Final Results

RNS Number : 5903X

MTI Wireless Edge Limited

17 February 2012

 



17 February 2012

MTI WIRELESS EDGE LTD

 FINANCIAL RESULTS FOR THE YEAR ENDED

 31 DECEMBER 2011

MTI Wireless Edge Ltd., (ticker: MWE) ('MTI' or 'the Company'), a market leader in the manufacture of flat panel antennas for fixed wireless broadband, today announces its audited full year results for the year ended 31 December 2011.

2011 Highlights

·    Revenues increased 9% to $14.7m (2010: $13.5m)

·    Gross profit up 17% to $5.05m (2010: $4.3m);

·    Returned to operating profit, of $0.25m, compared with operating loss of $0.65m in 2010;

·    Net cash, cash equivalents and marketable securities at the year-end of $7.3m, equivalent to 9 pence per share;

·    Net value of offices of $3m, equivalent to 3.5 pence per share;

·    Interim dividend of 1.93 cents per share paid.

Zvi Borovitz, Non Executive Chairman of MTI Wireless Edge, commented:

"I am pleased to report on our audited results for the financial year ended 31 December 2011 - another challenging year in terms of the global macro economy.  We were happy to learn that our long term view of the market and the demand for our products, as part of the increasing demand for broadband, had strengthen this year. We are particularly happy with the growth in RFID, which is now representing 13% per cent. of our business and see great potential in this market going forward. We believe that this, together with our key market for broadband wireless access, should serve our growth in the future.

"I am also pleased with our return to sustained profitability, achieved through continued initiatives to improve our operating margin, contain or reduce overheads and reduce our working capital usage relative to sales.

"We enter 2012 with confidence in the growth prospects of the business and its ability to increase its profitability. The underlying drivers of our business, such as continued growth in data usage and increasing subscriber numbers, are part of long term trends which we expect to continue for the foreseeable future."

Contacts:

MTI Wireless Edge Dov Feiner, CEO Moni Borovitz, Financial Director	[phone]
Allenby Capital Nick Naylor Alex Price	[phone]
Newgate Threadneedle Graham Herring Terry Garrett	[phone]

About MTI Wireless

MTI is engaged in the development, production and marketing of High Quality, Low Cost, Flat Panel Antennas for Commercial & for Military applications. Commercial applications such as: WiMAX, Wireless Networking, RFID readers &, Broadband Wireless Access. With over 40 years experience, supplying antennas 100KHz to 90GHz including directional antennas and Omni directional for outdoor and indoor deployments including Smart Antennas for WiMAX, Wi-Fi, Public Safety, RFID and for Base Stations and Terminals  - 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.

Chairman's Statement

I am pleased to report on our audited results for the financial year ended 31 December 2011 - another challenging year in terms of the global macro economy.  We were happy to learn that our long term view of the market and the demand for our products, as part of the increasing demand for broadband, had strengthen this year. We are particularly happy with the growth in RFID, which is now representing 13% per cent. of our business and see great potential in this market going forward. We believe that this, together with our key market for broadband wireless access, should serve our growth in the future.

I am also pleased with our return to sustained profitability, achieved through continued initiatives to improve our operating margin, contain or reduce overheads and reduce our working capital usage relative to sales. We were able to do so while continuing our long term view of the business and keeping our investment in the development of the Company throughout difficult year. This placed us in a leading position in the 60 - 80 GHz products range and we are planning to continue and invest in this area during 2012. 

We enter 2012 with confidence in the growth prospects of the business and its ability to increase its profitability. The underlying drivers of our business, such as continued growth in data usage and increasing subscriber numbers, are part of long term trends which we expect to continue for the foreseeable future.

Our Indian manufacturing facility is becoming increasingly important in terms of production capability. This facility will help us to continue reduce our costs while improving our ability to service customers in India and elsewhere.

Following a review of the business, the Board declared an interim dividend at the end of 2011. This was possible as a result of our position of profitability and strong cash position from which to support the business' growth in 2012 and beyond.    

I would like to compliment our employees on their contribution to the Company and thank each and every one for their dedication and creativity, which has enabled us to maintain our market leading position. I further would 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 after two slow years we were able to return both to growth and to profitability, our two key goals for 2011. We showed a gross profit improvement of $750K over 2010, an increase in gross margin of over 2%. Operating profit shows an even bigger improvement - nearly $900K.  This is partly offset by increases in accounted financial expenses, but much of this reflects the interim value of investments, a good proportion of which mature at minimum prices during 2012, so that we expect much of this cost will be recovered. Sales growth came from our key customers as well as some new customers, mainly in the RFID market where our business experienced substantial growth of 40% in 2011 becoming a significant segment in both our current business and future growth. Our key market of Fixed Broadband Wireless has shown a minor decrease (2%) as the industry continued to be impacted by the global recession but we remain confident in the future growth of that segment specially because of the increasing demand for our newly launched 60-80GHz line.

Our immediate focus is to win further major deals and to continue to support our existing customer base in all our business segments. Going forward, our focus in 2012 will be to grow our business and profits, and a core focus of this strategy will be to increase our operations in our facility in India, from which we generated more than 20% of our commercial antenna revenues in 2011.

To achieve this profitable growth, the Company aims to expand its position as a leader in the antenna markets for fixed wireless communication. We are confident in our ability to return to growth in this segment as we further develop our product offering. A key element is our 60 - 80GHz range of antennas, used for the short range point to point backhaul market, as this is becoming a major backhaul for wireless communication and we expect to generate more significant revenues from it in 2012 onwards. Additionally, we have further strengthened our offering in the Fixed Broadband Wireless including MIMO antennas and parabolic Point to Point antennas.

RFID, currently in its initial stages, continued to grow in 2011 and already represents 13% of our business (2010: 10%), reflecting the effort we have put into this new segment over a number of years. We strongly believe in the potential of this market and we were able to strengthen our position with both existing and new customers. We foresee 2012 as a next step in the growth of this market and plan to ensure that MTI remains well positioned to continue to enjoy success as RFID technology begins to be deployed more and more widely around the world.

Our military segment experienced strong growth in 2011 (over 30%) based on several contracts won back in 2010. We currently see more opportunities in this segment but these are only likely to produce revenue in the second half of 2012 and into 2013. 

I would like to end my review by thanking the employees and their families for the hard work, dedication and support during the past year. It is their creativity, perfectionism and implementation that led MTI to its position in the market and we see them as the key to our ongoing success.

Dov Feiner

Chief Executive Officer

M.T.I Wireless Edge Ltd.

Consolidated Statements of Comprehensive Income

			Year ended December 31,
			2011		2010
	Note		$'000		$'000
Revenues	2, 4		14,701		13,469
Cost of sales			9,642		9,165
Gross profit			5,059		4,304
Research and development expenses			1,176		1,281
Distribution expenses			1,925		2,046
General and administrative expenses			1,707		1,623
Profit (loss) from operations	3		251		(646)
Finance expense	5		456		170
Finance income	5		163		2
Profit (loss) before tax			(42)		(814)
Tax expense (income)	6		(80)		-
Total comprehensive income (loss)			38		(814)
Attributable to:
Owners of the parent			3		(816)
Non-controlling interest			35		2
			38		(814)
Earnings per share
Basic and Diluted (dollars per share)	7		0.0001		(0.0158)

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

M.T.I Wireless Edge Ltd.

