly deposits accounts, trade receivables and other receivables. The Group holds cash and cash equivalents and deposit accounts in big banking institutions in Israel and in the Switzerland, thereby substantially reducing the risk to suffer credit loss. With respect to trade receivables, the Group believes that there is no material credit risk which is not provided in light of Group's policy to assess the credit risk instruments of customers before entering contracts.

Moreover, the Group evaluates trade receivables on a day to day basis and adjusts the allowance for doubtful accounts accordingly.

Fair value

The carrying amount of cash and cash equivalents, trade receivables, other accounts receivable, credit from banks and others, trade payables and other accounts payable approximate their fair value.

Sensitivity tests relating to changes in market price of listed securities

The Group has performed sensitivity tests of principal market risk factors that are liable to affect its reported operating results or financial position. The sensitivity tests present the profit or loss and change in equity (before tax) in respect of each financial instrument for the relevant risk variable chosen for that instrument as of each reporting date.

The test of risk factors was determined based on the materiality of the exposure of the operating results or financial condition of each risk with reference to the functional currency and assuming that all the other variables are constant. The sensitivity tests for listed investments with quoted market price (bid price) were performed on possible changes in these market prices.

The Group is not exposed to cash flow risk due to interest rate since the long-term loan bares fixed interest.

The following table demonstrates the carrying amount and fair value of the groups of financial instruments that carrying amounts does not approximate fair value:

		Carrying amount				Fair value
		2017		2016		2017		2016
Financial liabilities:		$'000
Long-term loan with interest (1)		1,783		2,466		1,785		2,456

(1)           The fair value of long-term loan received with fixed interest is based the present value of cash flows using interest rate currently available for loan with similar terms.

Reconciliation of fair value measurements that are categorized within Level 3 of the fair value hierarchy:

		For the year ended December 31,
		2017		2016
		$'000		$'000
Balance as of January 1		-		92
Profit recognized in Profit or loss:		-		(92)
Total contingent consideration liability		-		-

Linkage terms of financial liabilities by groups of financial instruments pursuant to IAS 39

December 31, 2017:

	NIS	Unlinked	S.A Rand	Total
	$'000
Financial liabilities measured at amortized cost	888	813	82	1,783

December 31, 2016:

	NIS	Unlinked	S.A Rand	Total
	$'000
Financial liabilities measured at amortized cost	1,343	1,063	60	2,466

23.    Subsidiaries:

The principal subsidiaries of Company, all of which have been consolidated in these consolidated financial statements, are as follows:

Name	Country of incorporation	Proportion of ownership interest at 31 December		Held by
		2017	2016
AdvantCom Sarl	Switzerland	100%	100%	M.T.I Wireless Edge
Global Wave Technologies PVT Limited	India	80%	80%	AdvantCom Sarl
Mottech water solutions LTD	Israel	100%	100%	M.T.I Wireless Edge
Aqua water control solution LTD	Israel	100%	100%	Mottech water solutions
Mottech Water Management (pty) LTD	South Africa	85%	85%	Mottech water solutions
Mottech Water Management (pty) LTD	Australia	97.5%	97.5%	Mottech water solutions
Mottech USA Inc	United states	100%	100%	Aqua water control solution

24.          Share capital

	Authorized
	2017			2017		2016			2016
	Number			NIS		Number			NIS
Ordinary shares of NIS 0.01 each	100,000,000			1,000,000		100,000,000			1,000,000
	Issued and fully paid
	2017		2017				2016			2016
	Number		NIS				Number			NIS
Ordinary shares of NIS 0.01 each at beginning of the year	51,779,490		517,795				51,571,990			515,720
Changes during the year
Scrip dividend	1,022,328		10,223				-			-
Exercise of options to share capital	822,500		8,225				207,500			2,075
At end of the year	53,624,318		536,243				51,779,490			517,795

25.          Share-based payment

An Option Plan was adopted by the Company at the shareholders meeting held on July 5, 2013. Under the Plan, all previous plans cancelled and the new plan entered into effect. The new plan includes total of 2 million options to be converted to 2 million shares of the Company (approximately 4% of the company's outstanding shares) at a price of 9.5 pence per share (approximately 15 cents).

The vesting period of the options is as follows: 2 years for 50% of the options, 3 years for additional 25% of the options and 4 years for the rest of the options. An approval for the replacement of plans was received from the tax authorities on July 22, 2013, providing the Company, the employees and the trustee of the plan to submit the documentation required within 60 days from approval. As part of the grant of this plan an allocation of 280,000, 250,000 and 200,000 options was granted to the CEO, CFO and the Chairman of the board, respectively.

