Final Results

RNS Number : 4157F

MTI Wireless Edge Limited

20 February 2015

 



20 February 2015

MTI WIRELESS EDGE LTD

FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2014

MTI Wireless Edge Ltd., (ticker: MWE) ("MTI" or the "Company"), a market leader in the manufacture of flat panel antennas for broadband wireless access, today announces its audited full year results for the year ended 31 December 2014.

2014 Highlights

·      Revenues increased by 7% to $14.3m (2013: $13.4m)

·      Gross profit increased by 7% to $5.14m (2013: $4.8m)

·      Profit from operations increased 79% to $340K (2013: $190K)

·      Revenue in 80Ghz product line doubled to $1.9m (2013: $0.9m) 

·      $1m cash generated from operation (2013: $0.04m)

·      Net cash, cash equivalents and marketable securities at the year-end of $6.6m, equivalent to 8.4 pence per share

·      Net value of the Company's offices of $3.6m, equivalent to 4.6 pence per share

·      Shareholder's equity remains solid at $17.6m (at 31 December 2013: $17.7m),  equivalent to 22.5 pence per share

·      Dividend of $0.68 cent per share declared to be paid on 2 April, 2015 to shareholders on the register at close of trading on 13 March 2015.

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 2014 during which we continued to experience better profitability. In 2014 we continued the progress in our 60-80 GHz products range and achieved our goal of doubling the revenue from it. We also secured a number of new customers in this market sector, the benefit of which we expect to see in the future.  We continue to believe that the market demand for our products, as part of the increasing demand for broadband, will strengthen in the coming years. We are happy with our progress in RFID, which now represents 11% of our business, and see great potential in this market. In 2014 we were able to penetrate numerous applications and projects and we believe that RFID and the 60-80 GHz markets are where our future growth lies."

Contacts

MTI Wireless Edge Dov Feiner, CEO Moni Borovitz, Financial Director	[phone]
Allenby Capital Limited (Nominated Adviser and Broker) Nick Naylor Alex Price	[phone]

About MTI Wireless

MTI is a developer and manufacturer of sophisticated antennas and antenna systems, including antennas that are sold for use in Broadband Wireless Access compliant systems. In 2009 the Company successfully operated its new manufacturing facility in India which contributed approximately 30% to the Company's commercial production during the last two years. MTI is now based in Israel and has an operation in India, employing (as at 31 December 2014) a total of 73 employees.

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The Company produces antennas ranging in frequency from 2MHz to 90GHz, for both military and commercial applications, and has a broad customer base.

Chairman's Statement

Dear Shareholders,

I am pleased to report on our audited results for the financial year ended 31 December 2014 during which we continued to experience better profitability. In 2014 we continued the progress in our 60-80 GHz products range and achieved our goal of doubling the revenue from it. We also secured a number of new customers in this market sector, the benefit of which we expect to see in the future.  We continue to believe that the market demand for our products, as part of the increasing demand for broadband, will strengthen in the coming years.

We are happy with our progress in RFID, which now represents 11% of our business, and see great potential in this market. In 2014 we were able to penetrate numerous applications and projects and we believe that RFID and the 60-80 GHz markets are where our future growth lies.

Our military segment remained strong in 2014 and, although we experienced dramatic revenue growth of 65% in 2013, this year ended with small 10% decline. Based on the current backlog in the military segment we believe that we will maintain a similar level of business in this segment.  

Our overall ability to manage our costs, together with our revenue growth, helped us increase our operational profitability in 2014 and generate $1m in cash flow from operations. I would like to thank our management team for its continued work and dedication which has helped us increase the profitability and cash generation.

We enter 2015 with confidence in the growth prospects of our business and its ability to increase its profitability and cash. 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. This, together with the current backlog of $6m, provides us with confidence in both the Company's short and long term growth prospects.

Following a review of the business, the Board decided to declare a final dividend of $0.68 cent per share. We strongly believe it is in the interest of shareholders to receive a yearly yield on their investment, while at the same time the Company manages its earnings and cash generation. This level of dividend represents a balance between the Company's current ongoing earnings and the stability which we like to show our shareholders. The dividend will be paid on 2 April, 2015 to shareholders on the register at close of trading on 13 March 2015.

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 achieve our results. I would also like to acknowledge with thanks the employees' families for their continued support.

Zvi Borovitz

Non-Executive Chairman

Chief Executive's Review

I am happy to report that during 2014 we continued our positive momentum and were able to grow the business and increase our profitability and margins.  

The increase in revenue, together with our hard work on controlling our costs, enabled us, once again, to improve our operational margin. We view the future with confidence as our revenues continue to increase. As stated in my report last year our position in the 60-80GHz (used for wide broadband data transmission and short range point to point backhaul market and becoming a major backhaul for wireless communication) led us to double our revenue from this segment and we were able to develop new customers and products for this line. This gives us confidence in the future growth of the Company.

In the military segment we continued to see good demand and were able to maintain the business level at $3m which we believe should continue in the near term as the current backlog and order pipe line in the military segment are strong.

The RFID market, currently in its initial stages, continued at the same level as last year and represented 11% of our business and we believe in this sector's potential. We strengthened our position with both existing and new customers in 2014 and seen some progress in trials.  Our plan is to ensure that MTI remains well positioned in this market to maximize benefits as RFID technology continues its world-wide growth.

Our immediate focus is to win further major deals and maintain support of our existing customer base in all our business segments. 