Consolidated Statements of Changes in Equity

	Attributable to owners of the parent
	Share capital		Additional paid-in capital		Reserve for share-based payment transactions		Retained earnings		Total attributable to owners of the  parent		Non-controlling interest		Total equity
	U.S. $ in thousands
Balance as at January 1, 2010	109		14,945		88		4,433		19,575		-		19,575
Changes during 2010:
comprehensive loss for the year	-		-		-		(816)		(816)		2		(814)
Share based payment	-		-		49		-		49		-		49
Balance as at December 31, 2010	109		14,945		137		3,617		18,808		2		18,810
Changes during 2011:
comprehensive income (loss) for the year	-		-		-		3		3		35		38
Dividends	-		-		-		(995)		(995)		-		(995)
Share based payment	-		-		39		-		39		-		39
Balance as at December 31, 2011	109		14,945		176		2,625		17,855		37		17,892

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,
			2011		2011		2010		2010
	Note		$'000		$'000		$'000		$'000
ASSETS
Non-current assets:
Property, plant and equipment	9		5,465				5,506
Investment property	10		1,345				1,380
Goodwill			406				406
Long-term prepaid expenses			24				52
Deferred tax assets	11		248				121
Total non-current assets					7,488				7,465
Current assets:
Inventories	12		2,996				2,967
Income taxes receivable			-				103
Trade and other receivables	13		5,782				5,125
Other current financial assets	14		6,651				8,648
Cash and cash equivalents	15		625				846
Total current assets					16,054				17,689
TOTAL ASSETS					23,542				25,154
LIABILITIES
Non-current liabilities:
Loans from banks	16		2,063				2,250
Employee benefits	17		265				272
Provisions	18		96				81
Total Non-current liabilities					2,424				2,603
Current Liabilities:
Tax liability			68				-
Trade and other payables	19		2,908				3,491
Current maturities of Loans	20		250				250
Total current liabilities					3,226				3,741
Total liabilities					5,650				6,344
TOTAL NET ASSETS					17,892				18,810

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,
			2011		2011		2010		2010
	Note		$'000		$'000		$'000		$'000
Capital and reserves attributable to    owners of the parent	23
Share capital			109				109
Additional paid-in capital			14,945				14,945
Employee equity benefits reserve			176				137
Retained earnings			2,625				3,617
					17,855				18,808
Non-controlling interests					37				2
TOTAL EQUITY					17,892				18,810

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,
		2011		2011		2010		2010
		$'000		$'000		$'000		$'000
Operating Activities:
profit (loss) for the year		38				(814)
Adjustments for:
Depreciation		493				363
Loss from short-term investments		294				159
Equity settled share-based payment expense		39				49
Finance expense		117				-
Income tax income		(80)				-
Operating profit before changes      in working capital and provisions				901				(243)
Increase in inventories		(29)				(649)
Increase in trade receivables		(342)				(527)
Decrease (increase) in other accounts receivables for short and long term		(287)				4
Increase (decrease) in trade and other payables		(476)				768
Increase (decrease) in employee benefits		(7)				29
Increase in provisions		15				1
Interest paid		(117)				-
Taxes received		200				-
Taxes paid		(76)				(276)
				(1,119)				(650)
Cash generated from (used in) operations				(218)				(893)

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,
		2011			2011		2010		2010
		$'000			$'000		$'000		$'000
Cash flows from operating activities brought forward					(218)				(893)
Investing Activities:
Sale (Purchase) of short-term investment		1,703					1,539
Purchase of Property, plant and equipment		(524)					(5,512)
					1,179				(3,973)
Financing Activities:
Receipt of long-term loans from banks		-					2,500
Dividend paid to the holders of the parent		(995)					-
Repayment of long-term loans from banks		(187)					-
					(1,182)				2,500
Decrease in cash and cash equivalents					(221)				(2,366)
							For the year ended December 31,
							2011		2010
							$'000		$'000
Non-cash transactions:
Purchase of property and equipment against trade payables							16		123

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

Notes forming part of the consolidated financial statements for the year ended December 31, 2011

The directors of the Company are responsible for the financial information set out below.

1.     Accounting policies

General

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

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

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

Certain operational and administrate services are provided by the Parent Company to the Company.

Definitions

In these financial information:

The Company	-	M.T.I Wireless Edge Ltd
The Group	-	The Company and its subsidiaries.
Subsidiaries	-	Companies that are controlled by the Company (as defined in IAS 27 (2008)) and whose accounts are consolidated with those of the Company.
The parent company	-	M.T.I  Computers and Software Services (1982)Ltd.
Related parties	-	as defined in IAS 24.
NIS	-	New Israeli Shekel.
Dollar or $		U.S. dollar

Basis of preparation

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.

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs and IFRIC interpretations) issued by the International Accounting Standards Board (IASB). The financial statements have been prepared under the historical cost convention, as modified by the revaluation of Employee benefit assets and 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 nature of expense method.

1.     Accounting policies (Cont.)

Assets and Liabilities in foreign currencies:

Henceforth are the details of the foreign currencies of the main currencies and the percentage changes in the reporting period:

	Year ended December 31,
	2011		2010
NIS (New Israeli Shekel)	0.262		0.282

	Year ended December 31,
	2011		2010
	%		%
NIS (New Israeli Shekel)	(7.09)		6.37

Changes in accounting policies

Adoption of new and revised International Financial Reporting Standards (IFRS):

-        Amendments to IAS 1 Presentation of Financial Statements (as part of Improvements to IFRSs issued in 2010)

The amendments to IAS 1 clarify that an entity may choose to disclose an analysis of other comprehensive income by item in the statement of changes in equity or in the notes to the financial statements. Accordingly the Group has chosen to present such an analysis in the statement of changes in equity. Such amendments have been applied retrospectively.

-        IAS 24 Related Party Disclosures (as revised in 2009)

IAS 24 (as revised in 2009) has been revised on the following two aspects: (a) IAS 24 (as revised in 2009) has changed the definition of a related party and (b) IAS 24 (as revised in 2009) introduces a partial exemption from the disclosure requirements for government-related entities. The Group applied the amendment in note 26 to the consolidated financial statements retrospectively commencing from January 1, 2011.

-        Amendments to IFRS 3 Business Combinations

a)   Transition provisions for accounting for contingent consideration in a business combination that occurred prior to the adoption of IFRS 3 (Revised): According to the amendment, the amendments to IFRS 7, IAS 32 and IAS 39 which prescribe that contingent consideration in a business combination is within the scope of these Standards, do not apply to contingent consideration in respect of a business combination whose acquisition date preceded the date of adoption of IFRS 3 (Revised).

b)   Measurement of non-controlling interests:

As part of Improvements to IFRSs issued in 2010, IFRS 3 was amended to clarify that the measurement choice regarding non-controlling interests at the date of acquisition is only available in respect of non-controlling interests that are present ownership interests and that entitle their holders to a proportionate share of the entity's net assets in the event of liquidation. All other types of non-controlling interests are measured at their acquisition-date fair value, unless another measurement basis is required by other

 1.     Accounting policies (Cont.)

standards. In addition, IFRS 3 was amended to provide more guidance regarding the accounting for share-based payment awards held by the acquiree's employees. Specifically, the amendments specify that share-based payment transactions of the acquiree that are not replaced should be measured in accordance with IFRS 2 Share-based Payment at the acquisition date ('market-based measure').

c)   Share-based payment awards in a business combination:

The amendment prescribes the accounting treatment in a business combination of an exchange of the acquiree's share-based payment awards (whether the acquirer is obligated or chooses to exchange them) with the acquirer's share-based payment awards. According to the amendment, the acquirer allocates a portion of the value of the award to the consideration for the business combination and a portion as an expense in the period following the acquisition. However, if the award expires as a result of the business combination and is exchanged for a new award, the value of the new award in accordance with IFRS 2 is recognized as an expense in the period following the acquisition and is not included as part of the consideration for the acquisition. Furthermore, if share-based payment awards are not exchanged, then, if the instruments have vested, they form part of the non-controlling interests and are measured pursuant to the provisions of IFRS 2. If the instruments have not vested, they are measured at the value that would have been used had they been granted on the acquisition date and this amount is allocated between the non-controlling interests and a post-acquisition expense. The amendments have been applied (retrospectively) from the date of original adoption of IFRS 3 (Revised).

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

-        Amendments to IFRS 7  Financial Instruments - Disclosure:

Clarification of the Standard's disclosure requirements - In this context, emphasis is placed on the interaction between the quantitative disclosures and the qualitative disclosures about the nature and extent of risks arising from financial instruments. The Standard also reduces the disclosure requirements for collateral held by the Company and revises the disclosure requirements for credit risk. The amendment has been applied retrospectively commencing from the financial statements for periods beginning on January 1, 2011 (see note 21).

