Q3 Results

RNS Number : 9938R

MTI Wireless Edge Limited

04 November 2013

 



4 November 2013

MTI Wireless Edge Ltd

("MTI" or the "Company")

Financial results for the nine months ended 30 September 2013

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 nine months ended 30 September 2013.

Highlights

·      5% revenue growth YoY to $10.0m (Q1 - Q3 2012: $9.5m)

·      Gross margin improved by two points to 37%

·      Strong performance in military segment (9 month revenue exceeded full 2012 revenue)

·      Both operational and net profit (both were losses last year)

·      EBITDA of $541K in 9 months ($61K in 9 months of 2012 )

·      Balance sheet remains strong (after payment of dividend 0.36p per share in April 2013) with $6.6m in cash, cash equivalents and other current financial assets (30 September 2012: $7.0m) and net office value of $3.4m (30 September 2012: $3.15m) - total equal to 12.3p per share (30 September 2012:  12.3p per share).

·      New customers gained in the 80 GHz sector

Dov Feiner, Chief Executive Officer, commented:

"I am pleased to announce that the Company has made both an operational and a net profit in the first 9 months of this year. Our gross margins improved to 37% due mainly to a strong performance in the military sector.

As we anticipated, the 80 GHz sector continued to develop and this year we have added a number of new customers to our growing list which we believe will contribute to our future revenues and profits. This area will continue to expand as the demand for broadband escalates.

With a 5% year-on-year revenue growth, a strong backlog of orders and a healthy list of new customers the board believes that MTI will continue to grow."

Contacts

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

About MTI Wireless Edge

MTI is engaged in the development, production and marketing of High Quality, Low Cost, Flat Panel Antennas for Commercial & for Military applications. Commercial applications such as: WiMAX, Wireless Networking , RFID readers &, Broadband Wireless Access. With over 40 years experience, supplying antennas 100KHz to 90GHz including directional antennas and Omni directional for outdoor and indoor deployments including Smart Antennas for WiMAX, Wi-Fi, Public Safety, RFID and for Base Stations and Terminals  - Utility Market. Military applications includes a wide range of broadband, tactical and specialized communications antennas, antenna systems and DF arrays installed on numerous airborne, ground and naval, including submarine, platforms worldwide.

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Nine months ended September 30,				Year ended December 31,
	2013		2012		2012
	U.S. $ in thousands
	Unaudited				Audited
Revenues	9,987		9,502		12,711
Cost of sales	6,293		6,168		8,291
Gross profit	3,694		3,334		4,420
Research and development expenses	861		822		1,152
Distribution expenses	1,381		1,324		1,721
General and administrative expenses	1,265		1,517		1,911
Income (loss) from operations	187		(329)		(364)
Finance expense	146		215		186
Finance income	15		191		229
Profit (Loss) before income tax	56		(353)		(321)
Income tax (tax benefit)	(143)		2		(75)
Net income (loss)	199		(355)		(246)
Other comprehensive income (net of tax):
Items not to be reclassified to profit or loss in subsequent periods:
Re-measurement of defined benefit plans	-		-		53
Total comprehensive income (loss)	199		(355)		(193)
Net income (loss) Attributable to:
Owners of the parent	162		(448)		(365)
Non-controlling interest	37		93		119
	199		(355)		(246)
Total comprehensive income (loss) Attributable to:
Owners of the parent	162		(448)		(312)
Non-controlling interest	37		93		119
	199		(355)		(193)
Net Earnings (loss) per share
Basic and Diluted (dollars per share)	0.0031		(0.0087)		(0.0071)
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 nine months period ended September 30, 2013:

	Attributed to owners of the parent
	Share capital		Additional paid-in capital		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 at January 1, 2013 (Audited)	109		14,945		220		2,313		17,587		156		17,743
Changes during the nine months period     ended September 30, 2013 (Unaudited):
Comprehensive income for the period	-		-		-		162		162		37		199
Dividend paid	-		-		-		(299)		(299)		-		(299)
Share based payment	-		-		32		-		32		-		32
Balance at September 30, 2013 (Unaudited)	109		14,945		252		2,176		17,482		193		17,675