To achieve future growth, the Company aims to expand its leadership in the antenna markets for broadband wireless communication as well as its military capabilities and portfolio. We are continuing to develop our 60-80GHz range of antennas and customer base, to strengthen our positioning in the market including investment in new technologies and in 2014 we initiated registration of two new patents. 

I am also very happy with our ability to translate the profitability into cash and create a $1m positive cash flow from operation and providing the ability to declare dividends without reducing our cash reserve on the balance sheet.

I would like to end my review by thanking our employees and their families for their hard work, dedication and support during the past year. It is their creativity, perfectionism and dedication that have 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

			For the year ended December 31,
			2014		2013
	Note		$'000		$'000
Revenues	2, 4		14,341		13,422
Cost of sales			9,201		8,624
Gross profit			5,140		4,798
Research and development expenses			1,230		1,127
Distribution expenses			1,815		1,804
General and administrative expenses			1,755		1,677
Profit from operations	3		340		190
Finance expense	5		281		162
Finance income	5		94		58
Profit before income tax			153		86
Income tax benefit	6		(116)		(340)
Profit			269		426
Other comprehensive income (net of tax):
Items that will not be reclassified to profit or loss:
Re measurements on defined benefit plans			(29)		18
Total comprehensive income			240		444
profit attributable to:
Owners of the parent			247		388
Non-controlling interest			22		38
			269		426
Total comprehensive income attributable to:
Owners of the parent			218		406
Non-controlling interest			22		38
			240		444
Earnings per share
Basic and Diluted (dollars per share)	7		0.0048		0.0075

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		Capital Reserve from 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, 2013	109		14,945		220		2,313		17,587		156		17,743
Changes during 2013:
Income for the year	-		-		-		388		388		38		426
Other comprehensive income	-		-		-		18		18		-		18
Total comprehensive income for the year	-		-		-		406		406		38		444
Dividend paid	-		-		-		(299)		(299)		-		(299)
Share based payment	-		-		39		-		39		-		39
Balance as at December 31, 2013	109		14,945		259		2,420		17,733		194		17,927
Changes during 2014:
Income for the year	-		-		-		247		247		22		269
Other comprehensive income	-		-		-		(29)		(29)		-		(29)
Total comprehensive income for the year	-		-		-		218		218		22		240
Dividend paid	-		-		-		(351)		(351)		-		(351)
Share based payment	-		-		27		-		27		-		27
Balance as at December 31, 2014	109		14,945		286		2,287		17,627		216		17,843

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,
			2014		2014		2013		2013
	Note		$'000		$'000		$'000		$'000
ASSETS
Non-current assets:
Property, plant and equipment	9		5,209				5,343
Investment property	10		1,240				1,275
Goodwill			406				406
Long-term prepaid expenses			12				39
Deferred tax assets	11		368				226
Total non-current assets					7,235				7,289
Current assets:
Inventories	12		2,941				3,091
Current tax receivables			143				165
Trade and other receivables	13		5,783				5,907
Other current financial assets	14		3,728				5,753
Cash and cash equivalents	15		2,918				992
Total current assets					15,513				15,908
TOTAL ASSETS					22,748				23,197
LIABILITIES
Non-current liabilities:
Loans from banks	16		1,345				1,595
Employee benefits	17		365				316
Provisions	18		-				112
Total Non-current liabilities					1,710				2,023
Current Liabilities:
Trade and other payables	19		2,925				2,685
Current maturities and short term  Loans	20		270				562
Total current liabilities					3,195				3,247
Total liabilities					4,905				5,270
TOTAL NET ASSETS					17,843				17,927

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,
			2014		2014		2013		2013
	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
Capital reserve from share-based payment transactions			286				259
Retained earnings			2,287				2,420
					17,627				17,733
Non-controlling interests					216				194
TOTAL EQUITY					17,843				17,927

The financial statements on pages 4 to 42 were approved by the Board of Directors and authorised for issue on February 19, 2015, and were signed on its behalf by:

February 19, 2015
Date of approval			Moshe Borovitz	Dov Feiner	Zvi Borovitz
of financial statements		Chief Finance Officer		Chief Executive Officer	Non-executive Chairman

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,
		2014		2014		2013		2013
		$'000		$'000		$'000		$'000
Operating Activities:
Profit for the year		269				426
Adjustments for:
Depreciation		451				436
Gain from other current financial assets		(37)				(29)
Equity settled share-based payment expense		27				39
Finance expense		87				98
Income tax benefit		(116)				(340)
Operating profit before changes in working capital and provisions				681				630
Decrease (increase) in inventories		150				(144)
Decrease (increase) in trade receivables		347				(986)
Increase in other accounts receivables		(196)				(22)
Increase in trade and other payables		162				682
Increase in employee benefits		20				78
Decrease in provisions		(40)				(60)
Interest paid		(87)				(98)
Income tax paid		(4)				(40)
				352				(590)
Net cash provided by operating activities				1,033				40

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,
		2014			2014		2013		2013
		$'000			$'000		$'000		$'000
Cash flows from operating activities brought forward					1,033				40
Investing Activities:
Sale (purchase) of financial assets, net		2,053					(3,221)
Purchase of Property, plant and equipment		(276)					(270)
Net cash provided by (used in) investing activities					1,777				(3,491)
Financing Activities:
Short term Loan received (repayment)		(292)					301
Long term Loan received		31					43
Dividend paid to the owners of the parent		(351)					(299)
Repayment of long-term loans from banks		(272)					(250)
Net cash used in financing activities					(884)				(205)
Increase (decrease) in cash and cash equivalents					1,926				(3,656)
Cash and cash equivalents at the beginning of the year					992				4,648
Cash and cash equivalents at the end of the year					2,918				992
							For the year ended December 31,
							2014		2013
							$'000		$'000
Non-cash transactions:
Purchase of Property, plant and equipment with credit							11		5

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

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 administrative services are provided by the Parent Company.

