Final Results

RNS Number : 9110C

MTI Wireless Edge Limited

15 March 2011

 



MTI WIRELESS EDGE LTD

 FINANCIAL RESULTS FOR THE YEAR ENDED

 31 DECEMBER 2010

MTI Wireless Edge Ltd., (ticker: MWE) ('MTI' or 'the Company'), a market leader in the manufacture of flat panel antennas for fixed wireless broadband, today announces its audited full year results for the year ended 31 December 2010.

2010 Highlights

·     Revenues remained static overall at $13.5m (2009: $13.5m) but with an increasing trend  in the second half of the year;

·     Gross profit down 9% to $4.3m (2009: $4.7m);

·     Operating loss of $0.65m compared to profit of $0.1m in 2009;

·     Building purchased at $5.2m, representing a yield to the Company of ~9%;

·     Net cash, cash equivalents and marketable securities at the year end of $7.0m, equivalent to 8.5 pence per share

Dov Feiner, CEO of MTI Wireless Edge, commented:

"I am pleased to report on our audited results for the financial year ended 31 December 2010 - a very challenging year in terms of the global macro economy.  While the year started with contraction in our key market of antennas for broadband communications, we were pleased to see that this pattern stabilised in Q2 and there was a return to growth in the second half of 2010 and material positive cash flow in the last quarter of the year ($526K).

"We are entering 2011 with confidence in the growth prospects of the business and the ability to return to sustained profitability, with continued  initiatives to improve our operating margin and to reduce our working capital usage.  The underlying drivers of our business, such as continued growth in data usage and increasing subscriber numbers, are part of long term trends expected to continue for the foreseeable future.

"With resumed growth in our key market in the second half of 2010, revenue streams for the business improved and we substantially grew our order book. As a result, we entered 2011 with a record order backlog ($5.4m) which is more than double the backlog we had entering to 2010. This trend has continued so far in the first two months of 2011 in which our order book has grown by a further $2m."

In addition, MTI also gives notice that its AGM will be held at the second half of May. An exact date and time,  will be provided in due course.

The Annual Report and Accounts will shortly be available for download from the Company's website, www.mtiwe.com, in accordance with AIM Rule 20 and will be sent to shareholders when printed.

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.

Chairman's Statement

I am pleased to report on our audited results for the financial year ended 31 December 2010 - a very challenging year in terms of the global macro economy.  While the year started with contraction in our key market of antennas for broadband communications, we were pleased to see that this pattern stabilised in Q2 and there was a return to growth in the second half of 2010.

The reduction in the first half of the year resulted in a loss for the full year. However, we are entering 2011 with confidence in the growth prospects of the business and its ability to return to profitability. The underlying drivers of our business, such as continued growth in data usage and increasing subscriber numbers, are part of long term trends expected to continue for the foreseeable future.

Our Indian manufacturing facility is becoming increasingly important in terms of production capability. This facility will help us to reduce our costs while improving our ability to service customers in India and elsewhere. The Board believes that as our sales pipeline returns to growth, the benefits from this strategic investment will be increasingly visible. We see the Indian market as a promising one and our local presence in this rapidly expanding market will benefit us further as it develops with either direct or indirect sales.

With resumed growth in our key market in the second half of 2010, revenue streams for the business improved and we substantially grew the order book. As a result, we entered 2011 with a record order backlog ($5.4m) which is more than double the backlog we had entering to 2010 ($2.35m).

Following a review of the business, the Board has agreed not to declare a dividend this year as we believe it is appropriate to pay a dividend from earnings that we hope to achieve in 2011. Although we continue to have a strong balance sheet following the acquisition of new facilities, we believe it is in the interest of shareholders to maintain a healthy cash position. It is our plan to return to a dividend once the company returns to profitability. 

I would like to compliment our employees on their contribution to the company and thank each and every one for their dedication and creativity, which has enabled us to maintain our market leading position. I further would like to acknowledge with thanks the employees' families for their continued support.

Zvi Borovitz

Non Executive Chairman

Chief Executive's Review

I am happy to report that after a slow start to 2010, in which the Fixed Broadband Wireless industry was impacted by the global recession, we have experienced revenue growth in the second half of 2010 as demand for broadband continues to increase. Revenue for 2010 remained flat, however I am encouraged by our revenue growth of 11% in the second half of the year (over H2 2009) as well as the renewed growth in our key market of antennas for fixed wireless communication.  This growth came from our key customers and we have entered the new year with a strong order book. Unfortunately, we have reported a loss this year, mainly due to the slow start of 2010 and my key goal for 2011 is to return to profitability.

Our immediate focus is to win further major deals and to continue to support our existing customer base. While the market remains competitive, our goal is to grow our market share. We still maintain our position as a leader in the field of antennas for broadband applications, which the Directors believe will win the bulk of the Fixed Broadband Wireless business in years to come. Our strategy in 2010 was to emerge stronger from the global recession while supplying our customers with a better and wider range of products based on our advanced technology.  Going forward, our focus in 2011 will be to grow our business, and a core focus of this strategy will be ramping up our operations out of our facility in India, which produced nearly 20% of our revenue in 2010.

The Company remains focused on growth and on expanding its position as a leader in the antenna markets for fixed wireless communication. In 2010, we were able to return to growth in this segment (6% over 2009) and further develop our product offering. Product development in the period included the roll out of antennas for the short range point to point backhaul market in the 60 -90 GHz bandwidth, which we expect to generate more significant revenues from 2011 onwards. Additionally, we have further strengthened our offering in the Fixed Broadband Wireless including MIMO antennas and parabolic Point to Point antennas.