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.

The key assumptions made in the financial statements concerning uncertainties at the end of the reporting period and the critical estimates computed by 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.

1.     Accounting policies (Cont.)

-       Legal claims: In estimating the likelihood of outcome of legal claims filed against the Company and its investees, the companies rely on the opinion of their legal counsel. These estimates are based on the legal counsel's best professional judgment, taking into account the stage of proceedings and historical legal precedents in respect of the different issues. Since the outcome of the claims will be determined in courts, the results could differ from these estimates.

-       Pensions and other post-employment benefits: The liability in respect of post-employment defined benefit plans is determined using actuarial valuations. The actuarial valuation involves making assumptions about, among others, discount rates, expected rates of return on assets, future salary increases and mortality rates. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty.

Transactions with controlling parties

Transactions with controlling shareholders are disclosed in conformity with the provisions of the International Accounting Standard 24 (related party disclosures and transactions) All Transactions are measured on fair value and the changes recorded in equity.

Revenue recognition

1.   Revenues from services are recognized as follows:

In fixed fee contracts - according to International Accounting Standard No. 11 "Construction - Type Contracts pursuant to which revenues and costs are reported by the "percentage of completion" method. The percentage of completion is determined by dividing actual completion costs by the anticipated completion costs. 

In cases where a loss from a project is anticipated, a provision is made in the period in which it first becomes evident, for the entire loss anticipated until completion, as assessed by the Group's management.

2.   Revenues from sales of products 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 amount of revenue can be measured reliably. It is probable that the economic benefits associated with the transaction will flow to the group. The cost incurred or to be incurred in respect of the transactions can be measured reliably and the delivery date is usually the date, on which ownership passes, provided no significant vendor obligations remain.

3.   Finance income comprise interest income on amounts invested, changes in fair value of financial assets at fair value through profit or loss, exchange gains recognized in the statement of income. Interest income is recognized as it accrues using the effective interest method.

Basis of consolidation

Where the company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary.

The consolidated financial statements present the results of the company and its subsidiaries ("the group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.

1.     Accounting policies (Cont.)

Consolidated financial statements

The accounting policy in the financial statements of the subsidiaries was applied consistently and uniformly with the policy applied in the financial statements of the Company.

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 comprises the fair values of assets given, liabilities assumed and equity instruments issued, plus any direct costs of acquisition.

Goodwill is capitalized as an intangible asset with any impairment in carrying value being charged to the income statement.

Impairment of non-financial assets

Impairment tests on goodwill with indefinite useful economic lives are undertaken annually on December 31 or sooner when there are signs 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 an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly.

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the asset's cash-generating unit (i.e. the lowest Group's of assets in which the asset belongs for which there are separately identifiable cash flows). Goodwill is allocated on initial recognition to each of the Group's cash-generating units that are expected to benefit from the synergies of the 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) to which goodwill has been allocated is less 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 recognized for goodwill cannot be reversed in subsequent periods.

Impairment charges are included in the administrative expenses line item in the income statement, except to the extent they reverse gains previously recognized in the statement of recognized income and expense. During the years 2010 and 2011 no impairment charges of non-financial assets were required.

Functional and reporting currency

The majority of the revenues of the Company are generated in U.S. dollars.  In addition, a substantial portion of the Company's costs is incurred in U.S. dollars.  The Company's management believe that the U.S. dollar is the primary currency of the economic environment in which the Company operates. Thus, the functional and reporting currency of the Company is the U.S. dollar.

Foreign currency

Transactions entered into by the Group in a currency other than the currency of the primary economic environment in which it operates (the "functional currency") are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the balance sheet date.

1.     Accounting policies (Cont.)

Exchange differences arising on the retranslation of unsettled monetary assets and liabilities. are similarly recognized immediately in the income statement, except for foreign currency borrowings qualifying as a hedge instrument.

 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 in marketable securities. They are carried in the balance sheet at fair value with changes in fair value recognized in the comprehensive income statement.

Loans and receivables: These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and trade receivables, but also incorporate other types of contractual monetary asset. They are carried at amortized cost less any provision for impairment.

Held-to-maturity investments: These assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that The Group's management has the positive intention and ability to hold to maturity. These assets are measured at amortized cost, with changes through the comprehensive income statement. As of December 31, 2011, no such assets are held by the Group.

Available-for-sale: Non-derivative financial assets not included in the above categories are classified as available-for-sale and comprise The Group's strategic investments in entities not qualifying as subsidiaries, associates or jointly controlled entities. They are carried at fair value with changes in fair value recognized directly in equity. Where a decline in the fair value of an available-for-sale financial asset constitutes objective evidence of impairment, the amount of the loss is removed from equity and recognized in the comprehensive income statement. As of December 31, 2011, no such assets are held by the Group.

Offsetting financial instruments

Financial assets and financial liabilities are offset and the net amount is presented in the statement of financial position if there is a legally enforceable right to set off the recognized amounts and there is an intention either to settle on a net basis or to realize the asset and settle the liability simultaneously.

Fair value

The fair value of investments that are actively traded in organized financial markets is determined by reference to market prices at the end of the reporting period. For investments where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm's length market transactions; reference to the current market value of another instrument which is substantially the same; discounted cash flow or other valuation models.

Financial Liabilities

The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired.

1.     Accounting policies (Cont.)

The Group's accounting policy for each category is as follows:

Fair value through profit or loss: This category comprises only in Short-term borrowings. It is carried in the balance sheet at fair value with changes in fair value recognized in the income statement in finance income or expense line.

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

•        Bank borrowings are initially recognized at fair value net of 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 rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the balance sheet. 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.

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 Company 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 debtor (the Group):

·     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 above liabilities is recognized in profit or loss. If the exchange or modification is not substantial, it is accounted for as a change in the terms of the original liability and no gain or loss is recognized on the exchange.

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.

1.     Financial assets carried at amortized cost:

There is objective evidence of impairment of debt instruments, loans and receivables and held-to-maturity investments carried at amortized cost as a result of one or more events that has occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows.

1.     Accounting policies (Cont.)

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 computed at initial recognition). If the financial asset has a variable interest rate, the discount rate is the current effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account (see allowance for doubtful accounts above). 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, up to the amount of any previous impairment, is recorded in profit or loss.

2.     Available-for-sale financial assets:

For equity instruments classified as available-for-sale financial assets, the objective evidence includes a significant or prolonged decline in the fair value of the asset below its cost and calculation of changes in the technological, market, economic or legal environment in which the issuer of the instrument operates. Where there is evidence of impairment, the cumulative loss - measured as the difference between the acquisition cost (less any previous impairment losses) and the fair value is reclassified from equity and recognized as an impairment loss in profit or loss. In subsequent periods, reversal of impairment loss is not recognized in profit or loss but recognized as other comprehensive income. For debt instruments classified as available-for-sale financial assets, objective evidence of impairment may arise as a result of one or more events that have a negative impact on the estimated future cash flows of the asset since the recognition of the asset. Evidence of impairment may include indications that the debtor is experiencing financial difficulties, including liquidity difficulty and default in interest or principal payments. Where there is evidence of impairment, the cumulative loss - measured as the difference between the acquisition cost (less principal payments, amortization using the effective interest method and previous impairment losses) and the fair value is reclassified from equity and recognized as an impairment loss in profit or loss. In a subsequent period, the amount of the impairment loss is reversed if the increase in fair value can be related objectively to an event occurring after the impairment was recognized. The amount of the reversal, up to the amount of any previous impairment, is recorded in profit or loss.

Internally generated intangible assets (research and development costs)

Expenditure on internally developed products is capitalized if it can be demonstrated that:

·      it is technically feasible to develop the product for it to be sold;

·      adequate resources are available to complete the development;

·      there is an intention to complete and sell the product;

·      The Company is able to sell the product;

·      sale of the product will generate future economic benefits; and

·      expenditure on the project can be measured reliably.