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 (IFRS). 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 function of expense method.

Details of the changes in foreign currency:

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

	December 31,
	2014		2013
NIS (in Dollar per 1 NIS)	0.257		0.288

	Year ended December 31,
	2014		2013
	%		%
NIS	(10.72%)		7.55

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 used 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.)

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

Revenue recognition

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

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

1.   Revenues from services are recognized as follows:

In fixed fee contracts - according to IAS. 11 "Construction Contracts"pursuant to which revenues are reported by the "percentage of completion" method. The percentage of completion is determined by dividing actual completion costsincurred to date by the total completion costs anticipated. 

When 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, as assessed by the Group's management.

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

3.   Finance income comprise interest income on amounts invested recognized in the income statement. Interest income is recognized as it accrues using the effective interest method.

Customer discounts:

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

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

1.     Accounting policies (Cont.)

Basis of consolidation

Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

Specifically, the Group controls an investee if and only if the Group has:

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

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

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

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

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary.

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

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

Consolidated financial statements

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

1.     Accounting policies (Cont.)

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. Any direct costs of acquisition are charged to profit or loss.

Goodwill is recognized as an intangible asset with any impairment in carrying value being charged to the income statement. The Goodwill is not systematically amortized and the company reviews goodwill for impairment once a year.

Impairment of non-financial assets

Impairment tests on goodwill 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 the non-financial asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to dispose), the asset is written down and impairment charge is recognized accordingly.

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 smallest Group of assets to which the asset belongs that generates cash inflow that are largely independent of cash inflows from other assets). Goodwill is allocated at initial recognition to each of the Group's cash-generating units that are expected to benefit from the synergies of the business combination giving rise to the goodwill. An impairment loss is recognized if the recoverable amount of the cash-generating unit (or group of cash-generating units) to which goodwill has been allocated is lower than the carrying amount of the cash-generating unit (or group of cash-generating units). Any impairment loss is allocated first to goodwill. Impairment losses allocated to goodwill cannot be reversed in subsequent periods.

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

Impairment charges are included in general and administrative expenses line item in the statement of comprehensive income. During the years 2013 and 2014 no impairment charges of non-financial assets were recognized.

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 are incurred in U.S. dollars. Thus, the functional currency of the Company is the U.S. dollar

The reporting currency of the financial statements is the U.S. dollar.

1.     Accounting policies (Cont.)

Foreign currency transactions

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

Exchange differences arising on the retranslation of monetary assets and liabilities are recognized immediately in profit or loss, 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 marketable securities. These assets are carried at fair value with changes in fair value recognized in profit or loss.

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. These assets are carried at amortized cost less any provision for impairment.

Fair value measurement

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

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

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

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

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

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

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

1.     Accounting policies (Cont.)

Classification of financial instruments by fair value hierarchy:

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

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

Financial Liabilities

The Group classifies its financial liabilities as follows:

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

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

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

De-recognition of financial instruments:

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

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

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

·     is legally released from the liability.

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

1.     Accounting policies (Cont.)

Impairment of financial assets:

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

Financial assets carried at amortized cost:

There is objective evidence of impairment of loans and receivables if one or more events have occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows. Evidence of impairment may include indications that the debtor is experiencing financial difficulties, including liquidity difficulty and default in interest or principal payments. The amount of the loss recorded in profit or loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not yet been incurred) discounted at the financial asset's original effective interest rate (the effective interest rate at initial recognition). 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. In a subsequent period, the amount of the impairment loss is reversed if the recovery of the asset can be related objectively to an event occurring after the impairment was recognized. The amount of the reversal, which is limited to the amount of any previous impairment, is recorded in profit or loss.

Government grants:

Grants received from the Israel-U.S. Bi-national Industrial Research and Development Foundation (henceforth "BIRD") as support for a research and development projects include an obligation to pay back royalties conditional on future sales arising from the project. Grants received from the BIRD on or after January 1, 2009,  are accounted for as forgivable loans, in accordance with IAS 20 (Revised), pursuant to the provisions of IAS 39, "Financial Instruments: Recognition and Measurement". Accordingly, when the liability for the loan is first recognized, it is measured at fair value using a discount rate that reflects a market rate of interest. The difference between the amount of the grants received and the fair value of the liability is accounted for upon recognition of the liability as a grant and recognized as a reduction of research and development expenses. After initial recognition, the liability is measured at amortized cost using the effective interest method. Changes in the projected cash flows are discounted using the original effective interest and recorded in profit or loss in accordance with the provisions of IAS 39.