RFID, currently in its initial stages, continued to grow in 2010 and is already representing 10% of our business. We strongly believe in the potential of this market and we were able to strengthen our position with revenue growth of 30% over the previous year. We foresee 2011 as a next step in the growth of this market and plan to ensure that MTI remains well positioned to enjoy success once this market enters the full deployment stage.

Our military segment declined in 2010 in term of revenue but we were able to secure substantial new contracts in the period. We believe we shall return to growth in this segment in 2011.

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

Dov Feiner

Chief Executive Officer

M.T.I Wireless Edge Ltd.

Consolidated Statements of Comprehensive Income for the year ended December 31, 2010

			Year ended December 31,
			2010		2009
	Note		$'000		$'000
Revenues	2, 4		13,469		13,453
Cost of sales			9,165		8,756
Gross profit			4,304		4,697
Research and development expenses			1,281		1,114
Distribution expenses			2,046		2,050
General and administrative expenses			1,623		1,469
Profit (loss) from operations	3		(646)		64
Finance expense	5		170		128
Finance income	5		2		110
Profit (loss) before tax			(814)		46
Tax expense	6		-		34
Total comprehensive income (loss)			(814)		12
Attributable to:
Owners of the parent			(816)		17
Non-controlling interest			2		(5)
			(814)		12
Earnings per share
Basic and Diluted (dollars per share)	7		(0.0158)		0.0003

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

M.T.I Wireless Edge Ltd.

Consolidated Statements of Changes in Equity for the year ended December 31, 2010

	Attributable to owners of the parent
	Share capital	Additional paid-in capital	Reserve for share-based payment transactions	Retained earnings	Total attributable to owners of the  parent	Non-controlling interest		Total equity
	U.S. $ in thousands
Balance as at January 1, 2009	109	14,945	29	5,014	20,097	-		20,097
Changes during 2009:
comprehensive income for the year	-	-	-	17	17	(5)		12
Issue of capital to minority in subsidiary	-	-	-	-	-	5		5
Dividends	-	-	-	(598)	(598)	-		(598)
Share based payment	-	-	59	-	59	-		59
Balance as at December 31, 2009	109	14,945	88	4,433	19,575	-		19,575
Changes during 2010:
comprehensive loss for the year	-	-	-	(816)	(816)	2		(814)
Share based payment	-	-	49	-	49	-		49
Balance as at December 31, 2010	109	14,945	137	3,617	18,808	2		18,810

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

M.T.I Wireless Edge Ltd.

Consolidated Statements of Financial Position as of December 31, 2010

			As at December 31,				As at December 31,
			2010		2010		2009		2009
	Note		$'000		$'000		$'000		$'000
ASSETS
Non-current assets:
Property, plant and equipment	9		6,886				1,621
Goodwill			406				406
Long-term prepaid expenses			52				51
Deferred tax assets	10		121				121
Total non-current assets					7,465				2,199
Current assets:
Inventories	11		2,967				2,318
Income taxes receivable			103				-
Trade and other receivables	12		5,125				4,603
Other current financial assets	13		8,648				10,346
Cash and cash equivalents	14		846				3,212
Total current assets					17,689				20,479
TOTAL ASSETS					25,154				22,678
LIABILITIES
Non-current liabilities:
Loans from banks	15		2,250				-
Employee benefits	16		272				243
Provisions	17		81				80
Total Non-current liabilities					2,603				323
Current Liabilities:
Tax liability			-				173
Trade and other payables	18		3,491				2,607
Short-term bank credit	21		250				-
Total current liabilities					3,741				2,780
Total liabilities					6,344				3,103
TOTAL NET ASSETS					18,810				19,575

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

M.T.I Wireless Edge Ltd.

Consolidated Statements of Financial Position as of December 31, 2010 (Cont.)

			As at December 31,				As at December 31,
			2010		2010		2009		2009
	Note		$'000		$'000		$'000		$'000
Capital and reserves attributable to    owners of the parent	22
Share capital			109				109
Additional paid-in capital			14,945				14,945
Employee equity benefits reserve			137				88
Retained earnings			3,617				4,433
					18,808				19,575
Non-controlling interests					2				-
TOTAL EQUITY					18,810				19,575

The financial statements on pages 4 to 43 were approved the Board of Directors and authorised for issue by on March 14, 2011, and were signed on its behalf by:

March 14, 2011
Date of approval		Moshe Borovitz	Dov Feiner	Zvi Borovitz
of financial statements		Finance Director	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, 2010

		For the year ended December 31,				For the year ended December 31,
		2010		2010		2009		2009
		$'000		$'000		$'000		$'000
Operating Activities:
profit (loss) for the year		(814)				12
Adjustments for:
Depreciation		363				374
Gain from short-term investments		159				(71)
Equity settled share-based payment expense		49				59
Income tax expense		-				34
Operating profit before changes      in working capital and provisions				(243)				408
Decrease (increase) in inventories		(649)				253
Decrease (increase) in trade receivables		(527)				1,493
Decrease in other accounts receivables for short and long term		4				17
Increase (decrease) in trade and other payables		768				(905)
Increase in employee benefits		29				11
Increase in provisions		1				50
income tax paid		(276)				(239)
				(650)				680
Cash generated from (used in) operations				(893)				1,088

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, 2010 (Cont.)

		For the year ended December 31,				For the year ended December 31,
		2010		2010		2009		2009
		$'000		$'000		$'000		$'000
Cash flows from operating activities brought forward				(893)				1,088
Investing Activities:
Sale (Purchase) of short-term investment		1,539				(748)
Purchase of Property, plant and equipment		(5,512)				(341)
				(3,973)				(1,089)
Financing Activities:
Dividend paid to the holders of the parent		-				(598)
Receipt of long-term loans from banks		2,500				-
Issue of capital to non-controlling interests in subsidiary		-				5
				2,500				(593)
Increase (decrease) in cash and cash equivalents				(2,366)				(594)
						For the year ended December 31,
						2010		2009
						$'000		$'000
Non-cash transactions:
Purchase of property and equipment against trade payables						123		7

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

M.T.I Wireless Edge Ltd.