1.     Accounting policies (Cont.)

Capitalized development costs are amortized over the periods The Company expects to benefit from selling the products developed. The amortization expense is included within the research and development line in the income statement.

Development expenditure not satisfying the above criteria and expenditure on the research phase of internal projects are recognized in the income statement as incurred.

Development costs are recognized in the statement of income seeing as the Group does not meet the abovementioned conditions. As of December 31, 2011 no development costs are capitalized.

Government grants:

Government grants received from the Office of the Chief Scientist ("OCI") as support for a research and development project which grants include an obligation to pay to the State royalties that are conditional on future sales arising from the project, are recognized upon receipt as a liability if future economic benefits are expected from the project that will result in royalty-bearing sales. If no such economic benefits are expected, the grants are recognized as a reduction of the related research and development expenses. In that event, the royalty obligation is treated as contingent liability in accordance with IAS 37.

At the end of each reporting period, the Company 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 (since the Company will not be required to pay royalties). If there is such reasonable assurance, the appropriate amount of the liability is derecognized and recorded in profit or loss as a revaluation 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.

Deferred taxation

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

Deferred taxes are measured at the tax rates that are expected to apply to the period when the taxes are reversed in profit or loss, comprehensive income or equity, based on tax laws that have been enacted or substantively enacted by 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 outside of profit or loss.

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. Also, 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 has become probable. Any resulting reduction or reversal is recognized in the line item, "taxes on income".

1.     Accounting policies (Cont.)

Taxes that would apply in the event of the disposal of investments in investees have not been taken into account in computing deferred taxes, as long as the disposal of the investments in investees is not probable in the foreseeable future. Also, deferred taxes that would apply in the event of distribution of earnings by investees as dividends have not been taken into account in computing deferred taxes, since the distribution of dividends does not involve an additional tax liability or since it is the Company's policy not to initiate distribution of dividends that triggers an additional tax liability.

All deferred tax assets and deferred tax liabilities are presented in the statement of financial position as non-current assets and non-current liabilities, respectively. Deferred taxes are offset in the statement of financial position if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate to the same taxpayer and the same taxation authority.

Taxes on income

Tax-exempt income derived from "approved enterprises" will be subject to tax in the event of distribution of dividends out of such income. Such additional tax has not been provided for in the financial information, since the current policy of the Company is not to distribute dividends incurring additional tax.

Inventories

Inventories are initially recognized at cost, and subsequently at the lower of cost and net realizable value. Cost comprises all costs of purchase.

Weighted average cost is used to determine the cost of ordinarily interchangeable items.

Property, plant and equipment

Items of property, plant and equipment are initially recognized at cost. As well as the purchase price, cost includes directly attributable costs and the estimated present value of any future costs of dismantling and removing items. Depreciation is computed by the straight line method, based on the estimated useful lives of the assets, as follows:

	Rate of depreciation
buildings	3 - 4 %
Machinery and equipment	6 - 20 %
Leasehold improvements	15 %
Computers	10 - 33 %
Office furniture and equipment	6 - 15 %

Leasehold improvements are depreciated over the term of the expected lease including optional extension, or over the estimated useful lives of the improvements, whichever is shorter.

The Group recognizes in the carrying amount of an item of property, plant and equipment the cost of replacing part of such item when that cost is incurred if it is probable that economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Costs of day-to-day servicing expenses are recognized in profit or loss when incurred.

1.     Accounting policies (Cont.)

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 did not exceed three months at the time of deposit and which are not restricted.

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

Share-based payments

Where equity settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the income statement over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet 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. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the income statement over the remaining vesting period.

Employee benefits

The Group has several employee benefit plans:

1.     Short-term employee benefits: Short-term employee 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 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 when contributed simultaneously with receiving the employee's services and no additional provision is required in the financial statements.

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 or retirement. The liability for termination of employee-employer relation is measured using the projected unit credit method.

1.     Accounting policies (Cont.)

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 Government bonds with a term that matches the estimated term of the benefit obligation. In respect of its severance pay obligation to certain of its employees, the Company makes current deposits in pension funds and insurance companies ("the plan assets"). Plan assets comprise assets held by a long-term employee benefit 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, less past service costs and any unrecognized actuarial gains and losses.

Actuarial gains and losses are recognized in profit or loss in the period in which they occur.

Earnings per Share (EPS)

Earnings per share are calculated by dividing the net income attributable to equity holders of the Company 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 convertible debentures, warrants and 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 diluted earnings per share only until the conversion date and from that date in 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.

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 resources to be allocated to the segment and assess its performance; and

3.     For which separate financial information is available.

The principles activities of the Group and its primary segments are:

-      Antennas produced for commercial market.

-      Antennas produced for the military market.

The secondary segments of the Group are geographic:

-     Israel

-     North America

-     Europe

-     Asia

-     Other

1.     Accounting policies (Cont.)

Segment revenue and segment costs include items that are attributable to the relevant segments and items that can be distributed among segments. Non-distributed items include the Group's financial income and expenses and tax.

New IFRSs in the period prior to their adoption

-        IFRS 9 Financial Instruments:

a)  In November 2009, the IASB issued IFRS 9, "Financial Instruments", the first part of Phase 1 of a project to replace IAS 39, "Financial Instruments: Recognition and Measurement". IFRS 9 focuses mainly on the classification and measurement of financial assets and it applies to all financial assets within the scope of IAS 39.

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

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

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

Notwithstanding the aforesaid, upon initial recognition, the Company may designate a debt instrument that meets both of the abovementioned conditions as measured at fair value through profit or loss if this designation eliminates or significantly reduces a measurement or recognition inconsistency ("accounting mismatch") that would have otherwise arisen.

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

The Standard is effective commencing from January 1, 2013. Earlier application is permitted. Upon initial application, the Standard should be applied retrospectively, except as specified.

b)  In October 2010, the IASB issued certain amendments to IFRS 9 regarding de-recognition and financial liabilities. According to those amendments, the provisions of IAS 39 will continue to apply to de-recognition and to financial liabilities for which the fair value option has not been elected (designated as measured at fair value through profit or loss); that is, the classification and measurement provisions of IAS 39 will continue to apply to financial liabilities held for trading and financial liabilities measured at amortized cost.

1.     Accounting policies (Cont.)

The changes arising from these amendments affect the measurement of a liability for which the fair value option had been chosen. Pursuant to the amendments, the amount of the adjustment to the liability's fair value that is attributable to changes in credit risk should be presented in other comprehensive income. All other fair value adjustments should be presented in profit or loss. If presenting the fair value adjustment of the liability arising from changes in credit risk in other comprehensive income creates an accounting mismatch in profit or loss, then that adjustment should also be presented in profit or loss rather than in other comprehensive income.

Furthermore, according to the amendments, derivative liabilities in respect of certain unquoted equity instruments can no longer be measured at cost but rather only at fair value.

The amendments are effective commencing from January 1, 2013. Earlier application is permitted provided that the Company also adopts the provisions of IFRS 9 regarding the classification and measurement of financial assets (the first part of Phase 2). Upon initial application, the amendments should be applied retrospectively, except as specified in the amendments.

The Company believes that the amendments are not expected to have a material effect on the financial statements.

-        IAS 24 Related Party Disclosures:

New disclosure requirements about transferred financial assets including disclosures regarding unusual transfer activity near the end of a reporting period. The objective of the amendment is to assist users of financial statements to assess the risks to which the Company may remain exposed from transfers of financial assets and the effect of these risks on the Company's financial position. The amendment is designed to enhance the reporting transparency of transactions involving asset transfers, specifically securitization of financial assets. The amendment should be applied prospectively commencing from the financial statements for periods beginning on January 1, 2012. Earlier application is permitted. The relevant disclosures will be included in the Company's financial statements.

-        In May 2011, a package of Standards on consolidation, joint arrangements, associates and disclosures was issued, including IFRS 10, IFRS 11, IFRS 12, IAS 27 (as revised in 2011) and IAS 28 (as revised in 2011).