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

1.     Accounting policies (Cont.)

Deferred tax

Deferred taxes are computed in respect of temporary differences between the carrying amounts of assets and liabilities in the financial statements and the amounts 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 in the period when the taxes are reversed in profit or loss, other comprehensive income or equity, based on tax laws that have been enacted or substantively enacted at the end of the reporting period. Deferred taxes in profit or loss represent the changes in the carrying amount of deferred tax balances during the reporting period, excluding changes attributable to items recognized outside 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. In addition, temporary differences (such as carryforward losses) for which deferred tax assets have not been recognized are reassessed and deferred tax assets are recognized to the extent that their recoverability is probable. Any resulting reduction or reversal is recognized on " income tax" within the statement of comprehensive income.

Taxes that would apply in the event of the disposal of investments in investees have not been taken into account, as long as the disposal of such investments is not expected in the foreseeable future and the group has control over such disposal. In addition, deferred taxes that would apply in the event of distribution of dividends have not been taken into account, since the distribution of dividends does not involve an additional tax liability, and if so, the Group's policy is not to initiate distribution of dividends that triggers an additional tax liability.

All deferred tax assets and liabilities are presented in the statement of financial position as non-current items, 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 additional income tax in the event of distribution of dividends out of such income. Such additional income tax has not been provided for in the financial statements, since the current policy of the Group is not to distribute dividends incurring additional income tax.

Inventories

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

1.     Accounting policies (Cont.)

Property, plant and equipment

Items of property, plant and equipment are initially recognized at cost. 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	Mainly %
Buildings	3 - 4 %	3.13
Machinery and equipment	6 - 20 %	10
Office furniture and equipment	6 - 15 %	6
Computers	10 - 33 %	33
Vehicles	15 %	15

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

Investment property

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

Investment property is measured initially at cost, including costs directly attributable to the acquisition. After initial recognition, investment property is measured at cost, accumulated depreciation and accumulated impairment losses and accounted for as property, plant and equipment measured at cost.

Investment property is depreciated on a straight-line basis at annual rates of 3.13%, over its useful life.

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

Cash and cash equivalents

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

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.

1.     Accounting policies (Cont.)

Share-based payments

Where equity settled share options are awarded to employees, the fair value of the options at the grant date is charged to the statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. 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 charged 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 statement of comprehensive income 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 simultaneously with receiving the employee's services and no additional provision is required in the financial statements except for the unpaid contribution.

The Group also operates a defined benefit plan in respect of severance pay pursuant to the Severance Pay Law. According to the Law, employees are entitled to severance pay upon dismissal retirement and several other events prescribed by that Law. The liability for termination of employee-employer relationship is measured using the projected unit credit method.

The actuarial assumptions include rates of employee turnover and future salary increases based on the estimated timing of payment. The amounts are presented based on discounted expected future cash flows using a discount rate determined by reference to yields on corporate 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 ("plan assets"). Plan assets comprise assets held by a long-term employee benefit fund or qualifying insurance

1.     Accounting policies (Cont.)

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.

Earnings per Share (EPS)

Earnings per share are calculated by dividing the net profit or loss 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 employee options) are only included in the computation of diluted earnings per share when their conversion decreases earnings per share or increases loss per share from continuing operations. Further, potential Ordinary shares that are converted during the period are included in the diluted earnings per share only until the conversion date, and since that date they are included in the basic earnings per share. The Company's share of earnings of investees is included based on the earnings per share of the investees multiplied by the number of shares held by the Company.

Segment reporting

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

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

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

3.     For which separate financial information is available.

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

New IFRSs in the period prior to their adoption

-        IFRS 9 Financial Instruments:

In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("IFRS 9"), which replaces IAS 39, " Financial Instruments: Recognition and Measurement". IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies to all assets in the scope of IAS 39.

According to IFRS 9, all financial assets are measured at fair value upon initial recognition. In subsequent periods, debt instruments are measured at amortized cost only 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.

1.     Accounting policies (Cont.)

-        IFRS 9 Financial Instruments (Cont.):

Subsequent measurement of all other debt instruments and financial assets should be at fair value. IFRS 9 establishes a distinction between debt instruments to be measured at fair value through profit or loss and debt instruments to be measured at fair value through other comprehensive income.

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 (loss), in accordance with the election by the Company on an instrument-by-instrument basis. If equity instruments are held for trading, they should be measured at fair value through profit or loss.

According to IFRS 9, 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.

According to IFRS 9, changes in fair value s of financial liabilities which are attributable to the change in credit risk should be presented in other comprehensive income. All other changes in fair value should be presented in profit or loss.

IFRS 9 also prescribes new hedge accounting requirements.

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

The Company is evaluating the possible impact of IFRS 9 but is presently unable to assess its effect, if any, on the financial statements.

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

Upon first time application, IFRS 15 shall replace other IFRS provisions relating to revenue recognition.

The core principle of IFRS 15 is that an entity will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

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

1) Identify the contract(s) with a customer

2) Identify the performance obligations in the contract

3) Determine the transaction price

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

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

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

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

1.     Accounting policies (Cont.)

-        IFRS 15 - "Revenue from Contracts with Customers" (hereafter - IFRS 15) (Cont.):

The standard shall be applied retrospectively for annual reporting periods starting on January 1, 2017 or thereafter, taking into account the reliefs specified in the transitional provisions of IFRS 15. Under these provisions, early adoption of the standard is allowed. The Group has not as yet examined the implication of implementation of the IFRS 15 on the financial statements.