Notes forming part of the consolidated financial statements for the year ended December 31, 2009

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, 2000and 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.

On March 2008, the Company invested in establishing 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.

On February 2008, pursuant to the founder's agreement, 20 percent of the issued and outstanding share capital of GlobalWave Technologies PVT Ltd (formerly a wholly owned Indian based subsidiary of AdvantCom), was allotted to investors in return for approximately $5,000.

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

Definitions

In these financial information:

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

Basis of preparation

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

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs and IFRIC interpretations) issued by the International Accounting Standards Board (IASB). The financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities at fair value through profit or loss.

1.     Accounting policies (Cont.)

Assets and Liabilities in foreign currencies:

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

	Year ended December 31,
	2010		2009
NIS (New Israeli Shekel)	0.282		0.265

	Year ended December 31,
	2010		2009
	%		%
NIS (New Israeli Shekel)	6.37		0.76

Changes in accounting policies

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

-        IFRS 3 (Revised) - Business Combinations and IAS 27 (Amended) - Consolidated and Separate Financial Statements:

According to the new Standards:

The definition of a business was expanded such that it also includes activities and assets that are not conducted as a business as long as it is capable of being operated as a business.

For each business combination, an acquirer can choose to measure non-controlling interests, and consequently the goodwill, either at full fair value or at the proportionate share of the fair value of the net identifiable assets of the acquiree on the acquisition date.

Contingent consideration in a business combination is measured at fair value and changes in the fair value of the contingent consideration, which do not represent adjustments to provisional amounts in the measurement period, are not recognized as goodwill adjustments. If the contingent consideration is classified as a derivative within the scope of IAS 39, it will be measured at fair value with changes in fair value recognized in profit or loss.

Direct acquisition costs attributed to a business combination are recognized in profit or loss as incurred rather than as part of the acquisition cost.

Subsequent recognition of a deferred tax asset for acquired temporary differences which did not meet the recognition criteria at acquisition date is recorded in profit or loss and not as an adjustment to goodwill.

A subsidiary's losses, even if resulting in a capital deficiency in the subsidiary, will be allocated between the parent company and non-controlling interests, even if the non-controlling interests have not guaranteed or have no contractual obligation for supporting the subsidiary or of investing further amounts.

A transaction, whether sale or purchase, with non-controlling interests is accounted for as an equity transaction. Accordingly, the acquisition of non-controlling interests by the Group is recognized as an increase or decrease in equity (retained earnings) and is calculated as the difference between the consideration paid by the Group and the proportionate amount of the non-controlling interests acquired and derecognized on the acquisition date.

1.     Accounting policies (Cont.)

Upon the disposal of an interest in a subsidiary that does not result in a loss of control, an increase or decrease is recognized in equity (retained earnings) for the amount of the difference between the consideration received by the Group and the carrying amount of the non-controlling interests in the subsidiary which has been added to the equity attributable to the equity holders of the Company (as for non-controlling interests share of other comprehensive income, the Company reattributes the cumulative amounts recognized in other comprehensive income between the equity holders of the Company and the non-controlling interests).

Identifiable assets and liabilities on the acquisition date are classified and designated on the basis of the contractual terms, economic conditions and other pertinent conditions as they exist at the acquisition date, except for classifications of leases and insurance contracts.

In a business combination achieved in stages, the acquirer remeasures its previously held equity interest in the acquiree at its acquisition date fair value and recognizes the resulting gain or loss, if any, including reclassification of amounts included in other comprehensive income. Upon the loss of control of a subsidiary, any retained interest is revalued to fair value with the resulting difference included in the gain or loss from the sale and this fair value represents the cost basis for the purpose of subsequent accounting.

Cash flows from transactions with non-controlling interests (with no change in control status) are classified in the statement of cash flows as financing activities (and are no longer classified as investing activities).

The Standards have been adopted prospectively from January 1, 2010. The initial adoption of the Standard did not have any material effect on the consolidated financial statements.

-        IAS 7 - Statement of Cash Flows:

According to the amendment to IAS 7, only cash flows that are recognized as an asset may be classified as cash flows from investing activities.

The amendment was applied retrospectively commencing from January 1, 2010. The initial adoption of the amendment did not have any material effect on the consolidated financial statements.

-        IAS 17 - Leases:

Pursuant to an amendment to IAS 17, the specific criterion for classification of land as an operating or a finance lease was removed. Consequently, there is no longer a requirement to classify a lease of land as an operating lease in all situations in which title does not pass at the end of the lease, but rather the classification of a lease of land should be evaluated by reference to the general guidance in IAS 17, which addresses the classification of a lease as finance or operating, as of the date the original agreement with the Israel Lands Administration ("the Administration") was signed taking into account that land normally has an indefinite economic life. Accordingly, a lease of land from the Administration should be evaluated by comparing the present value of the amount reported as prepaid operating lease expense and the fair value of the land and if said amount substantially reflects the fair value, the lease should be classified as a finance lease.

1.     Accounting policies (Cont.)

The amendment was adopted commencing from January 1, 2010, with retrospective application to comparative data. The initial adoption of the amendment did not have any material effect on the consolidated financial statements.

The Group did not recognize an asset and a liability in respect of the future payments that will be due upon the exercise of the option to extend the lease period since these payments will be based on the fair value of the properties on the date of future exercise and represent contingent rent, which according to IAS 17 should not be taken into consideration.