Key requirements of these Standards are described below.

IFRS 10 replaces the parts of IAS 27 Consolidated and Separate Financial Statements that deal with consolidated financial statements. SIC-12 Consolidation - Special Purpose Entities has been withdrawn upon the issuance of IFRS 10. Under IFRS 10, there is only one basis for consolidation that is control. In addition, IFRS 10 includes a new definition of control that contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from its involvement with the investee, and (c) the ability to use its power over the investee to affect the amount of the investor's returns. Extensive guidance has been added in IFRS 10 to deal with complex scenarios. 

1.     Accounting policies (Cont.)

IFRS 11 replaces IAS 31 Interests in Joint Ventures. IFRS 11 deals with how a joint arrangement of which two or more parties have joint control should be classified. SIC-13 Jointly Controlled Entities - Non-monetary Contributions by Venturers has been withdrawn upon the issuance of IFRS 11. Under IFRS 11, joint arrangements are classified as joint operations or joint ventures, depending on the rights and obligations of the parties to the arrangements. In contrast, under IAS 31, there are three types of joint arrangements: jointly controlled entities, jointly controlled assets and jointly controlled operations.

In addition, joint ventures under IFRS 11 are required to be accounted for using the equity method of accounting, whereas jointly controlled entities under IAS 31 can be accounted for using the equity method of accounting or proportionate accounting.

IFRS 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the disclosure requirements in IFRS 12 are more extensive than those in the current standards.

These five standards are effective for annual periods beginning on or after 1 January 2013. Earlier application is permitted provided that all of these five standards are applied early at the same time.

The directors anticipate that these standards will be adopted in the Group's consolidated financial statements for the annual period beginning 1 January 2013. The application of these standards may have significant impact on amounts reported in the consolidated financial statements. However, the directors have not yet performed a detailed analysis of the impact of the application of these Standards and hence have not yet quantified the extent of the impact.

-        IFRS 13  Fair Value Measurement:

IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The Standard defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The scope of IFRS 13 is broad; it applies to both financial instrument items and non-financial instrument items for which other IFRSs require or permit fair value measurements and disclosures about fair value measurements, except in specified circumstances. In general, the disclosure requirements in IFRS 13 are more extensive than those required in the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only under IFRS 7 Financial Instruments: Disclosures will be extended by IFRS 13 to cover all assets and liabilities within its scope. 

IFRS 13 is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted.

The directors anticipate that IFRS 13 will be adopted in the Group's consolidated financial statements for the annual period beginning 1 January 2013 and that the application of the new Standard may affect the amounts reported in the financial statements and result in more extensive disclosures in the financial statements.

1.     Accounting policies (Cont.)

-        Amendments to IAS 1  Presentation of Items of Other Comprehensive Income:

The amendments to IAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to IAS 1 require additional disclosures to be made in the other comprehensive income section such that items of other comprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that will be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis.

The amendments to IAS 1 are effective for annual periods beginning on or after 1 July 2012. The presentation of items of other comprehensive income will be modified accordingly when the amendments are applied in the future accounting periods.

-        IAS 19 (as revised in 2011) Employee Benefits:

The amendments to IAS 19 change the accounting for defined benefit plans and termination benefits. The most significant change relates to the accounting for changes in defined benefit obligations and plan assets. The amendments require the recognition of changes in defined benefit obligations and in fair value of plan assets when they occur, and hence eliminate the 'corridor approach' permitted under the previous version of IAS 19 and accelerate the recognition of past service costs. The amendments require all actuarial gains and losses to be recognised immediately through other comprehensive income in order for the net pension asset or liability recognised in the consolidated statement of financial position to reflect the full value of the plan deficit or surplus.

The amendments to IAS 19 are effective for annual periods beginning on or after 1 January 2013 and require retrospective application with certain exceptions. The directors anticipate that the amendments to IAS 19 will be adopted in the Group's consolidated financial statements for the annual period beginning 1 January 2013 and that the application of the amendments to IAS 19 may have impact on amounts reported in respect of the Groups' defined benefit plans. However, the directors have not yet performed a detailed analysis of the impact of the application of the amendments and hence have not yet quantified the extent of the impact.

2.     Revenues

			For the year ended December 31,
			2011		2010
			$'000		$'000
Revenues arises from:
Sale of goods			11,642		11,340
Projects			3,059		2,129
			14,701		13,469

3.       Profit from operations

			For the year ended December 31,
			2011		2010
This has been arrived at after charging:			$'000		$'000
Wages and salaries			5,160		4,812
Depreciation of property, plant, equipment and investment property			493		363
Material and subcontractors			7,173		6,805
Operating lease expense			57		422
Plant, Machinery & Usage			563		621
Travel & Exhibition			234		257
Advertising & Commissions			141		168
Consultants			255		269
Others			374		398
			14,450		14,115

4.       Segments

The accounting policy for operating segments is consistent with that described in Note 1 "Segment reporting".

1.   Segment information

               The Group's primary reporting format for reporting segment information is business segments.

		Commercial		Military		Total
		2011		2011		2011
		$'000		$'000		$'000
Revenue
External		11,213		3,488		14,701
Total		11,213		3,488		14,701
Segment income		128		123		251
Unallocated corporate expenses
Finance expenses, net						293
loss before taxes on income						(42)
Other
Depreciation and other    non-cash expenses		419		74		493

4.       Segments (Cont.)

1.   Segment information (cont.)

		Commercial		Military		Total
		2010		2010		2010
		$'000		$'000		$'000
Revenue
External		10,881		2,588		13,469
Total		10,881		2,588		13,469
Segment loss		(629)		(17)		(646)
Unallocated corporate expenses
Finance expenses, net						168
loss before taxes on income						(814)
Other
Depreciation and other    non-cash expenses		237		126		363

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

2.   The Group's secondary reporting format for reporting segment information is geographic segments.

		External revenue by location of customers
		2011		2010
		$'000		$'000
Israel		7,941		7,064
North America		3,794		2,588
Europe		1,944		2,854
Asia		634		603
Other		388		360
		14,701		13,469

Revenues reported in the financial statements for a group of similar products or services:

Due to the diversify of the company's product it is not practical to categories them to different groups.

5.     Finance expense and income

		2011		2011		2010		2010
		$'000		$'000		$'000		$'000
Finance expense
Net Foreign exchange loss		-				27
Interest on bank loans		117				-
loses from financial assets         Classified as held  for trading		294				87
Bank fees		45				56
				456				170
Finance income
Interest received on bank deposits		9				2
Net Foreign exchange gain		154				-
				163				2
				293				168

6.     Tax expense

A.    Tax Laws in Israel:

1.  Law for the Encouragement of Capital Investments, 1959:

Pursuant to the provisions of the said law, the company is eligible for tax benefits resulting from implementation of programs for investment in assets, in accordance with the letters of approval they received ("approved enterprises"), which grant the Group the right to exemption from tax for a period of two year and subsequent to such period - to tax at a reduced rate of 25% on income derived from the approved enterprise, subject to fulfilment of the conditions stipulated in the letter of approval.

The period in which the company will enjoy the tax exemption or reduced tax rate is limited in each letter of approval to seven years from the first year in which taxable income is earned (actual - from the year 2005). If the percentage of a company's share capital held by foreign shareholders exceeds 25%, the company will be entitled to reduced tax rates for a further five years.

From the year 2008 the company decided to no longer take advantage of the reduced tax rate.

If the company distributes dividends out of the exempt income of the approved enterprise, the company will be subject to tax at the rate of 25% on the distributed income.

Amendments to the Law for the Encouragement of Capital Investments, 1959:

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 in the Law for the Encouragement of Capital Investments, 1959 ("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 Company will be able to opt to apply (the waiver is non-recourse) the Amendment and from the elected

6.     Tax expense (Cont.)

A.    Tax Laws in Israel (cont.):

tax year and onwards, it will be subject to the amended tax rates that are: 2011 and 2012 - 15%, 2013 and 2014 - 12.5% and in 2015 and thereafter - 12%.