2.     Revenues

			For the year ended December 31,
			2014		2013
			$'000		$'000
Revenues arises from:
Sale of goods			11,032		10,210
Projects			3,309		3,212
			14,341		13,422

3.       Profit from operations

			For the year ended December 31,
			2014		2013
This has been arrived at after charging:			$'000		$'000
Wages and salaries			4,957		4,892
Depreciation			451		436
Material and subcontractors			6,867		6,336
Operating lease expense			54		52
Plant, Machinery & Usage			661		609
Travel & Exhibition			231		240
Advertising & Commissions			149		96
Consultants			272		255
Others			359		316
			14,001		13,232

4.       Segments

1.   Segment information

		For the year ended December 31, 2014
		Commercial		Military		Total
		$'000
Revenue
External		11,323		3,018		14,341
Total		11,323		3,018		14,341
Segment profit		171		140		311
Unallocated corporate expenses
Unallocated income						29
Finance expense, net						(187)
Profit before income tax						153
Other
Depreciation		394		57		451

		For the year ended December 31, 2013
		Commercial		Military		Total
		$'000
Revenue
External		10,069		3,353		13,422
Total		10,069		3,353		13,422
Segment profit (loss)		(32)		240		208
Unallocated corporate expenses
Unallocated expenses						(18)
Finance expense, net						(104)
Profit before income tax						86
Other
Depreciation		368		68		436

4.       Segments (Cont.)

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

		For the year ended December 31,
		2014		2013
		$'000		$'000
Israel		8,334		7,366
North America		2,259		2,571
Europe		2,590		1,774
Asia		780		1,320
Other		378		391
		14,341		13,422

3.     Additional information about revenues:

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

		For the year ended December 31,
Revenues		2014		2013
		$'000		$'000
Customer A - Commercial segment		3,414		3,244
Others (non major customers)		10,927		10,178
		14,341		13,422

5.     Finance expense and income

	For the year ended December 31,
	2014	2014	2013	2013
	$'000	$'000	$'000	$'000
Finance expense
Interest on bank loans	87		98
Net Foreign exchange loss	72		-
Interest and bank fees	122		64
		281		162
Finance income
Gains from financial assets classified as held for trading	94		29
Net Foreign exchange gain	-		29
		94		58
		187		104

6.     Income Tax

A.    Tax Laws in Israel:

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

In December 2010, the "Knesset" (Israeli Parliament) passed the Law for Economic Policy for 2011 and 2012 (Amended Legislation), 2011 ("the Amendment"), which prescribes, among others, amendments to the Law. The Amendment became effective as of January 1, 2011. According to the Amendment, the benefit tracks in the Law were modified and a flat tax rate applies to the Company's entire preferred income. Commencing from the 2011 tax year, the Group will be able to opt to apply (the waiver is non-recourse) the Amendment and from the elected tax year and onwards, it will be subject to the amended tax rates that are: 2011 and 2012 - 15%, 2013 and 2014 - 12.5% and in 2015 and thereafter - 12%.

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

2.  Tax rates:

On August 5, 2013, the Law for Change of National Priorities (Legislative Amendments for Achieving the Budgetary Goals for 2013-2014), 2013 (hereinafter - the 2013 Amendments) was published in Reshumot (the Israeli government official gazette), which enacts, among other things, the following amendments:

- Raising the corporate tax rate to 26.5% (instead of 25%) beginning in 2014 and thereafter.

- Commencing tax year 2014 and thereafter the tax rate on the income of preferred enterprises of a qualifying Company in Development Zone A as stated in the Encouragement of Capital Investment Law, shall increase to 9% (instead of 7% in 2014 and 6% in 2015 and thereafter) and for companies located in zones other than Zone A the rate shall increase to 16% (instead of 12.5% in 2014 and 12% in 2015 and thereafter).

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

Therefore the applicable corporate tax rate for 2013 - 12.5% and in 2014 and thereafter - 16% and the real capital gains tax rate and the real betterment tax rate 25%.

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

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

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

6.     Income Tax (Cont.)

C.    Income tax assessments:

The Company has tax assessments considered as final up to and including the year 2010.

	For the year ended December 31,
	2014	2014	2013	2013
	$'000	$'000	$'000	$'000
Current tax expense
Income tax on profits for the year	26		45
		26		45
Deferred tax income
Origination and reversal of temporary  differences	(142)		(6)
		(142)		(6)
Taxes in respect of previous years	-		(379)
		-		(379)
Total tax benefit		(116)		(340)

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:

	For the year ended December 31,
	2014	2013
	$'000	$'000
Profit before income tax	153	86
Tax computed at the corporate rate in Israel of 16% (2013 - 12.5%)	24	11
Un deductible expenses (Income not subject to tax)	(13)	48
Taxes resulting from different tax rates applicable to foreign subsidiaries	3	(65)
Losses and temporary differences for which deferred taxes were not recorded	-	79
Utilization of previously unrecognized tax losses	(119)	-
Taxes in respect of previous years	-	(379)
Other	(11)	(34)
Total income tax benefit	(116)	(340)

7.     Earnings per share

Net earnings per share attributable to equity holders of the Company

			For the year ended December 31,
			2014		2013
			$'000		$'000
Net Earnings used in basic and diluted EPS			247		388
Weighted average number of shares used in basic and diluted  EPS			51,571,990		51,571,990
Basic and diluted net EPS ($)			0.0048		0.0075

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 24.

8.     Dividends

			For the year ended December 31,
			2014		2013
			$'000		$'000
Dividend of 0.68 cents (0.58 cents) per ordinary share proposed and  paid during the year relating to the previous year's results			351		299

After the date of the financial statements the board of directors declared a dividend of 0.68 cents per share totaling US$ 350 thousands. This dividend has not been accrued at the reporting date (December 31, 2014).