-        IAS 36 - Impairment of Assets:

The amendment to IAS 36 clarifies the required accounting unit to which goodwill will be allocated for the purpose of testing the impairment of goodwill. According to the amendment, the highest possible level for allocating goodwill recognized in a business combination is an operating segment as defined in IFRS 8, "Operating Segments", before aggregation for reporting purposes.

The amendment has been applied prospectively commencing from January 1, 2010. The initial adoption of the amendment did not have any material effect on the consolidated financial statements.

Estimates and assumptions

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

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

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

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

Transactions with controlling parties

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

1.     Accounting policies (Cont.)

Revenue recognition

2.   Revenues from services are recognized as follows:

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

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

3.   Revenues from sales of products are recognized when: all the significant risks and rewards of ownership of the goods have passed to the buyer and the seller no longer retains continuing managerial involvement. the amount of revenue can be measured reliably. It is probable that the economic benefits associated with the transaction will flow to the group. the cost incurred or to be incurred in respect of the transactions can be measured reliably And the delivery date is usually the date, on which ownership passes, provided no significant vendor obligations remain.

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

Basis of consolidation

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

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

Consolidated financial statements

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

Goodwill

Goodwill represents the excess of the cost of a business combination over the interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired. Cost comprises the fair values of assets given, liabilities assumed and equity instruments issued, plus any direct costs of acquisition.

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

Impairment of non-financial assets

Impairment tests on goodwill with indefinite useful economic lives are undertaken annually on December 31 or sooner when there are signs of impairment. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying

1.     Accounting policies (Cont.)

value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly.

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

Impairment charges are included in the administrative expenses line item in the income statement, except to the extent they reverse gains previously recognized in the statement of recognized income and expense. During the years 2009 and 2010 no impairment charges of non-financial assets were required.

Functional and reporting currency

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

Foreign currency

Transactions entered into by the Group in a currency other than the currency of the primary economic environment in which it operates (the "functional currency") are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the balance sheet date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities. are similarly recognized immediately in the income statement, except for foreign currency borrowings qualifying as a hedge instrument.

 Financial assets

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

Fair value through profit or loss: This category comprises only in marketable securities. They are carried in the balance sheet at fair value with changes in fair value recognized in the comprehensive income statement.

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

Held-to-maturity investments: These assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that The Group's management has the positive intention and ability to hold to

1.     Accounting policies (Cont.)

maturity. These assets are measured at amortized cost, with changes through the comprehensive income statement. As of December 31, 2010, no such assets are held by the Group.

Available-for-sale: Non-derivative financial assets not included in the above categories are classified as available-for-sale and comprise The Group's strategic investments in entities not qualifying as subsidiaries, associates or jointly controlled entities. They are carried at fair value with changes in fair value recognized directly in equity. Where a decline in the fair value of an available-for-sale financial asset constitutes objective evidence of impairment, the amount of the loss is removed from equity and recognized in the comprehensive income statement. As of December 31, 2010, no such assets are held by the Group.

Offsetting financial instruments

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

Fair value

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

Financial Liabilities

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

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

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

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

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

•        Trade payables and other short-term monetary liabilities, which are initially recognized at fair value.

1.     Accounting policies (Cont.)

Derecognition of financial instruments:

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

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

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

·     is legally released from the liability.

Where an existing financial liability is exchanged with another liability from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is accounted for as an extinguishment of the original liability and the recognition of a new liability. The difference between the carrying amounts of the above liabilities is recognized in profit or loss. If the exchange or modification is not substantial, it is accounted for as a change in the terms of the original liability and no gain or loss is recognized on the exchange.

Impairment of financial assets:

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

1.     Financial assets carried at amortized cost:

There is objective evidence of impairment of debt instruments, loans and receivables and held-to-maturity investments carried at amortized cost as a result of one or more events that has occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows. Evidence of impairment may include indications that the debtor is experiencing financial difficulties, including liquidity difficulty and default in interest or principal payments. The amount of the loss recorded in profit or loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not yet been incurred) discounted at the financial asset's original effective interest rate (the effective interest rate computed at initial recognition). If the financial asset has a variable interest rate, the discount rate is the current effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account (see allowance for doubtful accounts above). In a subsequent period, the amount of the impairment loss is reversed if the recovery of the asset can be related objectively to an event occurring after the impairment was recognized. The amount of the reversal, up to the amount of any previous impairment, is recorded in profit or loss.

1.     Accounting policies (Cont.)

2.     Available-for-sale financial assets:

For equity instruments classified as available-for-sale financial assets, the objective evidence includes a significant or prolonged decline in the fair value of the asset below its cost and calculation of changes in the technological, market, economic or legal environment in which the issuer of the instrument operates. Where there is evidence of impairment, the cumulative loss - measured as the difference between the acquisition cost (less any previous impairment losses) and the fair value is reclassified from equity and recognized as an impairment loss in profit or loss. In subsequent periods, reversal of impairment loss is not recognized in profit or loss but recognized as other comprehensive income.

For debt instruments classified as available-for-sale financial assets, objective evidence of impairment may arise as a result of one or more events that have a negative impact on the estimated future cash flows of the asset since the recognition of the asset. Evidence of impairment may include indications that the debtor is experiencing financial difficulties, including liquidity difficulty and default in interest or principal payments. Where there is evidence of impairment, the cumulative loss - measured as the difference between the acquisition cost (less principal payments, amortization using the effective interest method and previous impairment losses) and the fair value is reclassified from equity and recognized as an impairment loss in profit or loss. In a subsequent period, the amount of the impairment loss is reversed if the increase in fair value can be related objectively to an event occurring after the impairment was recognized. The amount of the reversal, up to the amount of any previous impairment, is recorded in profit or loss.

Internally generated intangible assets (research and development costs)

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

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

·      adequate resources are available to complete the development;

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

·      The Company is able to sell the product;

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

·      expenditure on the project can be measured reliably.