The Company applied the Amendment effective from the 2011 tax year. Accordingly, the Company has adjusted its deferred tax balances as of December 31, 2011 by the amount of USD 14 thousand against taxes on income.

2.  Tax rates:

In July 2009, the "Knesset" passed the Economic Efficiency Law 2009, which prescribes, among other things, an additional gradual reduction in the Israeli corporate tax rate starting from 2011 to the following tax rates: 2011 - 24%, 2012 - 23%, 2013 - 22%, 2014 - 21%, 2015 - 20%, 2016 and thereafter - 18%.

On December 5, 2011, the Knesset passed the Law for Tax Burden Reform (Legislative Amendments), 2011 ("the Law") which, among others, cancels effective from 2012, the scheduled progressive reduction in the corporate tax rate. The Law also increases the corporate tax rate to 25% in 2012. In view of this increase in the corporate tax rate to 25% in 2012, the real capital gains tax rate and the real betterment tax rate were also increased accordingly.

Since the company is applying the Amendments to the Law for the Encouragement of Capital Investments, 1959 the applicable corporate tax rate for 2011 and 2012 - 15%, 2013 and 2014 - 12.5% and in 2015 and thereafter - 12% and the real capital gains tax rate and the real betterment tax rate 25%.for 2012 onwards.

3.  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 is in exempt zone. Nevertheless in the absence of taxable income the Indian regulation states that the company must pay Minimum Alternate tax rate which is 50% of the tax rate (the 36%) out of the accounting profit

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%.

B.    Income tax assessments:

The Company has tax assessments considered as final up and including the year 2005.

	2011	2011	2010	2010
	$'000	$'000	$'000	$'000
Current tax expense
Indian income tax on profits for the year	47		-
		47		-
Deferred tax income
Origination and reversal of temporary  differences	(141)		-
Adjustment of deferred tax balances due to change in tax rates of the benefit tracks	14		-
		(127)		-
Total tax charge		(80)		-

6.     Tax expense (Cont.)

B.    Income tax assessments(cont.):

The reasons 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:

			2011		2010
			$'000		$'000
Loss before tax			(42)		(814)
Expected tax charge based on the standard rate of corporation tax in Israel of 15% (2010 - 25%)			(6)		(204)
Expenses not deductible for tax purposes			3		13
Income not subject to tax			36		49
Losses and temporary differences for which deferred taxes were not recorded			(127)		161
Other			14		(19)
Total tax charge			(80)		-

7.     Earnings per share

Net earnings (loss) per share attributable to equity holders of the Company

			2011		2010
			$'000		$'000
Earnings (Loss) used in basic EPS			3		(816)
Earnings (Loss) used in diluted EPS			3		(816)
Weighted average number of shares used in basic EPS			51,571,990		51,571,990
Weighted average number of shares used in diluted EPS			51,571,990		51,571,990
Basic net EPS			0.0001		(0.0158)
Diluted net EPS			0.0001		(0.0158)

The employee options have been excluded from the calculation of diluted EPS as their exercise price is greater than the weighted average share price during the year (i.e. they are out-of-the-money) and therefore it would not be advantageous for the holders to exercise those options. The total number of options in issue is disclosed in note 23.

8.     Dividends

			2011		2010
			$'000		$'000
Dividend of 1.93 cents per ordinary share proposed and  paid during the year relating to the previous years results			995		-

9.     Property, plant and equipment

	Buildings& Leasehold Improvements		Machinery & equipment		Office furniture & equipment		Computer equipment		Total
	$'000		$'000		$'000		$'000		$'000
At 31 December 2010
Cost	4,305		3,909		254		1,123		9,591
Accumulated depreciation	189		2,705		194		997		4,085
Net book value	4,116		1,204		60		126		5,506
At 31 December 2011
Cost	4,562		4,038		254		1,152		10,006
Accumulated depreciation	310		2,970		201		1,060		4,541
Net book value	4,252		1,068		53		92		5,465
Year ended 31 December 2010
Opening net book value	247		1,149		69		156		1,621
Additions	3,889		316		2		41		5,628
Depreciation	20		261		11		71		363
Closing net book value	4,116		1,204		60		126		5,506
Year ended 31 December 2011
Opening net book value	4,116		1,204		60		126		5,506
Additions	258		129		1		29		417
Depreciation	122		265		8		63		458
Closing net book value	4,252		1,068		53		92		5,465

10.   Investment Property

Composition and movement of Rental properties:

		2011		2010
		$'000		$'000
Cost:
Balance at January 1		1,380		-
Additions during the year:
Transfer from property, plant and equipment		-		1,380
Total additions		1,380		1,380
Disposals during the year:
Realizations		-		-
Total disposals		-		-
Balance at December 31		1,380		1,380
Accumulated depreciation:
Balance at January 1		-		-
Additions during the year:
Depreciation		35		-
Total additions		35		-
Disposals during the year:
Realizations		-		-
Total disposals		-		-
Balance at December 31		35		1,380
Depreciated cost at December 31		1,345		1,380

On December 2010 the Company acquired from its largest 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. The rent and management payments are presented as deduction from Plant, Machinery & Usage, as appear in note 3 since the Company views this area as a potential additional space for its operations in the future.

11.   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 on the deferred tax account is as shown below:

		2011		2010
		$'000		$'000
At 1 January 2011		121		121
Profit and loss charge		127		-
At 31 December 2011		248		121

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.

Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balances net.

        Details of the deferred tax amounts charged to reserves are as follows:

		Charged to reserves 2011		Charged to reserves 2010
		$'000		$'000
Accrued severance pay		30		46
Other provisions for employee-related obligations		48		75
Research and development expenses deductible over 3 years		91		-
Carry forward tax losses		79		-
		248		121

Deferred tax assets relating to carry forward operating losses of approximately $ 890 thousand were not recognized in 2010 because their utilization in the foreseeable future was not probable.

Deferred tax assets relating to carry forward capital losses of the Group total approximately $603 and $797thousand as of December 31, 2010 and 2011respectively were not recognized in the financial statements because their utilization in the foreseeable future is not probable.

12.   Inventories

		2011		2010
		$'000		$'000
Raw materials and consumables		2,054		1,883
Work-in-progress		18		77
Finished goods and goods for resale		924		1,007
		2,996		2,967

13.   Trade and other receivables

        Trade receivables:

		2011		2010
		$'000		$'000
Trade receivables(*)		4,061		4,128
Unbilled receivables		1,157		791
Checks receivable		67		13
Allowance for doubtful accounts		(11)		-
		5,274		4,932

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

As at 31 December 2011 trade receivables of $271K (2010 - $224K) were past due but not impaired.

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

		2011		2010
		$'000		$'000
Up to 3 months		182		224
3 to 6 months		13		-
6 to 12 months		76		-
		271		224

Balance as of		2011		2010
		$'000		$'000
Customer A		304		626
Customer B		685		930
Others		3,072		2,870
		4,061		4,128

Unbilled receivables:				2011			2010
				$'000			$'000
Actual completion costs				3,592			1,197
Profit earned				783			551
Billed revenue				(3,218)			(957)
Total Unbilled receivables - Projects					1,157			791

The balance of Unbilled receivables represents undue amounts at balance sheet date (no past due amounts).

Other receivables:

		2011		2010
		$'000		$'000
Prepaid expenses		180		66
Advances to suppliers		307		122
Employees (*)		18		4
Other receivables		3		1
		508		193

 (*)       Balances with employees are linked to the consumer price index and bear annual interest of 4%.

14.     Other current financial assets

		2011		2010
		$'000		$'000
Fair value through profit or loss*		6,203		7,992
Bank deposits		448		656
		6,651		8,648

* consist of marketable securities.

15.     Cash and cash equivalents

		2011		2010
		$'000		$'000
In New Israeli Shekels
Cash on hand and in banks		226		49
In U.S. dollars
Deposits with banks		399		797
Total		625		846

       The deposits are not linked and bear interest mainly up to 0.9% as of December 31, 2011(2010 - 0.1%).