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

INTERIM CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY

For the nine months period ended September 30, 2012:

	Attributed to owners of the parent
	Share capital		Additional paid-in capital		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 at January 1, 2012 (Audited)	109		14,945		176		2,625		17,855		37		17,892
Changes during the nine month period     ended September 30, 2012 (Unaudited):
Comprehensive income (loss) for the period	-		-		-		(448)		(448)		93		(355)
Share based payment	-		-		33		-		33		-		33
Balance at September 30, 2012 (Unaudited)	109		14,945		209		2,177		17,440		130		17,570

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

INTERIM CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY

For the year ended December 31, 2012:

	Attributable to owners of the parent
	Share capital		Additional paid-in capital		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, 2012	109		14,945		176		2,625		17,855		37		17,892
Changes during 2012:
Net Loss for the year	-		-		-		(365)		(365)		119		(246)
Other comprehensive income	-		-		-		53		53		-		53
Total comprehensive income (loss) for the year	-		-		-		(312)		(312)		119		(193)
Share based payment	-		-		44		-		44		-		44
Balance at December 31, 2012	109		14,945		220		2,313		17,587		156		17,743

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

INTERIM CONSOLIDATED STATEMENT OF

FINANCIAL POSITION

	30.9.2013		30.9.2012		31.12.2012
	U.S. $ in thousands
	Unaudited				Audited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	944		4,657		4,648
Other current financial assets	5,704		2,371		2,503
Trade receivables	4,856		4,561		4,373
Other receivables	636		663		520
Current tax receivables	110		-		-
Inventories	2,912		3,050		2,947
	15,162		15,302		14,991
NON-CURRENT ASSETS:
Long term prepaid expenses	39		35		45
Property, plant and equipment	5,324		5,530		5,478
Investment property	1,283		1,319		1,310
Deferred tax assets	225		185		220
Goodwill	406		406		406
	7,277		7,475		7,459
Total assets	22,439		22,777		22,450

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

INTERIM CONSOLIDATED STATEMENT OF

FINANCIAL POSITION

	30.9.2013		30.9.2012			31.12.2012
	U.S. $ In thousands
	Unaudited				Audited
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term bank credit	250		250		250
Trade payables	1,532		1,486		1,404
Other accounts payables	730		608		603
Current tax payables	145		232		209
	2,657		2,576		2,466
NON- CURRENT LIABILITIES:
Loans from banks	1,625		1,875		1,813
Employee benefits	310		274		256
Provisions	172		482		172
	2,107		2,631		2,241
Total liabilities	4,792		5,207		4,707
EQUITY
Equity attributable to owners of the parent
Share capital	109		109		109
Additional paid-in capital	14,945		14,945		14,945
Capital reserve from share-based payment transactions	252		209		220
Retained earnings	2,176		2,177		2,313
	17,482		17,440		17,587
Non-controlling interest	193		130		156
Total equity	17,675		17,570		17,743
Total equity and liabilities	22,439		22,777		22,450

November 3, 2013
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

			Nine months ended September 30,						Year ended December 31,
		2013			2012			2012
		U.S. $ in thousands
		Unaudited						Audited
Cash Flows from Operating Activities:
Net income (loss) for the period		199			(355)		(193)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		322			357		482
Loss (gain) from other current financial assets		59			(168)		(210)
Equity settled share-based payment expense		32			33		44
Finance expenses		74			84		111
Income tax		(143)			2		(75)
Changes in operating assets and  liabilities:
Decrease (increase) in inventories		35			(54)		49
Decrease (Increase) in trade receivables		(483)			713		901
Increase in other accounts receivables and prepaid expenses		(110)			(166)		(33)
Increase (decrease) in trade and other accounts payables		260			(818)		(894)
Increase in provisions		-			386		76
Increase (decrease) in employee benefits, net		54			9		(9)
Interest paid		(74)			(84)		(111)
Income tax received (paid)		(36)			225		244
Net cash provided by (used) in operating activities		189			164		382