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

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

Development costs are recognized in the statement of income seeing as the Group does not meet the abovementioned conditions. As of December 31, 2010 no development costs are capitalized.

1.     Accounting policies (Cont.)

Government grants:

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

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

Deferred taxation

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

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

Deferred tax assets are reviewed at the end of each reporting period and reduced to the extent that it is not probable that they will be utilized. Also, temporary differences (such as carryforward losses) for which deferred tax assets have not been recognized are reassessed and deferred tax assets are recognized to the extent that their recoverability has become probable. Any resulting reduction or reversal is recognized in the line item, "taxes on income".

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

All deferred tax assets and deferred tax liabilities are presented in the statement of financial position as non-current assets and non-current liabilities, respectively. Deferred taxes are offset in the statement of financial position if

1.     Accounting policies (Cont.)

Deferred taxation ( cont.)

there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate to the same taxpayer and the same taxation authority.

Taxes on income

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

Inventories

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

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

Property, plant and equipment

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

	Rate of depreciation
buildings	2 %
Machinery and equipment	6 - 20 %
Leasehold improvements	15 %
Computers	10 - 33 %
Office furniture and equipment	6 - 15 %

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

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

Cash and cash equivalents

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

Provision for warranty

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

1.     Accounting policies (Cont.)

Share-based payments

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

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

Employee benefits

The Group has several employee benefit plans:

1.     Short-term employee benefits: Short-term employee benefits include salaries, paid annual leave, paid sick leave, recreation and social security contributions and are recognized as expenses as the services are rendered. A liability in respect of a cash bonus or a profit-sharing plan is recognized when the Group has a legal or constructive obligation to make such payment as a result of past service rendered by an employee and a reliable estimate of the amount can be made.

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

The Group has defined contribution plans pursuant to Section 14 to the Severance Pay Law under which the Group pays fixed contributions and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient amounts to pay all employee benefits relating to employee service in the current and prior periods. Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributed simultaneously with receiving the employee's services and no additional provision is required in the financial statements.

The Group also operates a defined benefit plan in respect of severance pay pursuant to the Severance Pay Law. According to the Law, employees are entitled to severance pay upon dismissal or retirement. The liability for termination of employee-employer relation is measured using the projected unit credit method. The actuarial assumptions include rates of employee turnover and future salary increases based on the estimated timing of payment. The amounts are presented based on discounted expected future cash flows using a discount rate determined by reference to yields on Government bonds with a term that matches the estimated term of the benefit obligation.

In respect of its severance pay obligation to certain of its employees, the Company makes current deposits in pension funds and insurance companies ("the plan assets"). Plan assets comprise assets held by a long-term

1.     Accounting policies (Cont.)

Employee benefits(cont.)

employee benefit fund or qualifying insurance policies. Plan assets are not available to the Group's own creditors and cannot be returned directly to the Group.

The liability for employee benefits presented in the statement of financial position presents the present value of the defined benefit obligation less the fair value of the plan assets, less past service costs and any unrecognized actuarial gains and losses.

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

Earnings per Share (EPS)

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

Segment reporting

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

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

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

3.     For which separate financial information is available.

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

-      Antennas produced for commercial market.

-      Antennas produced for the military market.

The secondary segments of the Group are geographic:

-      Israel

-      North America

-      Europe

-      Asia

-      Other

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

1.     Accounting policies (Cont.)

New IFRSs in the period prior to their adoption

-        IFRS 7 - Financial Instruments: Disclosure:

The amendments to IFRS 7 deal with the following issues:

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

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

The relevant disclosures will be included in the Company's financial statements.

-        IFRS 9 - Financial Instruments:

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

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

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

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

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

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

1.     Accounting policies (Cont.)

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

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

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

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

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

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

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

-        IAS 24 - Related Party Disclosures:

The amendment to IAS 24 clarifies the definition of a related party in order to simplify the identification of such relationships and to eliminate inconsistencies in its application. In addition, Government-related companies are provided a partial exemption of disclosure requirements for transactions with the Government and other Government-related companies. The amendment should be applied retrospectively commencing from the financial statements for annual periods beginning on January 1, 2011. Earlier application is permitted.

The relevant disclosures will be included in the Company's financial statements.

2.     Revenues

			For the year ended December 31,
			2010		2009
			$'000		$'000
Revenues arise from:
Sale of goods			11,340		10,282
Projects			2,129		3,171
			13,469		13,453

			For the year ended December 31,
Revenues			2010		2009
			$'000		$'000
Customer A			2,397		1,675
Customer B			1,467		1,305
Others			9,605		10,473
			13,469		13,453

3.       Profit from operations

			For the year ended December 31,
			2010		2009
This has been arrived at after charging:			$'000		$'000
Wages and salaries			4,755		4,708
Depreciation of property, plant and equipment			420		374
Material and subcontractors			6,805		6,262
Operating lease expense			422		404
Plant, Machinery & Usage			621		596
Travel & Exhibition			257		351
Advertising & Commissions			168		119
Consultants			269		213
Others			398		362
			14,115		13,389

4.       Segments

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

1.   Segment information

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

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

		Commercial		Military		Total
		2009		2009		2009
		$'000		$'000		$'000
Revenue
External		10,090		3,363		13,453
Total		10,090		3,363		13,453
Segment income (loss)		(290)		354		64
Unallocated corporate expenses
Finance expenses, net						18
Income (loss) before taxes on income						46
Other
Depreciation and other    non-cash expenses		243		131		374

(*) 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.