9.     Property, plant and equipment

	Building	Machinery & equipment	Office furniture & equipment	Computer equipment	Vehicles	Total
	$'000	$'000	$'000	$'000	$'000	$'000
At 31 December 2013
Cost	4,572	4,422	268	1,238	234	10,734
Accumulated depreciation	555	3,429	218	1,159	30	5,391
Net book value	4,017	993	50	79	204	5,343
At 31 December 2014
Cost	4,572	4,559	270	1,317	257	10,975
Accumulated depreciation	676	3,620	230	1,211	29	5,766
Net book value	3,896	939	40	106	228	5,209
Year ended 31 December 2013
Opening net book value	4,141	1,079	52	82	124	5,478
Additions	-	113	7	43	103	266
Depreciation	124	199	9	46	23	401
Closing net book value	4,017	993	50	79	204	5,343
Year ended 31 December 2014
Opening net book value	4,017	993	50	79	204	5,343
Additions	-	140	1	79	62	282
Depreciation	121	194	11	52	38	416
Closing net book value	3,896	939	40	106	228	5,209

10.   Investment Property

Composition and movement of Rental properties:

		2014		2013
		$'000		$'000
Cost:
Balance at January 1 and December 31		1,380		1,380
Accumulated depreciation:
Balance at January 1		105		70
Additions during the year:
Depreciation		35		35
Balance at December 31		140		105
Depreciated cost at December 31		1,240		1,275

On December 2011 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 Group estimates that the fair value does not differ from the carrying amount as at December 31, 2014.

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 in the deferred tax asset is as shown below:

		2014		2013
		$'000		$'000
At January 1		226		220
Profit charge		142		6
At December 31		368		226

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

        Composition:

		31.12.2014		31.12.2013
		$'000		$'000
Accrued severance pay		56		46
Other provisions for employee-related obligations		32		28
Research and development expenses deductible over 3 years		177		152
Carry forward tax losses		103		-
		368		226

Deferred tax assets relating to carry forward operating losses of approximately $ 129 thousand were not recognized in 2014 because their utilization in the foreseeable future was not probable.

Deferred tax assets relating to carry forward capital losses of the Group total approximately $1,021 and $968 thousand as of December 31, 2014 and 2013 respectively were not recognized in the financial statements because their utilization in the foreseeable future is not probable.

12.   Inventories

		31.12.2014		31.12.2013
		$'000		$'000
Raw materials and consumables		1,982		1,938
Work-in-progress		81		55
Finished goods and goods for resale		878		1,098
		2,941		3,091

13.   Trade and other receivables

Balance as of		31.12.2014		31.12.2013
		$'000		$'000
Trade receivables		5,012		5,359
Other receivables		771		548
		5,783		5,907

        Trade receivables:

		31.12.2014		31.12.2013
		$'000		$'000
Trade receivables (*)		3,433		4,119
Unbilled receivables - Projects		1,395		1,274
Notes receivable		255		33
Allowance for doubtful accounts		(71)		(67)
		5,012		5,359

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

As at 31 December 2014 trade receivables of $ 97K (2013 - $459K) were past due but not impaired.

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

		31.12.2014		31.12.2013
		$'000		$'000
Up to 3 months		96		210
3 to 6 months		1		3
6 to 12 months		-		246
		97		459

Unbilled receivables:		31.12.2014			31.12.2013
		$'000			$'000
Actual completion costs		1,171			3,723
Profit recognised		1,530			737
Billed revenue		(1,306)			(3,186)
Total Unbilled receivables - Projects			1,395			1,274

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

Other receivables:

		31.12.2014		31.12.2013
		$'000		$'000
Prepaid expenses		101		139
Advances to suppliers		222		325
Employees (*)		24		16
Other receivables		424		68
		771		548

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

14.     Other current financial assets

		31.12.2014		31.12.2013
		$'000		$'000
marketable securities at Fair value through profit or loss		3,728		5,753

15.     Cash and cash equivalents

		31.12.2014		31.12.2013
		$'000		$'000
In New Israeli Shekels
Cash on hand and in banks		82		366
In U.S. dollars
Deposits with banks		2,836		626
Total		2,918		992

       The deposits are not linked and bear interest mainly up to 0.07% as of December 31, 2014 (2013 - 0.55%).

16.   Loans from banks

Composition:

		31.12.2014		31.12.2013
		$'000		$'000
US Dollars - unlinked		1,563		1,813
NIS		52		43
Less - current maturities		270		261
		1,345		1,595

In 2011 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.

On December 2013 and July 2014, the Company received NIS 150,000 and NIS 107,000 loans (respectively) for purchase of cars. The loans are for 4 and 3 years, respectively, with a monthly repayment starting January and July 2014, respectively and bear interest of Prime +0.75% (2.5% as of December 31, 2014). Each of these bank loans is secured by a fixed lien on the cars. 