The weighted average fair value of the options as at the grant date was 2 pence (approximately 3 cents) per option, and was estimated using a Black and Scholes option pricing model based on the following significant data and assumptions:

Share price - 7 pence (representing approximately 11 cents)

Exercise price - 9.5 pence (representing approximately 15 cents)

Expected volatility - 25.90%

Risk-free interest rate - 0.8%

And expected average life of options 4.375 years

On May 18, 2016 a new option scheme for key Employees was approved at the Company's Annual General Meeting. Under the plan, options to purchase 800 thousands ordinary shares were granted (each option to one ordinary share) at a price of 27 pence per share (approximately 33 cents). This represents approximately 1.5% of the Company's current issued and voting share capital on a fully diluted basis. The vesting period of the options shall be as follows: 2 years for 50% of the options, 3 years for additional 25% of the options and 4 years for the reminder of the option.

Unexercised options expire nine years after date of the grant after which they will be void. Options are forfeited when the employee leaves the Company.

There is no cash settlement of the options. The weighted average fair value of the options as at the grant date is 6 pence (approximately 9 cents) per option, and was estimated using a Black and Scholes option pricing model based on the following significant data and assumptions:

Share price - 19.88 pence (representing approximately 29 cents)

Exercise price - 27 pence (representing approximately 39 cents)

Expected volatility - 45.34%

Risk-free interest rate - 0.85%

And expected average life of options 4.375 years

The volatility measured at the standard deviation of expected share price returns is based on the historical volatility of the Company. The options were granted as part of a plan that was adopted in accordance with the provision of section 102 of the Israeli Income Tax Ordinance.

The expense recognized in the financial statements for employee services received for the year ended December 31, 2017 and 2016 was US $29,000 and US $20,000 respectively.

The following table lists the number of share options, the weighted average exercise prices of share options and modification in employee option plans during the current year:

	2017		2017		2016		2016
	weighted average exercise price		Number		weighted average exercise price		Number
	$				$
Outstanding at beginning of year	0.23		2,342,500		0.23		1,800,000
Exercised during the year	0.12		(822,500)		0.15		(207,500)
Granted during the year	-		-		0.39		800,000
Forfeited during the year	0.12		(20,000)		0.15		(50,000)
Outstanding at the end of the year	0.27		1,500,000		0.23		2,342,500
Exercisable at the end of the year	0.15		700,000		0.15		1,142,500

The weighted average remaining contractual life for the share options outstanding as of December 31, 2017 was 0.67 years (2016 - 2.33 years).

26.          Commitments and guarantees

A.            Royalty commitments

The Group is committed to pay royalties to the Government of Israel on proceeds from sales of products in the research and development of which the Government of Israel participates by way of grants. Under the terms of Group's funding from Government of Israel, royalties of 2%-3.5% are payable on sales of products developed from a project so funded, up to 100% of the amount of the grant received, including amounts received by the Parent Company and its subsidiaries through July 1, 2000. 

The maximum royalty amount payable by the Group at December 31, 2017 is US$ 470,000.

No provision is recognized due to the lack of expectation to sale relevant products in the foreseeable future.

During 2017 the Group did not pay any royalties.

B.             Guarantees

The Group has guarantees in favour of customers and government institutes in the amount of US$ 2,100,000 and US$31,000 respectively. The guarantees are mainly to guarantee advances received from customers and performance of contracts signed.

C.             Charges

In order to secure the Group's liabilities, real estate properties were mortgaged and fixed charges were recorded on property and some bank deposits (see also note 17).

27.          Transactions with related parties:

A.               Amendment to Service Agreement with controlling shareholder:

Following the receipt of recommendations of both the remuneration committee and the board of directors of the company, an amendment to the service agreement between the Company and the controlling shareholders (via their management company) was approved by a shareholders' meeting held on July 5, 2013. According to the amendment, the agreement is in place for 3 years starting July 1, 2013, after which it will be renewed for periods of 3 years in accordance to the relevant rules and regulations. Nevertheless the agreement can be terminated by either party by providing 90 days notice. The agreement includes remuneration (per month) of:

1.     20,000 NIS to Mr. Zvi Borovitz for his service as a chairman of the board of the company in capacity of at least 25% and

2.     60,000 NIS to Mr. Moni Borovitz for his service as CFO of the company in capacity of at least 80%.

