1st Quarter Results

RNS Number : 3820G

MTI Wireless Edge Limited

12 May 2011

 



 12 May 2011

MTI Wireless Edge Ltd

("MTI" or the "Company")

Financial results for the three months ended 31 March 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 three months ended 31 March 2011.

Highlights

·     Revenue up by 31% to US$3.7m (Q1 2010: US$2.8m)

·     Gross profits 62% higher at US$1.3m (Q1 2010:US$809k)

·     Profit before tax of US$65k (Q1 2010: loss of US$548k)

·     Gross cash, cash equivalents and marketable securities of US$9.1m as at 31 March 2011 (less $2.5 m property mortgage)

Dov Feiner, Chief Executive Officer, commented:

"I am pleased to report that MTI has achieved progress in the first quarter of 2011, most markedly compared with the corresponding quarter in 2010 but also maintaining the order book from the last quarter of 2010.  Compared with the same period in 2010, all our markets have improved.

"Revenue was up by 31% in the quarter, compared with the same period of 2010, with a resulting 62% increase in gross profits to US$1.3m. 

"I am also very pleased that our recent strong focus on improving margins and efforts to keep close control of expenses are reflected in a reduction in both R&D and selling and marketing costs compared with the previous quarter. General and administrative expenses are slightly higher in the period, but this is expected to reverse from Q2 onwards.

"Given the improving market outlook and the Company's strong order book, the Board remains optimistic about the Company's prospects for further growth, although this optimism is tempered by the upward trend in the US Dollar exchange rate relative to the Shekel, which is not helpful. Nevertheless we anticipate reporting continued progress."

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

 

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three months ended March 31,				Year ended December 31,
	2011		2010		2010
	U.S. $ in thousands
	Unaudited				Audited
Revenues	3,669		2,801		13,469
Cost of sales	2,362		1,992		9,165
Gross profit	1,307		809		4,304
Research and development expenses	319		358		1,281
Selling and marketing expenses	494		549		2,046
General and administrative expenses	480		444		1,623
Profit (loss) from operations	14		(542)		(646)
Finance expense	82		14		170
Finance income	133		8		2
Profit (loss) before tax	65		(548)		(814)
Tax expense (income)	18		(13)		-
Total comprehensive income (loss)	47		(535)		(814)
Attributable to:
Owners of the parent	49		(523)		(816)
Non-controlling interest	(2)		(12)		2
	47		(535)		(814)
Earnings per share
Basic and Diluted (dollars per share)	0.0009		(0.0101)		(0.0158)
Weighted average number    of shares outstanding
Basic and Diluted	51,571,990		51,571,990		51,571,990

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

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the three months ended March 31, 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 three months     ended March 31, 2011:
Total comprehensive loss for the period	-		-		-		49		49		(2)		47
Share based payment	-		-		13		-		13		-		13
Balance at March 31, 2011	109		14,945		150		3,666		18,870		-		18,870

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

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the three months ended March 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
	Unaudited
Balance at January 1, 2010 (Audited)	109		14,945		88		4,433		19,575		-		19,575
Changes during the three months     ended March 31, 2010:
Total comprehensive loss for the period	-		-		-		(523)		(523)		(12)		(535)
Share based payment	-		-		15		-		15		-		15
Balance at March 31, 2010	109		14,945		103		3,910		19,067		(12)		19,055

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:
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

	31.3.2011		31.3.2010		31.12.2010
	U.S. $ in thousands
	Unaudited				Audited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	348		12,518		846
Other financial assets	8,781		23		8,648
Trade receivables	4,957		4,338		4,932
Other receivables	278		597		193
Income taxes receivable	24		-		103
Inventories	2,799		2,447		2,967
Total current assets	17,187		19,923		17,689
LONG TERM PREPAID EXPENSES	42		63		52
PROPERTY AND EQUIPMENT, NET	7,098		1,580		6,886
GOODWILL	406		406		406
DEFERRED TAX ASSETS	114		135		121
	24,847		22,107		25,154

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

INTERIM CONSOLIDATED STATMENTE OF FINANCIAL POSITION

	31.3.2011		31.3.2010			31.12.2010
	U.S. $ In thousands
	Unaudited				Audited
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term bank credit	250		-		250
Trade payables	2,331		1,926		2,742
Other accounts payables	766		762		749
Tax liability	-		31		-
Total current liabilities	3,347		2,719		3,741
NON- CURRENT LIABILITIES:
Loans from banks	2,250		-		2,250
Employee benefits	298		253		272
Provisions	82		80		81
Total non-current liabilities	2,630		333		2,603
EQUITY
Share capital	109		109		109
Additional paid-in capital	14,945		14,945		14,945
Employee equity benefits reserve	150		103		137
Retained earnings	3,666		3,910		3,617
Equity attributable to owners of the parent	18,870		19,067		18,808
Non-controlling interest	-		(12)		2
Total equity	18,870		19,055		18,810
	24,847		22,107		25,154