16.   Loans from banks

Composition:

		2011		2010
		$'000		$'000
US Dollars - unlinked		2,313		2,500
Less - current maturities		250		250
At 31 December 2011		2,063		2,250

The company received $ 2,500,000 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%.

The bank loan is secured by a fixed charge over the Group's freehold land and building /property.

Maturity dates after the date of the statement of financial position as of December 31, 2011:

		First year		Second year		Third year		Fourth year		Fifth year		Sixth year and thereafter
		$'000
Long-term loan		250		250		250		250		250		813

17.   Employee benefits

A.    Composition:

	As at December  31
	2011		2010
	$'000		$'000
Present value of the obligations	812		850
Fair value of plan assets	(547)		(578)
	265		272

B.    Movement in plan assets:

	As at December  31
	2011		2010
	$'000		$'000
At 1 January 2011	578		538
Foreign exchange gains	(41)		35
Expected return	26		29
Return on plan assets	(10)		(12)
Benefit paid	-		(29)
Actuarial gain (loss)	(6)		17
At 31 December 2011	547		578

C.    Movement in the liability for benefit obligation:

	As at December  31
	2011		2010
	$'000		$'000
At 1 January 2011	850		781
Foreign exchange losses	(60)		51
Interest cost	39		43
Current service cost	52		55
Benefits paid	(9)		(47)
Actuarial (gain) loss	(60)		(33)
At 31 December 2011	812		850

Supplementary information

1.       The Group's liabilities for severance pay retirement and pension pursuant to Israeli law and employment agreements are full covered - 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 accrued in managers' insurance funds are registered under the name of the employees, and therefore such amounts are not stated in the financial information as liability for termination of employee-employer relationships or amounts funded.

17.   Employee benefits (Cont.)

3.       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.

4.       Principal nominal actuarial assumptions:

		As at December 31,  2011		As at December  31,  2010
Discount rate on plan liabilities		4.56%		4.95%
Expected rate of return on plan assets		4.55%		4.92%
Expected increase in pensionable salary		2.5%		3%

D.  The expenses and income in the income statement from employee benefits are included as salary and wage expenses in the relevant clauses.

Expenses recognized in the statement of income:

	As at December  31
	2011		2010
	$'000		$'000
Current service cost	52		55
Interest cost on benefit obligation	39		43
Expected return on plan assets	(26)		(29)
Net actuarial loss recognized in the year	(54)		(50)
Past service cost	1		(6)
Others	(19)		16
Total employee benefit expenses	(7)		29

The expenses are presented in the statement of income as follows:

	As at December  31
	2011		2010
	$'000		$'000
Cost of sales	6		5
Research and development expenses	2		2
Selling and marketing expenses	2		5
General and administrative expenses	2		1
Finance expense (income)	(19)		16
	(7)		29

18.   Provisions

		Legal disputes		Royalties to BIRD Foundation		Total
		$'000		$'000		$'000
At 1 January 2011		30		50		80
Charged to profit or loss		-		36		-
At 31 December 2011		30		86		116
Due within one year or less		-		20		20
Due after more than one year		30		66		96
		30		86		116

A.   The Group is currently involved in a legal dispute (see note 25C - contingent liability).

B.   During 2009 - 2011 the Company received a Conditional Grant from the Israel-U.S. Bi-national Industrial Research and Development Foundation (henceforth "BIRD"). The Company is obligated to repay BIRD the total Conditional Grant received, referred to as "the Repayment".  Repayments are made at the rate of 5% of each $ of reported sales revenue up to a maximum of 150% of its investment linked to the U.S. Consumer Price Index (CPI), from revenue generated by the Product's sales upon successful commercialization.

19.   Trade and other payables

		2011		2010
		$'000		$'000
Trade payables		2,003		2,565
Employees' wages and other related liabilities		623		543
Advances from receivables		70		33
Accrued expenses		75		177
Government authorities		99		46
Others		17		-
Related parties		21		127
		2,908		3,491

20.   Current maturities of Loans

	interest rate		2011		2010
	%		$'000		$'000
Current maturities of long-term bank loans	4.9		250		250

21.   Financial instruments - Risk Management

        The Group is exposed through its operations to one or more of the following financial risks:

·    Foreign currency risk

·    Credit risk

Foreign currency risk

Foreign exchange risk arises when Group operations enter into transactions denominated in a currency other than their functional currency. Management does mitigate that risk by holding some cash and cash equivalents and deposit accounts in Israeli NIS. The company also sell from time to time some forwards on the NIS/$ exchange rate to cover some of the costs of salaries.

In order to mitigate the currency risk the Company sold in January 2012 USD against the NIS in the following manner:

Date of transaction	$'000	Exchange rate
1.2.2012	300	3.8078
1.3.2012	300	3.8089
2.4.2012	300	3.8095
1.5.2012	180	3.8101
1.6.2012	180	3.8107
2.7.2012	180	3.8114
1.8.2012	125	3.8116
4.9.2012	125	3.8118
2.10.2012	125	3.8119

Credit risks

Financial instruments which have the potential to expose the Group to credit risks are mainly trade receivables, other receivables and long term debts.

The Group holds cash and cash equivalents and deposit accounts at large banks in Israel and in the Switzerland, thereby substantially reducing the risk of loss.

With respect to trade receivables, the Group believes that there is not a material credit risk for which a provision was not made in light of the fact that the 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, short-term investments, trade receivables, other accounts receivable, credit from banks and others, trade payables and other accounts payable approximate their fair value.

21.   Financial instruments - Risk Management (Cont.)

Sensitivity tests relating to changes in market price of listed securities:

As December 31, 2011 the Company investments were in various different liquid securities with maturity until June 2014. Most of the securities are 100% capital guarantied at maturity and therefore under the assumption that the Company will not sell at loss before maturity and only one parameter (the relevant for each fund herein "market price") is changed, by increase or decrease of 5% in the market price the gain and the change in equity would not be more than US$ 400 thousand or 0, receptivity, compared to the value at 31 December 2011.

The changes in the relevant risk variables were determined based on management's estimate as to reasonable possible changes in these risk variables.

The Company 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 interest rate risk in respect of long-term loan with fixed interest.

The following table demonstrates the carrying amount and fair value of the groups of financial instruments that are presented in the financial statements not at fair value:

		Carrying amount				Fair value
		2011		2010		2011		2010
		$'000
Financial liabilities:
Long-term loan with fixed interest (1)		2,313		2,500		2,313		2,500

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

Classification of financial instruments by fair value hierarchy:

The financial instruments presented in the balance sheet 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).

21.   Financial instruments - Risk Management (Cont.)

Financial assets measured at fair value:

December 31, 2011:

		Level 1		Level 2		Level 3
		$'000
Financial assets at fair value through profit or loss:
marketable securities		6,651		-		-

December 31, 2010:

		Level 1		Level 2		Level 3
		$'000
Financial assets at fair value through profit or loss:
marketable securities		8,648		-		-

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

December 31, 2011:

		Unlinked		Total
		$'000
Financial liabilities measured at amortized cost		2,313		2,313

22.    Subsidiaries:

The principal subsidiaries of M.T.I Wireless Edge Ltd Group, all of which have been included in these consolidated financial statements, are as follows:

Name	Country of incorporation	Proportion of ownership interest at 31 December
		2011	2010
AdvantCom Sarl	Switzerland	100%	100%
Global Wave Technologies PVT Limited	India	80%	80%

On March 2008, the Company invested in establishing a wholly owned subsidiary Switzerland based AdvantCom Sarl, (hereafter AdvantCom)..

In 2008, AdvantCom Sarl established Global Wave Technologies PVT Limited (India), a wholly-owned subsidiary which specialises in selling and distributing and manufacturing of antennas and accessories. In February 2009, pursuant to the founder's agreement, 20 percent of the issued and outstanding share capital of GlobalWave Technologies PVT Ltd was allotted to third party investors in return for approximately $5,000. 