Maturity dates after the date of the statement of financial position as of December 31, 2014:

		First year		Second year		Third year		Fourth year		Fifth year		Sixth year and thereafter
		$'000
Long-term loan		270		270		262		250		250		313

17.   Employee benefits

A.    Composition:

	As at December  31
	2014		2013
	$'000		$'000
Present value of the obligations	853		877
Fair value of plan assets	(488)		(561)
	365		316

B.    Movement in plan assets:

	As at December  31
	2014		2013
	$'000		$'000
Year begin	561		513
Foreign exchange gain (loss)	(60)		39
Interest income	13		16
Benefit paid	(13)		-
Re measurements gain (loss)
Actuarial loss from financial assumptions	(1)		-
Return on plan assets (excluding interest)	(12)		(7)
Year end	488		561

C.    Movement in the liability for benefit obligation:

	As at December  31
	2014		2013
	$'000		$'000
Year begin	877		769
Foreign exchange loss (gain)	(95)		59
Interest cost	29		33
Current service cost	43		44
Benefits paid	(17)		(3)
Re measurements loss (gain)
Actuarial loss from financial assumptions	31		-
Adjustments (experience)	(15)		(25)
Year end	853		877

Supplementary information

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

17.   Employee benefits (Cont.)

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

3.       Principal nominal actuarial assumptions:

		As at December 31,
		2014		2013
Discount rate on plan liabilities		3.11%		3.73%
Expected increase in pensionable salary		2%		2%

18.   Provisions

BIRD Foundation 

				Royalties to BIRD Foundation
				$'000
At  January 1, 2014				152
Paid				(79)
At December 31,  2014				73
Due within one year or less				73
Due after more than one year				-
				73

During 2009 - 2012 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

		For the year ended December 31,
		2014		2013
		$'000		$'000
Trade payables		1,724		1,776
Employees' wages and other related liabilities		523		535
Advances from trade receivables		231		43
Accrued expenses		183		160
Government authorities		19		78
Others		245		93
		2,925		2,685

20.   Current maturities and short term Loans

			For the year ended December 31,
	interest rate		2014		2013
	%		$'000		$'000
Current maturities In NIS	Prime+0.75%		20		11
Current maturities In US $	4.9		250		250
			270		261
Short term bank loans			-		301
Total Current maturities and short-term bank loans			270		562

21.   Financial instruments - Risk Management

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

·    Foreign currency risk

·    Credit risk

Foreign currency risk

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

Liquidity Risk

The Group have sufficient availability of cash including the short-term investment of cash surpluses and the raising of loans to meet its obligations by cash management, subject to Group policies and guidelines.

Credit risks

Financial instruments which have the potential to expose the Group to credit risks are mainly deposits accounts, trade receivables and other receivables.

The Group holds cash and cash equivalents and deposit accounts in big banking institutions in Israel and in the Switzerland, thereby substantially reducing the risk to suffer credit loss.

With respect to trade receivables, the Group believes that there is no material credit risk which is not provided in light of Group's policy to assess the credit risk instruments of customers before entering contracts.

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

Fair value

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

21.   Financial instruments - Risk Management (Cont.)

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

As at December 31, 2014 the Group investments were in various different liquid securities with maturity until June 2016. Most of the securities are 100% capital guaranteed at maturity and therefore under the assumption that the Group 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$ 150 thousand or 0, receptivity, compared to the value at 31 December 2014.

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

The Group has performed sensitivity tests of principal market risk factors that are liable to affect its reported operating results or financial position. The sensitivity tests present the profit or loss and change in equity (before tax) in respect of each financial instrument for the relevant risk variable chosen for that instrument as of each reporting date. The test of risk factors was determined based on the materiality of the exposure of the operating results or financial condition of each risk with reference to the functional currency and assuming that all the other variables are constant.

The sensitivity tests for listed investments with quoted market price (bid price) were performed on possible changes in these market prices.

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

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

		Carrying amount				Fair value
		2014		2013		2014		2013
		$'000
Financial liabilities:
Long-term loan with interest (1)		1,615		1,856		1,641		1,901

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

Financial assets measured at fair value:

December 31, 2014:

		Level 1
		$'000
Financial assets at fair value through profit or loss:
marketable securities		3,728

December 31, 2013:

		Level 1
		$'000
Financial assets at fair value through profit or loss:
marketable securities		5,753

21.   Financial instruments - Risk Management (Cont.)

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

December 31, 2014:

	NIS	Unlinked	Total
	$'000
Financial liabilities measured at amortized cost	52	1,563	1,615

December 31, 2013:

	NIS	Unlinked	Total
	$'000
Financial liabilities measured at amortized cost	43	1,813	1,856

22.   Subsidiaries:

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

Name	Country of incorporation	Proportion of ownership interest at 31 December
		2014	2013
AdvantCom Sarl	Switzerland	100%	100%
Global Wave Technologies PVT Limited	India	80%	80%

On March 2008, the Company established a wholly owned subsidiary Switzerland based AdvantCom Sarl, (hereafter - AdvantCom). AdvantCom is engaged in selling and distributing of antennas and accessories and in manufacturing through an Indian subsidiary.

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
	2014		2014		2013		2013
	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
	2014		2014		2013		2013
	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 of the Company 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) 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).

A second 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 of the Company were granted (each option to one ordinary share). This represents approximately 2.3% of the Company's current issued and voting share capital. 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 May 31, 2014. the fair value for each option according Black and Scholes option pricing method which was used is 7 pence (approximately 11 cents at the time of grant) and in an exercise price of 13.5 pence (representing approximately 22 cents at the time of grant).