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

 INTERIM CONSOLIDATED STATEMENTS OF

CASH FLOWS

		Nine months ended September 30,				Year ended December 31,
		2013		2012		2012
		U.S. $ in thousands
		Unaudited				Audited
Cash Flows From Investing Activities:
Sale (purchase) of short-term investment, net		(3,260)		4,448		4,358
Purchase of property, plant and equipment		(146)		(392)		(467)
Net cash provided by (used in)    investing activities		(3,406)		4,056		3,891
Cash Flows From Financing Activities:
Dividend paid to the holders of the parent		(299)		-		-
Repayment of long-term loan from banks		(188)		(188)		(250)
Net cash provided by (used in)    financing activities		(487)		(188)		(250)
Increase (decrease) in cash and  cash equivalents		(3,704)		4,032		4,023
Cash and cash equivalents  at the beginning of the period		4,648		625		625
Cash and cash equivalents at the end of the period		944		4,657		4,648

Appendix A - Non-cash activities:

			Nine months ended September 30,				Year ended December 31,
			2013		2012		2012
			U.S. $ in thousands
		Unaudited					Audited
Purchase of property, plant and equipment   with trade payables credit		4			20		9

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

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - General:

A.    Corporate information:

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

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

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

B.    Assets and Liabilities in foreign currencies

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

	September 30,			December 31,
	2013		2012	2012
NIS (in Dollar per 1 NIS)	0.283		0.256	0.268

	Nine months ended September 30,			Year ended December 31,
	2013		2012	2012
	%		%	%
NIS	5.54		(2.33)	2.36

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 Accounting Standard No. 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 December 31, 2012 was approved by the board on February 19, 2013. The report of the auditors on those financial statements was unqualified. The interim consolidated financial statements as of September 30, 2013 have not been audited.

The interim consolidated financial information should be read in conjunction with the annual financial statements as of 31 December, 2012 and for the year ended on that date and with the notes thereto,

The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2012 are applied consistently in these interim consolidated financial statements.

Note 2 - Significant Accounting Policies (CONT.): 

Adoption of New Standards, Amendments and Interpretations Effective for the first time from January 1, 2013:

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

The revised IAS 19 includes a number of changes to the recognition and measurement of defined benefit plans and termination benefit and to the disclosures for all employee benefits within IAS 19. Set forth below is a summary of the key changes:

-    "Actuarial gains and losses" are renamed "re-measurements" and recognized immediately in OCI.

-    Past-service costs recognized immediately in the period of a plan amendment including unvested benefits.

-    Annual expenses for a funded benefit plan include net interest expense or income, calculated by applying the discount rate to the net defined benefit asset or liability.

-    The distinction between short-term and long-term benefits for measurement purposes is be based on when payment is expected in full, not when payment can be demanded.

-    A clarification that any benefit that has a future-service obligation is not a termination benefit. A liability for a termination benefit is recognized when the entity can no longer withdraw the offer of the termination benefit or recognizes any related restructuring costs.

The amendment is effective for periods beginning on or after 1 January 2013. Earlier application is permitted.

The amendment has been applied retrospectively commencing from the financial statements for periods beginning on January 1, 2013 (see note 3).

-        Amendment to IAS 1 Presentation of Financial Statements

The amendments to IAS 1 revised the presentation of other comprehensive income (OCI). Separate subtotals are required for items which may subsequently be recycled through profit or loss and items that will not be recycled through profit or loss. The Group has updated the presentation of OCI on the face of the Statement of Comprehensive Income.

The following new standards and amendments apply for the first time in 2013. However, they do not impact the annual consolidated financial statements of the Group or the interim condensed consolidated financial statements of the Group.