23.   Share capital

	Authorized
	2011		2011		2010		2010
	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
	2011		2011		2010		2010
	Number		NIS		Number		NIS
Ordinary shares of NIS 0.01 each at    beginning of the year	51,571,990		515,720		51,571,990		515,720
Changes during the year	-		-		-		-
At end of the year	51,571,990		515,720		51,571,990		515,720

24.     Share-based payment

An option scheme for key Directors and Employees was approved at the company's Annual General Meeting on May 15, 2008. Under the plan, options for 1.5 million shares were granted on July 15, 2008. The vesting date of 1st April 2011 and an exercise price of 30 pence (representing approximately 60 cents at the time of grant, 47 cents as of December 31, 2011) per share. The fair value for each option according Black and Scholes option pricing method which was used is 5 pence (approximately 11 cents at the time of grant, 8 cents as of December 31, 2011).

A new option scheme for key Directors and Employees was approved at the Company's Annual General Meeting on May 20, 2011. Under the plan, options to purchase 1.2 million ordinary shares were granted (each option to one ordinary share). This represents approximately 2.3% of the Company's current issued and voting share capital of 51,571,990 ordinary shares. Among those 180,000 and 150,000 options were granted to the C.E.O and to the Finance Director respectively. Each option vest over a period of three years ending June 1, 2014, unexercised options expire eight years after date of the grant. 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 7 pence (approximately 11 cents) per option, and was estimated using a Black and Scholes option pricing model based on the following significant data and assumptions:

Share price - 12.75 pence (representing approximately 21 cents)

Exercise price - 13.5 pence (representing approximately 22 cents)

Expected volatility - 39.52%

Risk-free interest rate - 2.74%

Expected dividends - 0%

And expected average life of options 5.5 years

24.     Share-based payment (Cont.)

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 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:

	2011		2011		2010		2010
	weighted average exercise price		Number		weighted average exercise price		Number
	$				$
Outstanding at beginning of year	0.47		1,398,000		0.44		1,500,000
Granted during the year	0.21		1,200,000		-		-
Forfeited during the year	0.48		157,000		0.46		102,000
Exercised during the year	-		-		-		-
Lapsed during the year	-		-		-		-
Outstanding at the end of the year	0.34		2,441,000		0.47		1,398,000

The weighted average remaining contractual life for the share options outstanding as of December 31, 2011 was 5.81 years (2010 - 5.25 years).

25.     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 participates by way of grants. Under the terms of Group's funding from the Israeli Government, 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 Group through July 1, 2000.

The maximum royalty amount payable by the Group at December 31, 2011 is US$ 470,000.

During the year 2011 the Group did not pay any royalties.

B.       Guarantees

The Group has guarantees in favour of customers in the amount of US$ 703,000. The guarantees are mainly to guarantee advances received from customers and performance of contracts signed.

C.       Contingent liability

On July 3, 2005, Mars Antenna RF Systems Ltd. ("Mars") filed a complaint (Civil Case No. 05/1867) in the District Court of Tel Aviv-Yafo against the Group, the parent Group and the CEO of the Group.

The lawsuit relates to certain printed circuits in three models of antennas that the Group sells to one of its customers. 

25. Commitments and guarantees (Cont.)

C.      Contingent liability (Cont.)

Mars claims that the printed circuits are an infringement of Mars' rights in its antennas, raising causes of action under copyright, passing off, unjust enrichment, negligence, breach of statutory duty and the Law for Protection of Integrated Circuits.

The lawsuit seeks monetary damages in the nominal sum of 100,000 NIS, (approximately - US$ 26,300 which it reserves the right to modify in the future) and a permanent injunction, collection of the accused antennas, appointment of a receiver and an accounting of profits. In addition, Mars petitioned for provisional remedies prior to final judgment, including preliminary injunction, temporary receivership, and collection of the accused antenna.  The Group answered the claims, stating that Mars does not own the copyright in the relevant circuits, that the Law for Protection of Integrated Circuits does not apply to the antennas, that consumers are not confused by any similarity, and other defences.

On 22 December 2005, the District Court partially granted Mars' petition for Provisional remedies and preliminarily enjoined the Group from manufacturing and selling the relevant antennae. On 26 December 2005, the Group moved for a stay of enforcement of the preliminary injunction until the Supreme Court's decision on the Group's anticipated petition for interlocutory appeal. On 26 October 2006, the Supreme Court acknowledges, in part, the Group's claim and cancelled the petition with regard to a specific client for which the antennas were sold. In addition, on November 3, 2005, the Group filed a complaint against Mars (Civil Case No. 05/2422) in the District Court of Tel Aviv-Yafo for infringement of the Group's design of its radome covers for antennas and its mounting kit.  The lawsuit seeks monetary damages in the nominal sum of 500,000 NIS, (approximately US$ 131,510 which it reserves the right to modify in the future), and a permanent injunction.

In its answer, filed January 5, 2006, Mars defended against the Group's claim, itself issuing a counter-claim, stating that the legal action taken by the Group presents improper usage of the legal procedures and therefore is entitled to compensation as a result of damages caused by unfounded claims. On July 2, 2006, the court confirmed the Group's request to combine the two law-suits that were filed. The court also ruled that the hearings will begin on May 9, 2007.

On May 9, 2007 a court hearing in the joint case was held. In the hearing Mars filed a request to enlarge the suit amount to 2M NIS, approximately US$ 526,040, and to order MTI to revile the number of antennas under the case that were sold. Mars request re enlarging the amount was approved and the other request was not answered yet. The next court hearing was set to March 2nd, 2008.

On November 20, 2008 Mars filed an enlargement suit for the total amount of 2M NIS, approximately US$ 526,040, and to order MTI to revile the number of antennas under the case that were sold, claiming that the replacement antennas developed by the Company is infringing Mars rights as well. This issue was closed by a ruling upon which MTI has to declare the sales to its attorney on a monthly basis. Since then the parties have provided their evidences, together with supporting experts opinions. On November 3rd 2010, the court appointed its expert to estimate both parties expert's opinions.

25. Commitments and guarantees (Cont.)

C.      Contingent liability (Cont.)

The expert has filed his opinion and was already cross examined in court by both parties on January 17, 2012.  There are now expected to be 5 more hearing sessions in which the party's witnesses (in both lawsuits) will be cross examined. These examinations, expected to take place during the month of March 2012. If the said stage is not concluded with a compromise, the parties will then file their summations and await for the court's judgment. The information usually required by IAS 37 Provisions, contingent liabilities and contingent assets is not disclosed on the grounds that it can be expected to prejudice seriously the outcome of the litigation.

26.     Transactions with related parties

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

	2011		2010
	$'000		$'000
Purchased Goods	165		180
Management Fee	259		239
Services Fee	160		160
Lease	(120)		341
	464		920

Compensation of key management personnel of the Group:

	2011		2010
	$'000		$'000
Short-term employee benefits *)	596		523

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

All Transactions are made on market value. As of December 31, 2011 the Group owes to the parent group and related party US $5,000 (2010: US $139,000).

On December 2010 the Company acquired from its largest 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 purchase price to be paid by the Company is NIS 18,800,000 (approximately US$ 5.2 Million) plus 5 per cent. Purchase tax (the "Purchase Price"), and this has been calculated on the basis an independent valuation report dated 26 September 2010. Since the Company occupies approximately 75 percent of the Property, following the purchase of the Property by the Company, it had entered into a lease agreement with MTI Computers upon which MTI Computers will continue to occupy approximately 1,100 square meters of the Property (representing the majority of the Property not occupied by the Company). The term of the lease is for an initial period of 5 years, with an option in favor of MTI Computers to extend the lease for an additional 5 year period (the "Option Period").

26.     Transactions with related parties (Cont.)

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, MTI Computers 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.

27.     Subsequent events

On January 2012 the board of MTI (the "Board") announced that Sybille Krinsky has been appointed as an additional non-executive Director of MTI with immediate effect.

The financial statements were authorized for issue by the board as a whole following their approval on February 16, 2012.

 

END

 

 

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