Half Yearly Report

RNS Number : 6927L

MTI Wireless Edge Limited

04 August 2011

 



4 August 2011

MTI Wireless Edge Ltd

("MTI" or the "Company")

Financial results for the six months ended 30 June 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 unaudited results for the six months ended 30 June 2011.

Highlights

·     Revenue up by 21% to US$7.4m (Q1 2010: US$6.1m)

·     Gross profits 25% higher at US2.63m (Q1 2010: US$2.1m)

·     Profit from Operations of US$78k (Q1 2010: loss of US$464k)

Dov Feiner, Chief Executive Officer, commented:

"I am pleased to report that MTI has continued to deliver good progress in the second quarter of 2011.  Revenue in the period was slightly up on the previous three months and 13 per cent higher than the comparable quarter in 2010.  It is also most encouraging to see that all segments of the business showed growth in the six months resulting in a 21 per cent revenue increase against the first half of 2010.

"As announced before we are concentrating on profitability which is improving and also showing the benefit of our purchase of our building in the second half of 2010.  The group is making good progress at the operating level which, before finance costs, amounted to a profit of US$78,000, the bulk of which was achieved in the latest quarter, compared to a loss of US$464,000 in the first half of 2010.  After finance costs and tax, total comprehensive profits were US$64,000 compared to a loss of US$535,000.

"The Company's order book remains strong, and present indications are that MTI's revenue in second half of 2011 will exceed the first half of 2011."

Contacts:

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

About MTI Wireless Edge

MTI designs and manufactures flat panel antennas, largely supplied to international OEMs of fixed broadband wireless access systems and RIFD. With over 40 years of technical `know-how', flexible high volume manufacturing capabilities and low failure rates in the range of 100 KHz to 90 GHz. the Company is successfully developing  products for new commercial applications as wireless systems become increasingly prevalent in new markets.

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Six months ended June 30,				Year ended December 31,
	2011		2010		2010
	U.S. $ in thousands
	Unaudited				Audited
Revenues	7,436		6,145		13,469
Cost of sales	4,829		4,064		9,165
Gross profit	2,607		2,081		4,304
Research and development expenses	618		678		1,281
Selling and marketing expenses	1,023		1,060		2,046
General and administrative expenses	888		807		1,623
Profit (loss) from operations	78		(464)		(646)
Finance expense	123		102		170
Finance income	35		14		2
Loss before tax	(10)		(552)		(814)
Tax income	(74)		(17)		-
Total comprehensive Profit (loss)	64		(535)		(814)
Attributable to:
Owners of the parent	73		(529)		(816)
Non-controlling interest	(9)		(6)		2
	64		(535)		(814)
Earnings (loss) per share
Basic and Diluted (dollars per share)	0.0012		(0.0103)		(0.0158)
Weighted average number    of shares outstanding of NIS 0.01 each
Basic and Diluted	51,571,990		51,571,990		51,571,990

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

INTERIM CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY

For the Six months ended June 30, 2011:

	Attributed 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
	Unaudited
Balance at January 1, 2011 (Audited)	109		14,945		137		3,617		18,808		2		18,810
Changes during the Six months      ended June 30, 2011:
Total comprehensive Profit for the period	-		-		-		73		73		(9)		64
Share based payment	-		-		17		-		17		-		17
Balance at June 30, 2011	109		14,945		154		3,690		18,898		(7)		18,891

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

INTERIM CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY

For the Six months ended June 30, 2010:

	Attributed 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
	Unaudited
Balance at January 1, 2010 (Audited)	109		14,945		88		4,433		19,575		-		19,575
Changes during the Six months      ended June 30, 2010:
Total comprehensive loss for the period	-		-		-		(529)		(529)		(6)		(535)
Share based payment	-		-		21		-		21		-		21
Balance at June 30, 2010	109		14,945		109		3,904		19,067		(6)		19,061

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

INTERIM CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY

For the year ended December 31, 2010:

	Attributed 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
	Audited
Balance at January 1, 2010	109		14,945		88		4,433		19,575		-		19,575
Changes during 2010:
Total comprehensive loss for the year	-		-		-		(816)		(816)		2		(814)
Share based payment	-		-		49		-		49		-		49
Balance at December 31, 2010	109		14,945		137		3,617		18,808		2		18,810