4.       Segments (Cont.)

1.   Segment information (cont.)

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

		External revenue by location of customers
		2010		2009
		$'000		$'000
Israel		7,064		6,714
North America		2,588		2,822
Europe		2,854		2,941
Asia		603		758
Other		360		218
		13,469		13,453

2.   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		2010		2009
		$'000		$'000
Customer A - Commercial segment		2,397		1,675
Customer B - Commercial segment		1,467		1,305
Others		9,605		10,473
		13,469		13,453

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

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

5.     Finance expense and income

		2010		2010		2009		2009
		$'000		$'000		$'000		$'000
Finance expense
Foreign  currency exchange    costs		27				77
loses from financial assets         Classified as held  for trading		87				-
Bank fees		56				51
				170				128
Finance income
Interest received on bank    deposits		2				2
Other
Gains from financial assets         Classified as held  for trading		-				108
				2				110
				151				18

6.     Tax expense

A.      Tax Laws in Israel:

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

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

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

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

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

6.     Tax expense (Cont.)

2.       Tax rates:

In July 2005, due to new tax legislation, the reduction in the tax rate for Israeli Companies was accelerated. On July 1, 2004 and in 2005, the Corporate tax rate was reduced to 35% for 2004 tax year, 34% for the 2005 tax year, 31% for the 2006 tax year, 29% for the 2007 tax year , 27% for the 2008 tax year, 26% for the 2009 tax year and 25% for the 2010 tax year and thereafter.

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

3.       Income Tax (Inflationary Adjustments) Law, 1985:

According to the law, until 2007, the results for tax purposes were measured based on the changes in the Israeli CPI.

In February 2008, the "Knesset" (Israeli parliament) passed an amendment to the Income Tax (Inflationary Adjustments) Law, 1985, which limits the scope of the law starting 2008 and thereafter. Starting 2008, the results for tax purposes are measured in nominal values, excluding certain adjustments for changes in the Israeli CPI carried out in the period up to December 31, 2007. The amendment to the law includes, inter alia, the elimination of the inflationary additions and deductions and the additional deduction for depreciation starting 2008.

B.      Income tax assessments:

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

		2010		2010		2009		2009
		$'000		$'000		$'000		$'000
Current tax expense
Israeli income tax on profits for the year		-				38
				-				38
Deferred tax income
Origination and reversal of temporary    differences		-				4
				-				4
Total tax charge				-				34

6.     Tax expense (Cont.)

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

			2010		2009
			$'000		$'000
Profit (Loss) before tax			(814)		46
Expected tax charge based on the standard rate     of corporation tax in Israel of 25% (2009 - 26%)			(204)		12
Expenses not deductible for tax purposes			13		13
Income (Loss) not subject to tax			49		33
Losses and temporary differences for which deferred taxes    were not recorded			161		(42)
Other			(19)		18
Total tax charge			0		34

7.     Earnings per share

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

			2010		2009
			$'000		$'000
Earnings (Loss) used in basic EPS			(816)		17
Earnings (Loss) used in diluted EPS			(816)		17
Weighted average number of shares used in basic EPS			51,571,990		51,571,990
Weighted average number of shares used in diluted EPS			51,571,990		51,571,990
Basic net EPS			(0.0158)		0.0003
Diluted net EPS			(0.0158)		0.0003

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

8.     Dividends

			2010		2009
			$'000		$'000
Dividend of 1.85 cents per ordinary share proposed and  paid during the year relating to the previous year's results			-		598

9.     Property, plant and equipment

	Buildings& Leasehold Improvements		Machinery & equipment		Office furniture & equipment		Computer equipment		Total
	$'000		$'000		$'000		$'000		$'000
At 31 December 2009
Cost	416		3,593		252		1,082		343,5
Accumulated depreciation	169		2,444		183		926		3,722
Net book value	247		1,149		69		156		1,621
At 31 December 2010
Cost	5,685		3,909		254		1,123		10,971
Accumulated depreciation	189		2,705		194		997		4,085
Net book value	5,496		1,204		60		126		6,886
Year ended 31 December 2009
Opening net book value	269		1,169		79		154		1,671
Additions	-		239		1		84		324
Depreciation	22		259		11		82		374
Closing net book value	247		1,149		69		156		1,621
Year ended 31 December 2010
Opening net book value	247		1,149		69		156		1,621
Additions	5,269		316		2		41		5,628
Depreciation	20		261		11		71		363
Closing net book value	5,496		1,204		60		126		6,886

10.   Deferred Tax

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

        The movement on the deferred tax account is as shown below:

		2010		2009
		$'000		$'000
At 1 January 2010		121		117
Profit and loss charge		-		4
At 31 December 2010		121		121

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

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

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

		Charged to reserves 2010		Charged to reserves 2009
		$'000		$'000
Accrued severance pay		46		46
Other provisions for employee-related obligations		75		75
		121		121

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

11.   Inventories

		2010		2009
		$'000		$'000
Raw materials and consumables		1,883		1,523
Work-in-progress		77		76
Finished goods and goods for resale		1,007		719
		2,967		2,318

12.   Trade and other receivables

        Trade receivables:

		2010		2009
		$'000		$'000
Trade receivables(*)		4,128		3,104
Unbilled receivables		791		1,272
Checks receivable		13		29
		4,932		4,405

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

12.   Trade and other receivables (cont.)

As at 31 December 2010 trade receivables of $224K (2009 - $680K) were past due but not impaired.

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

		2010		2009
		$'000		$'000
Up to 3 months		224		600
3 to 6 months		-		80
		224		680

Balance as of		2010		2009
		$'000		$'000
Customer A		626		234
Customer B		930		588
Others		2,572		2,282
		4,128		3,104

Unbilled receivables:				2010			2009
				$'000			$'000
Actual completion costs				1,197			1,356
Profit earned				551			1,313
Billed revenue				(957)			(1,397)
Total Unbilled receivables - Projects					791			1,272

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

Other receivables:

		2010		2009
		$'000		$'000
Prepaid expenses		66		72
Advances to suppliers		122		65
Employees (*)		4		12
Government authorities		-		24
Other receivables		1		25
		193		198

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

13.   Other current financial assets

		2010		2009
		$'000		$'000
Fair value through profit or loss		8,648		10,346

The other current financial assets consist of marketable securities and Bank deposits.