May 11, 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

			Three months ended March 31,					Year ended December 31,
		2011			2010		2010
		U.S. $ in thousands
		Unaudited			Unaudited		Audited
Cash Flows from Operating Activities:
profit (loss) for the period		47			(535)		(814)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		125			94		363
Loss (Gain) from short-term  investments		(133)			(18)		159
Equity settled share-based payment expense		13			15		49
Tax expense (Income)		18			(13)		-
Changes in operating assets and  liabilities:
Decrease (increase) in inventories		168			(129)		(649)
Decrease (increase) in trade receivables		(25)			67		(527)
Decrease (increase) in other    accounts receivables for short and long term		(75)			(411)		4
Increase (decrease) in trade payables		(310)			(86)		773
Increase (decrease) in  other accounts payables		17			129		(5)
Increase in provisions		1			-		1
Increase  in employee benefits		26			10		29
Income tax received (paid)		68			(143)		(276)
Net cash used in operating activities		(60)			(1,020)		(893)

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

 INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

		Three months ended March 31,					Year ended December 31,
		2011		2010			2010
		U.S. $ in thousands
		Unaudited				Audited
Cash Flows From Investing Activities:
Sale (purchase) of short-term investment, net		-		10,341			1,539
Purchase of property and equipment		(438)		(15)			(5,512)
Net cash (used in) provided    by investing activities		(438)		10,326			(3,973)
Cash Flows From Financing Activities:
Receipt of long-term loans from banks		-		-			2,500
Net cash provided    by financing activities		-		-			2,500
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(498)		9,306			(2,366)
CASH AND CASH EQUIVALENTS  AT BEGINNING OF PERIOD		846		3,212			3,212
CASH AND CASH EQUIVALENTS   AT END OF PERIOD		348		12,518			846

Appendix A - Non-cash activities:

		Three months ended March 31,				Year ended December 31,
		2011		2010			2010
		U.S. $ in thousands
		Unaudited				Audited
Purchase of property and equipment   against trade payables		22		45			123

 

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

Note 1 - General:

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

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

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

Note 2 - Significant Accounting Policies:

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

The interim consolidated financial information set out above does not constitute full year end accounts within the meaning of Israeli Companies Law. It has been prepared on a going concern basis in accordance with the recognition and measurement criteria of the International Financial Reporting Standards (IFRS). Statutory financial information for the financial year ended 31 December 2010 was approved by the board on March 14, 2011. The report of the auditors on those financial statements was unqualified. The interim consolidated financial statements as of 30 September 2010 have not been audited.

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

-        Improvements to International Financial Reporting Standards 2009

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

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

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

The following new standards, new interpretations and amendments to standards and interpretations have been issued but are not effective for the financial year beginning 1 January 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 there months ended March 31, 2011 and 2010, respectively.

Three months ended March 31, 2011 (Unaudited)
		Commercial		Military		Total
		$'000
Revenue
External		2,632		1,037		3,669
Total		2,632		1,037		3,669
Segment income (loss)		(50)		64		14
Unallocated corporate expenses
Finance income, net						71
Income before taxes on income						85
Other
Depreciation and other    non-cash expenses		86		39		125

Three months ended March 31, 2010 (Unaudited)
		Commercial		Military		Total
		$'000
Revenue
External		2,300		501		2,801
Total		2,300		501		2,801
Segment loss		(431)		(111)		(542)
Unallocated corporate expenses
Finance expenses, net						6
loss before taxes on income						(548)
Other
Depreciation and other    non-cash expenses		61		33		94

(*) 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:

		Three months ended      March 31,				Year ended December 31,
		2011		2010			2010
		U.S. $ in thousands
		Unaudited				Audited
Purchased Goods		34		43			180
Management Fee		66		59			239
Services Fee		40		40			160
Lease		(51)		87			341
Total		89		229			920

Compensation of key management personnel of the Group:

		Three months ended      March 31,				Year ended December 31,
		2011		2010			2010
		U.S. $ in thousands
		Unaudited				Audited
Short-term employee benefits *)		155		133			523

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

All Transactions are made at market value.

As of March 31, 2011 the Group owes to the parent group and related party US $121,000 while in 31 March 2010 the parent group and related party owed to the Group  US $366,000. 

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.

Note 6 -SUBSEQUENT EVENTS:

On April 13, 2011 The Company issued a Notice of Annual General Meeting to be held on May 20, 2011at which it is seeking approval for the issue of 1.2 million options to certain Directors and Employees of the Company, exercisable into 1.2 million ordinary shares of the Company (representing approximately 2.3% of the Company's current issued and voting share capital of 51,571,990 ordinary shares). These options will have a vesting date of May 31, 2014 and an exercise price of 13.5p per share, which represents a premium of 25% on the Company's share price as at April 13, 2011.

 

END

 

 

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