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

INTERIM CONSOLIDATED STATMENTE OF

FINANCIAL POSITION

	30.6.2011		30.6.2010		31.12.2010
	U.S. $ in thousands
	Unaudited				Audited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	419		12,295		846
Other financial assets	8,326		-		8,648
Trade receivables	5,189		4,653		4,932
Other receivables	381		404		193
Income taxes receivable	53		9		103
Inventories	2,856		2,702		2,967
Total current assets	17,224		20,063		17,689
LONG TERM PREPAID EXPENSES	46		63		52
PROPERTY AND EQUIPMENT, NET	6,983		1,567		6,886
GOODWILL	406		406		406
DEFERRED TAX ASSETS	195		138		121
	24,854		22,237		25,154

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

INTERIM CONSOLIDATED STATMENTE OF

FINANCIAL POSITION

	30.6.2011		30.6.2010			31.12.2010
	U.S. $ In thousands
	Unaudited				Audited
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term bank credit	250		-		250
Trade payables	2,354		2,025		2,742
Other financial liabilities	-		35		-
Other accounts payables	740		789		749
Total current liabilities	3,344		2,849		3,741
NON- CURRENT LIABILITIES:
Loans from banks	2,187		-		2,250
Employee benefits	312		248		272
Provisions	120		79		81
Total non-current liabilities	2,619		327		2,603
EQUITY
Share capital	109		109		109
Additional paid-in capital	14,945		14,945		14,945
Employee equity benefits reserve	154		109		137
Retained earnings	3,690		3,904		3,617
Equity attributable to owners of the parent	18,898		19,067		18,808
Non-controlling interest	(7)		(6)		2
Total equity	18,891		19,061		18,810
	24,854		22,237		25,154

August 3, 2011
Date of approval of financial statements		Moshe Borovitz Finance Director	Dov Feiner Chief Executive Officer	Zvi Borovitz Non-executive Chairman

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

INTERIM CONSOLIDATED STATEMENTS OF

CASH FLOWS

			Six months ended June 30,					Year ended December 31,
		2011			2010		2010
		U.S. $ in thousands
		Unaudited			Unaudited		Audited
Cash Flows from Operating Activities:
Profit (loss) for the period		64			(535)		(814)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		248			184		363
Loss from short-term  investments		139			40		159
Equity settled share-based payment expense		17			21		49
Tax Income		(74)			(17)		-
Changes in operating assets and  liabilities:
Decrease (increase) in inventories		111			(384)		(649)
Increase in trade receivables		(257)			(248)		(527)
Decrease (increase) in other    accounts receivables for short and long term		(182)			(218)		4
Increase (decrease) in trade payables		(273)			47		773
Increase (decrease) in  other accounts payables		(9)			156		(5)
Increase (decrease) in provisions		39			(1)		1
Increase  in employee benefits		40			5		29
Income tax paid (received)		50			(182)		(276)
Net cash used in operating activities		(87)			(1,132)		(893)

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

 INTERIM CONSOLIDATED STATEMENTS OF

CASH FLOWS

		Six months ended June 30,					Year ended December 31,
		2011		2010			2010
		U.S. $ in thousands
		Unaudited				Audited
Cash Flows From Investing Activities:
Sale of short-term investment, net		183		10,341			1,539
Purchase of property and equipment		(460)		(126)			(5,512)
Net cash (used in) provided    by investing activities		(277)		10,215			(3,973)
Cash Flows From Financing Activities:
Interest paid		(63)		-			-
Receipt of long-term loans from banks		-		-			2,500
Net cash (used in) provided    by financing activities		(63)		-			2,500
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(427)		9,083			(2,366)
CASH AND CASH EQUIVALENTS  AT BEGINNING OF PERIOD		846		3,212			3,212
CASH AND CASH EQUIVALENTS   AT END OF PERIOD		419		12,295			846

Appendix A - Non-cash activities:

		Six months ended June 30,				Year ended December 31,
		2011		2010			2010
		U.S. $ in thousands
		Unaudited				Audited
Purchase of property and equipment   against trade payables		8		11			123

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

Note 1 - General:

A.        Corporate information:

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.

B.            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:

	Six months ended June 30,			Year ended December 31,
	2011		2010	2010
NIS (New Israeli Shekel)	0.293		0.258	0.282

	Six months ended June 30,			Year ended December 31,
	2011		2010	2010
	%		%	%
NIS (New Israeli Shekel)	3.9		(2.64)	6.41

Note 2 - Significant Accounting Policies:

The interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for the preparation of financial statements for interim periods, as prescribed in International Financial Reporting Standard IAS 34 ("Interim Financial Reporting").