14.     Cash and cash equivalents

		2010		2009
		$'000		$'000
In New Israeli Shekels
Cash on hand and in banks		49		347
Deposits		-		50
		49		397
In U.S. dollars
Deposits with banks		797		2,815
Total		846		3,212

       The deposits are not linked and bear interest up to 0.1% as of December 31, 2010(2009 - 0.3%).

15.   Loans from banks

Composition:

		2010		2009
		$'000		$'000
US Dollars - unlinked		2,500		-
Less - current maturities		250		-
At 31 December 2010		2,250		-

The company received $ 2,500,000 loan for the purchase of the company building in Rosh ha'ayin, Israel, secured by a mortgage on the said asset. The loan is for 10 years, the repayment on a quarterly basis from April 2011 until January 2021 and bears interest at a fixed rate of 4.9%.

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

16.   Employee benefits

A.    Composition:

	As at December  31
	2010		2009
	$'000		$'000
Present value of the obligations	850		781
Fair value of plan assets	(578)		(538)
	272		243

B.    Movement in plan assets:

	As at December  31
	2010		2009
	$'000		$'000
At 1 January 2010	538		519
Foreign exchange gains	35		4
Expected return	29		26
Return on plan assets	(12)		(16)
Benefit paid	(29)		(53)
Actuarial gain (loss)	17		58
At 31 December 2010	578		538

C.    Movement in the liability for benefit obligation:

	As at December  31
	2010		2009
	$'000		$'000
At 1 January 2010	781		751
Foreign exchange losses	51		4
Interest cost	43		41
Current service cost	55		54
Benefits paid	(47)		(97)
Actuarial (gain) loss	(33)		28
At 31 December 2010	850		781

Supplementary information

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

2.       The amounts accrued in managers' insurance funds are registered under the name of the employees, and therefore such amounts are not stated in the financial information as liability for termination of employee-employer relationships or amounts funded.

16.   Employee benefits (Cont.)

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

4.       Principal nominal actuarial assumptions:

		As at December 31,  2010		As at December  31,  2009
Discount rate on plan liabilities		4.95%		5.13%
Expected rate of return on plan assets		4.92%		5.05%
Expected increase in pensionable salary		3%		3%

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

Expenses recognized in the statement of income:

	As at December  31
	2010		2009
	$'000		$'000
Current service cost	55		54
Interest cost on benefit obligation	43		41
Expected return on plan assets	(29)		(26)
Net actuarial loss recognized in the year	(50)		(30)
Past service cost	(6)		(29)
Total employee benefit expenses	13		10

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

	As at December  31
	2010		2009
	$'000		$'000
Cost of sales	5		12
Research and development expenses	2		3
Selling and marketing expenses	5		(6)
General and administrative expenses	1		1
	13		10

17.   Provisions

		Legal disputes		Royalties to BIRD Foundation		Total
		$'000		$'000		$'000
At 1 January 2010		30		50		80
Charged to profit or loss		-		-		-
At 31 December 2010		30		50		80
Due within one year or less		-		-		-
Due after more than one year		30		50		80
		30		50		80

A.   The Group is currently involved in a legal dispute (see note 24C - contingent liability).

B.   During 2009-2010 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.

18.   Trade and other payables - current

		2010		2009
		$'000		$'000
Trade payables		2,565		1,817
Employees' wages and other related liabilities		543		525
Other payables		33		51
Accrued expenses		177		157
Government authorities		46		-
Related parties		127		57
		3,491		2,607

19.   Short-term bank credit

	Effective interest rate		2010		2009
	%		$'000		$'000
Current maturities of long-term bank loans	5.07%		250		-

20.   Financial instruments - Risk Management

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

·    Foreign currency risk

·    Credit risk

Foreign currency risk

Foreign exchange risk arises when Group operations enter into transactions denominated in a currency other than their functional currency. Management does mitigate that risk by holding cash and cash equivalents and deposit accounts in Israeli NIS.

Credit risks

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

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

With respect to trade receivables, the Group believes that there is not a material credit risk in light of the fact that the Group's policy to assess the credit risk instruments of customers before entering contracts.

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

As indicated above the main currency risk of the Company relates to changes in the exchange rate between US$ and NIS. In 2010 the Company accrued employees compensation costs related to NIS totaling US $4.5 million. In addition the company is working with few key vendors in NIS and the total purchases from them were US $0.8 million in 2010. Therefore, the total material exposed amount to the NIS - US$ exchange rate was US $5.3 million, which indicates that any increase of 1% in the NIS rate against the US $ would increase the costs to the company by approximately US $53,000.

Fair value

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

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

		Carrying amount				Fair value
		2010		2009		2010		2009
		$'000
Financial liabilities:
Long-term loan with fixed interest (1)		2,500		-		2,500		-

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

20.   Financial instruments - Risk Management (Cont.)

Classification of financial instruments by fair value hierarchy:

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

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

Financial assets measured at fair value:

December 31, 2010:

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

December 31, 2009:

		Level 1		Level 2		Level 3
		$'000
Financial assets at fair value through profit or loss:
marketable securities		10,346		-		-

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

December 31, 2010:

		Unlinked		Total
		$'000
Financial liabilities measured at amortized cost		2,500		2,500

21.    Subsidiaries:

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

Name	Country of incorporation	Proportion of ownership interest at 31 December
		2010	2009
AdvantCom Sarl	Switzerland	100%	100%
Global Wave Technologies PVT Limited	India	80%	80%

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. 