A new Option Plan was adopted by the Company at the shareholders meeting held on July 5, 2013. Under the new Plan, all previous plans shall are cancelled and the new plan enter into effect. The new plan includes total of 2 million options to be converted to 2 million shares of the Company (approximately 4% of the company's outstanding shares) at a price of 9.5 pence per share (approximately 15 cents). The vesting period of the options is as follows: 2 years for 50% of the options, 3 years for additional 25% of the options and 4 years for the rest of the options. An approval for the replacement of plans was received from the tax authorities on July 22, 2013, providing the Company, the employees and the trustee of the plan to submit the documentation required within 60 days from approval. As part of the grant of this plan an allocation of 280,000, 250,000 and 200,000 options was granted to the CEO, CFO and the Chairman of the board, respectively.

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

Share price - 7 pence (representing approximately 11 cents)

Exercise price - 9.5 pence (representing approximately 15 cents)

Expected volatility - 25.90%

Risk-free interest rate - 0.8%

Expected dividends - 0%

And expected average life of options 4.375 years

The volatility measured at the standard deviation of expected share price returns is based on the historical volatility of the Company.

24.     Share-based payment (Cont.)

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:

	2014		2014		2013		2013
	weighted average exercise price		Number		weighted average exercise price		Number
	$				$
Outstanding at beginning of year	0.15		1,920,000		0.34		2,441,000
Granted during the year	-		-		0.15		2,000,000
Cancelled during the year	-		-		0.34		(2,441,000)
Forfeited during the year	-		-		0.15		(80,000)
Exercised during the year	-		-		-		-
Lapsed during the year	-		-		-		-
Outstanding at the end of the year	0.15		1,920,000		0.15		1,920,000
Exercisable at the end of the year	-		-		-		-

The weighted average remaining contractual life for the share options outstanding as of December 31, 2014 was 4.66 years (2013 - 5.66 years).

The expense recognized in the financial statements for employee services received for the year ended December 31, 2014 and 2013 was US $27,000 and US $39,000 respectively.

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, 2014 is US$ 470,000.

A provision hasn't recognized due to the lack of expectation to sale this product in the near future.

During 2014 the Group did not pay any royalties due to lack of sales of the developed products.

25.     Commitments and guarantees (Cont.)

B.       Guarantees

The Group has guarantees in favour of customers in the amount of US$ 550,000. The guarantees are mainly to guarantee advances received from customers and performance of contracts signed.

On October 23, 2013 pursuant to an approval of the Company shareholders meeting, a guaranty agreement for three years between the Company and the Parent Company was signed. In which the Parent Company has entered into an agreement with a commercial bank (the "Lender") whereby the Lender has agreed to extend a loan of up to an aggregate amount of US$1,000,000 (the "Loan Amount") and the Parent Company has approached the Company to request that it provides a guarantee to the Lender for the Loan Amount pursuant to specific terms, along with:

1.  The Parent Company will pay for all of the costs and expenses incurred, and which will continue to be incurred, by the Company in connection with the Guarantee for the duration of its term.

2.  In consideration of the provision of the Guarantee by the Company, the Parent Company will pay the Company an amount equal to 2.5 per cent. Of the Loan Amount per year of the Term. Such amount shall be paid quarterly in advance based on the amount covered by the Guarantee at the beginning of each period.

3.  The Parent Company undertakes to apply any dividend that it may receive from the Company in order to reduce the outstanding amount of the Loan Amount prior to the use of any such dividend sum (or part thereof) for any other purpose.

In the event that the Company receives written notification from the Parent Company and/or the Lender that the loan is to be repaid pursuant to the terms of the loan agreement (and the Lender intends to use the Guaranty Agreement), the Company will call a meeting of its directors in order to declare on a dividend to shareholders of the Company in an amount that will enable MTI Computers to discharge the then outstanding balance of the loan without the Lender using the Guaranty. For the avoidance of doubt, any director appointed to the board of directors of the Company on behalf of MTI Computers, will not be entitled to participate and vote on any such resolution.

C.    Contingent liability

During 2014 an employee filed a suit against the Group in the Tel Aviv Court relating to termination of his employment for an amount of 585,000 NIS. The Group filed a suit against the employee, in an amount of 290,000 NIS in connection with damages arising from his performance during his employment period, hearing on both law suits have not started yet. The group made a provision for this suit in an amount it believes to be sufficient. 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.

D.    Charges:

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

26.     Transactions with related parties:

A.      Amendment to Service Agreement with controlling shareholder:

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

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

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

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

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

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

As part of the new policy the shareholders meeting also approved a change to the share option plan of the Company, subject to the approval of the Israeli Tax Authorities. As part of the new option plan Mr. Zvi Borovitz was granted 200,000 options and Mr. Moni Borovitz was granted 250,000 options. Further details re the new option plan are detailed in section 24 above.

26.     Transactions with related parties (Cont.):

B.    Transaction with the Parent Group:

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

	2014		2013
	$'000		$'000
Purchased Goods	301		322
Management Fee	387		334
Services Fee	208		190
Lease	(120)		(120)

Compensation of key management personnel of the Group:

	2014		2013
	$'000		$'000
Short-term employee benefits *)	717		673

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

All Transactions are made on market value. As of December 31, 2014 and 2013 the Group owed to the parent group and related party US $25,000 and US $37,000 respectively.

27.     Subsequent events

A.      The Board of directors has decided to declare a dividend of 0.68 cent per share being approximately $350,000.

B.      The financial statements were authorized for issue by the board as a whole following their approval on February 19, 2015.

 

END

 

 

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