-     IFRS 10 Consolidated Financial Statements

-     IFRS 12 - Disclosure of Interests in Other Entities

-     IFRS 13 Fair Value Measurement

-     IFRS 7 Financial Instruments: Disclosures: Amendments - Offsetting Financial Assets and Financial Liabilities

-     Annual Improvements to IFRSs (2009 - 2011 Cycle)

Note 3 - Adoption of New Amendments:

Following the Adoption of the IAS 19 (as revised in 2011) Employee Benefits as described above (note 2), here is the effects of the change on the financial statements:

	Year ended December 31, 2012
	$'000
	As previously reported	IAS 19	As presented in these financial statements
	Audited
General and administrative expenses	1,858	53	1,911
Loss before income tax	(268)	(53)	(321)
Net loss	(193)	(53)	(246)
Re measurement of benefit plans	-	53	53
Total comprehensive loss	(193)	-	(193)
Net loss per share Basic and Diluted (dollars per share)	(0.0060)	(0.0011)	(0.0071)

Note 4 - SEGMENTS:

The following table's present revenue and profit information regarding the Group's operating segments for the nine months ended September 30, 2013 and 2012, respectively and for the year ended December 31, 2012.

Nine months ended September 30, 2013 (Unaudited)
		Commercial		Military		Total
		$'000
Revenue
External		7,552		2,435		9,987
Total		7,552		2,435		9,987
Segment income (loss)		(56)		243		187
Unallocated corporate expenses
Finance expenses, net						131
Profit before income tax						56
Other
Depreciation and other non-cash expenses		272		49		322

Note 4 - SEGMENTS (CONT.):

Nine months ended September 30, 2012 (Unaudited)
		Commercial		Military		Total
		$'000
Revenue
External		8,049		1,453		9,502
Total		8,049		1,453		9,502
Segment income (loss)		285		(614)		(329)
Unallocated corporate expenses
Finance expenses, net						24
loss before taxes on income						(353)
Other
Depreciation		322		35		357

Year ended December 31, 2012 (audited)
		Commercial		Military		Total
		$'000
Revenue
External		10,686		2,025		12,711
Total		10,686		2,025		12,711
Segment income (loss)		399		(710)		(311)
Unallocated corporate expenses
Re-measurement of defined benefit plans						(53)
Finance income, net						43
loss before income tax						(321)
Other
Depreciation and other non-cash expenses		434		48		482

Note 5 -TRANSACTIONS WITH RELATED PARTIES:

The Parent Company and other related parties provide certain services to the Group as follows:

		Nine months ended      September 30,				Year ended December 31,
		2013		2012			2012
		U.S. $ in thousands
		Unaudited					Audited
Purchased Goods		218		208			268
Management Fee		240		215			282
Services Fee		120		120			160
Lease income		(90)		(156)			(120)

Compensation of key management personnel of the Group:

		Nine months ended      September 30,				Year ended December 31,
		2013		2012			2012
		U.S. $ in thousands
		Unaudited					Audited
Short-term employee benefits *)		483		465			605

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

All Transactions are made at market value.

As of September 30, 2013, September 30, 2012 and December 31, 2012 the parent company and related parties owe to the Group US $83,000, US $72,000 and US $30,000 respectively. 

Note 6 - SIGNIFICANT EVENTS:

A.        On April 4, 2013 the company paid a dividend of 0.58 cents per share totaling approximately $299,000.

B.        Amendment to Service Agreement with controlling shareholder :

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

Note 6 - SIGNIFICANT EVENTS (CONT.):

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

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

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

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

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

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

C.        New Option Plan

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

Note 7 - SUBSEQUENT EVENTS:

On October 23, 2013 pursuant to an approval of the Company shareholders meeting, a guaranty agreement for three years between the Company and the Parent Company was signed.

In which The Parent Company has entered into an agreement with a commercial bank (the "Lender") whereby the Lender has agreed to extend a loan of up to an aggregate amount of US$1,000,000 (the "Loan Amount") and the Parent Company has approached the Company to request that it provides a guarantee to the Lender for the Loan Amount pursuant to specific terms, along with:

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

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

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

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

 

END

 

 

QRTGMMGMMMDGFZM