22.   Share capital

	Authorized
	2010		2010		2009		2009
	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
	2010		2010		2009		2009
	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

23.     Share-based payment

An option scheme for key Directors and Employees was approved at the company's Annual General Meeting on May 15^th, 2008. Under the plan, options for 1.5 million shares were granted on July 15, 2008. The vesting date of 1st April 2011 and an exercise price of 30 pence (representing approximately 60 cents at the time of grant, 47 cents as of December 31, 2010) per share. The fair value for each option according Black and Scholes option pricing method which was used is 5 pence (approximately 11 cents at the time of grant, 8 cents as of December 31, 2010).

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.

	2010		2010		2009		2009
	weighted average exercise price		Number		weighted average exercise price		Number
	$				$
Outstanding at beginning of year	0.44		1,500,000		0.44		1,500,000
Granted during the year	-		-		-		-
Forfeited during the year	0.46		102,000		-		-
Exercised during the year	-		-		-		-
Lapsed during the year	-		-		-		-
Outstanding at the end of the year	0.47		1,398,000		0.44		1,500,000

The remaining contractual life for the share options outstanding as of December 31, 2010 was 5.25 years (2009 - 6.25 years)

24.     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, 2010 is US$ 470,000.

During the year 2010 the Group did not pay any royalties.

B.    Guarantees

The Group has guarantees in favour of customers in the amount of US$ 576,000. The guarantees are mainly to guarantee advances received from customers.

C.    Contingent liability

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

The lawsuit relates to certain printed circuits in three models of antennas that the Group sells to one of its customers.  Mars claims that the printed circuits are an infringement of Mars' rights in its antennas, raising causes of action under copyright, passing off, unjust enrichment, negligence, breach of statutory duty and the Law for Protection of Integrated Circuits.

The lawsuit seeks monetary damages in the nominal sum of 100,000 NIS, (approximately - US$ 26,300 which it reserves the right to modify in the future) and a permanent injunction, collection of the accused antennas, appointment of a receiver and an accounting of profits.

In addition, Mars petitioned for provisional remedies prior to final judgment, including preliminary injunction, temporary receivership, and collection of the accused antenna.  The Group answered the claims, stating that Mars does not own the copyright in the relevant circuits, that the Law for Protection of Integrated Circuits does not apply to the antennas, that consumers are not confused by any similarity, and other defences.

On 22 December 2005, the District Court partially granted Mars' petition for Provisional remedies and preliminarily enjoined the Group from manufacturing and selling the relevant antennae. On 26 December 2005, the Group moved for a stay of enforcement of the preliminary injunction until the Supreme Court's decision on the Group's anticipated petition for interlocutory appeal. On 26 October 2006, the Supreme Court acknowledges, in part, the Group's claim and cancelled the petition with regard to a specific client for which the antennas were sold.

In addition, on November 3, 2005, the Group filed a complaint against Mars (Civil Case No. 05/2422) in the District Court of Tel Aviv-Yafo for infringement of the Group's design of its radome covers for antennas and its mounting kit.  The lawsuit seeks monetary damages in the nominal sum of 500,000 NIS,

24. Commitments and guarantees (Cont.)

C.    Contingent liability (Cont.)

(approximately US$ 131,510 which it reserves the right to modify in the future), and a permanent injunction.  In its answer, filed January 5, 2006, Mars defended against the Group's claim, itself issuing a counter-claim, stating that the legal action taken by the Group presents improper usage of the legal procedures and therefore is entitled to compensation as a result of damages caused by unfounded claims. On July 2, 2006, the court confirmed the Group's request to combine the two law-suits that were filed. The court also ruled that the hearings will begin on May 9, 2007.

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

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

25.     Transactions with related parties

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

	2010		2009
	$'000		$'000
Purchased Goods	180		127
Management Fee	239		227
Services Fee	160		160
Lease	341		317
	920		831

Compensation of key management personnel of the Group:

	2010		2009
	$'000		$'000
Short-term employee benefits *)	523		509

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

25.     Transactions with related parties (cont.)

All Transactions are made on market value.

As of December 31, 2010 the Group owes to the parent group and related party US $139,000 (2009: US $57,000).

On December 2010 the Company acquired from its largest shareholder, MTI Computers & Software Services (1982) Ltd. ("MTI Computers"), the leasehold interest of its head office located at 11 Hamelacha St., Afek Industrial Park, Rosh-Ha'Ayin, 48091, Israel (the "Property").

The purchase price to be paid by the Company is NIS 18,800,000 (approximately US$ 5.2 Million) plus 5 per cent. Purchase tax (the "Purchase Price"), and this has been calculated on the basis an independent valuation report dated 26 September 2010. Since the Company occupies approximately 75 percent of the Property, following the purchase of the Property by the Company, it had entered into a lease agreement with MTI Computers upon which MTI Computers will continue to occupy approximately 1,100 square meters of the Property (representing the majority of the Property not occupied by the Company). The term of the lease is for an initial period of 5 years, with an option in favor of MTI Computers to extend the lease for an additional 5 year period (the "Option Period"). The rent for the leased area is US$ 10,000 per month throughout the initial period and will be increased by an amount of 10 percent for the Option Period. In addition to the monthly rental payments, MTI Computers will pay to the Company a monthly management payment of US$ 7,150 per month as a contribution towards certain expenses (including insurance, the use of the car park, maintenance services, rates, water and electricity). This amount will be increased by 3 percent on a yearly basis.

26.     Subsequent events

The financial statements were authorized for issue by the board as a whole following their approval on March 14, 2011.

 

END

 

 

FR JIMATMBIBBRB