All amounts are prior to VAT which will be added to the invoices and are linked to the increase in the consumer price index.

In addition to the above, and in accordance to the remuneration policy adopted by the company, as required under rule 20 to the Israeli Companies Law, a bonus scheme was granted to each of the managers. The bonus scheme states that Zvi Borovitz and Moni Borovitz will be entitled (each one of them) to a bonus amounting 2.5% of the company's net profit exceeding 250,000 USD per year, prior to any bonuses grant in the Company. In case of a loss in a year (commencing from 2013 as first year for accumulation) the bonus for the next year will be for a net profit exceeding 250,000 USD above the loss made in the previous year. In addition Mr. Moni Borovitz shall be entitled to a bonus equal to one month management fee, based on the meeting of targets specified by the remuneration committee at the beginning of each year. A ceiling to the bonuses was set at 8 months management fees for Mr. Moni Borovitz and 100,000 USD for Mr. Zvi Borovitz. 

The agreement also states that the Company shall reimburse the management of the company for any expense made in performance of the manager's duty. The Company shall also provide each of the managers with a car and phones and will be responsible for all its related expenses, including all relevant taxes.

As part of the new policy the shareholders meeting also approved a change to the share option plan of the Company, subject to the approval of the Israeli Tax Authorities. As part of the new option plan Mr. Zvi Borovitz was granted 200,000 options and Mr. Moni Borovitz was granted 250,000 options. Further details re the new option plan are detailed in section 25 above.

Following the receipt of recommendations of both the remuneration committee and the board of directors of the Company, an amendment to the service agreement between the Company and the controlling shareholders (via their management company) was approved at a shareholders' meeting held on May 18, 2016. According to the amendment, the agreement is in place for 3 years starting June 1, 2016, after which it will be renewed for periods of 3 years in accordance to the relevant rules and regulations. Nevertheless the agreement can be terminated by either party by providing 90 days' notice. The agreement includes remuneration (per month) of:

1.     25,000 NIS to Mr. Zvi Borovitz (raised from 20,000 NIS prior to this approval) for his service as a chairman of the board of the Company in capacity of at least 25% and

2.     65,000 NIS to Mr. Moni Borovitz (raised from 60,000 NIS prior to this approval) for his service as CFO of the Company in capacity of at least 80%.

All amounts are prior to VAT which will be added to the invoices and are linked to the increase in the consumer price index.

In addition to the above, and in accordance with the remuneration policy adopted by the Company, as required under rule 20 to the Israeli Companies Law, a bonus scheme was granted to each of the managers. The bonus scheme states that Zvi Borovitz and Moni Borovitz will be entitled (each one of them) to a bonus amounting 2.5% of the company's net profit exceeding US$400,000 per year (raised from US$250,000 prior to this approval), prior to any bonuses grant in the Company. In case of a loss in a year the bonus for the next year will be for a net profit exceeding US$400,000 above the loss made in the previous year. In addition Mr. Moni Borovitz shall be entitled to a bonus equal to two months management fee, based on the meeting of targets specified by the remuneration committee at the beginning of each year. A ceiling to the bonuses was set at 8 months management fees for Mr. Moni Borovitz and US$100,000 for Mr. Zvi Borovitz.

The agreement also states that the Company shall reimburse the management of the Company for any expense made in performance of the manager's duty. The Company shall also provide each of the managers with a car and phones and will be responsible for all its related expenses, including all relevant taxes.

On January 12, 2016, following an approval of the remuneration committee, the board of directors and shareholder's meeting a bonus of 120,000 NIS was granted to the Company's CFO for his contribution on the acquisition made.

B.             Transaction with the Parent Group:

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

	2017		2016
	$'000		$'000
Purchased Goods	252		369
Management Fee	498		428
Services Fee	259		249
Lease	(72)		(72)

Compensation of key management personnel of the Group:

	2017		2016
	$'000		$'000
Short-term employee benefits *)	920		810

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

All Transactions are made on market value. As of December 31, 2017 and 2016 the Group owed to the parent group and related party US $467,000 and US $207,000 respectively.

28.          Subsequent events

A.     The Board of directors has decided to declare a dividend of 2 cent per share being approximately $1,072,000 the dividend has a scrip option (see note 9).

B.     The financial statements were authorized for issue by the board as a whole following their approval on February 15, 2018.

 

END

 

 

FR UVAWRWSAUAAR