Statutory financial information for the financial year ended December 31, 2010 was approved by the board on August 3, 2011. The report of the auditors on those financial statements was unqualified. The interim consolidated financial statements as of June 30, 2011 have not been audited.

The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2010 are applied consistently in these interim consolidated financial statements, except for the impact of the adoption of the Standards and Interpretations described below.

Note 2 - Significant Accounting Policies (cont.):

-           Improvements to International Financial Reporting Standards 2009

-    Improvements to IFRSs (issued May 2010)

In May 2010, the IASB issued its third omnibus of amendments to its standards, primarily with a view to removing inconsistencies and clarifying wording. There are separate transitional provisions for each standard. The adoption of the following amendments did not have any material effect on the consolidated financial statements of the Group.

1.   IFRS 3 Business Combinations: The measurement options available for non-controlling interest (NCI) have been amended. Only components of NCI that constitute a present ownership interest that entitles their holder to a proportionate share of the entity's net assets in the event of liquidation shall be measured at either fair value or at the present ownership instruments' proportionate share of the acquiree's identifiable net assets. All other components are to be measured at their acquisition date fair value.

2.   IFRS 7 Financial Instruments - Disclosures: The amendment was intended to simplify the disclosures provided by reducing the volume of disclosures around collateral held and improving disclosures by requiring qualitative information to put the quantitative information in context.

3.   IAS 1 Presentation of Financial Statements: The amendment clarifies that an option to present an analysis of each component of other comprehensive income may be included either in the statement of changes in equity or in the notes to the financial statements.

4.   IAS 34 Interim Financial Statements: The amendment requires additional disclosures for fair values and changes in classification of financial assets, as well as changes to contingent assets and liabilities in interim condensed financial statements.

5.   IFRS 3 Business Combinations - Clarification that contingent consideration arising from business combination prior to adoption of IFRS 3 (as revised in 2008) are accounted for in accordance with IFRS 3 (2005)

6.   IFRS 3 Business Combinations - Unreplaced and voluntarily replaced share-based payment awards and its accounting treatment within a business combination

7.   IAS 27 Consolidated and Separate Financial Statements - applying the IAS 27 (as revised in 2008) transition requirements to consequentially amended standards

The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

The following new standards, new interpretations and amendments to standards and interpretations have been issued but are not effective for the financial year beginning 1 January 2011 and have not been early adopted:

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

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

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

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

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

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

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

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

Note 3 - SEGMENTS:

The following table's present revenue and profit information regarding the Group's operating segments for the six months ended June 30, 2011 and 2010, respectively.

Six months ended June 30, 2011 (Unaudited)
		Commercial		Military		Total
		$'000
Revenue
External		5,510		1,926		7,436
Total		5,510		1,926		7,436
Segment income (loss)		(105)		183		78
Unallocated corporate expenses
Finance expenses, net						88
Loss before taxes on income						(10)
Other
Depreciation and other    non-cash expenses		208		40		248

Six months ended June 30, 2010 (Unaudited)
		Commercial		Military		Total
		$'000
Revenue
External		4,824		1,321		6,145
Total		4,824		1,321		6,145
Segment income (loss)		(522)		58		(464)
Unallocated corporate expenses
Finance expenses, net						88
Loss before taxes on income						(552)
Other
Depreciation and other    non-cash expenses		120		64		184

Note 3 - SEGMENTS (cont.):

Year ended December 31, 2010 (audited)		Commercial		Military		Total
		$'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.

Note 4 -TRANSACTIONS WITH RELATED PARTIES:

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

		Six months ended      June 30,				Year ended December 31,
		2011		2010			2010
		$'000
		Unaudited				Audited
Purchased Goods		74		100			180
Management Fee		133		115			239
Services Fee		80		80			160
Lease expenses (income)		(103)		172			341
Total		184		467			920

Compensation of key management personnel of the Group:

		Six months ended      June 30,				Year ended December 31,
		2011		2010			2010
		$'000
		Unaudited				Audited
Short-term employee benefits *)		312		269			523

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

All Transactions are made at market value.

As of June 30, 2011 the Group owes to the parent group and related party US $45,000 while in June 30, 2010 the parent group and related party owed to the Group  US $229,000.

Note 5 -TAX LAWS APPLICABLE:

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), 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. The Company will be able to opt to apply (the waiver is non-recourse) the amendment and from then on 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 has decided to apply the amendment from January 1, 2011. And accordingly, it has revised its deferred tax balances by the amount of US $14,000 against tax expense.

Note 6 - EMPLOYEE STOCK OPTION PLAN:

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

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.

 

END

 

 

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