Half Yearly Report

RNS Number : 5831Q

MTI Wireless Edge Limited

05 August 2010

 



MTI WIRELESS EDGE LTD

FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 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 unaudited results for the six months ended 30 June 2010.

Highlights

·      Revenues for H1 of US$6.15m (H1 2009: US$6.87m)

·      Revenues for Q2 (US$3.3m) up 19% compared to Q1 2010 (US$2.8m)

·      H1 loss before tax of US$552k (H1 2009: profit US$119k)

·      US$2.2m contract win for military application during the period

·      US$700k contract win from an existing client for fixed broadband wireless antennas, post period end

·      Net cash and equivalents at 30 June 2010 of US$12.3m representing 15p per share

Dov Feiner, Chief Executive Officer, commented:

'Whilst the first six months of 2010 have been a difficult period for the Company, we are encouraged by the recent second quarter performance which shows a healthy improvement on the first quarter.  Our continued investment in R & D and Marketing has resulted in a revenue increase of 19% for this quarter and a return to operational profitability in the second quarter.

Our key market of fixed broadband showed improvement in the second quarter of the year compared to the first quarter, and the product launch for our 60-90GHZ antennas for short range backhaul communications remain on schedule for the second half of 2010. The good demand for our military division's products, reported last year, has continued and resulted in a US$2.2m contract win in June of which $0.5m is likely to be recognized as revenue in 2010, maintaining the Company's military order book going forward. Our RFID operations also show an on going healthy growth. Overall therefore our order book so far this quarter continues the improved trend of the second quarter.

During the period, management has continued its rigorous control on costs, whilst maintaining the Company's position as market leaders. This makes us very well-placed to benefit from any upturn in the market. The sector continues to be challenging but the Company continues to retain a strong balance sheet and we remain confident in the long term prospects.'

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

About MTI Wireless Edge Ltd.

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 (LOSS)

	Six months ended June 30,				Year ended December 31,
	2010		2009		2009
	U.S. $ in thousands
	Unaudited				Audited
Revenues	6,145		6,865		13,453
Cost of sales	4,064		4,560		8,756
Gross profit	2,081		2,305		4,697
Research and development expenses	678		486		1,114
Selling and marketing expenses	1,060		960		2,050
General and administrative expenses	807		746		1,469
Profit (loss) from operations	(464)		113		64
Finance expense	102		111		128
Finance income	14		117		110
Profit (loss) before tax	(552)		119		46
Tax expense (income)	(17)		126		34
Net and comprehensive Income (loss)	(535)		(7)		12
Attributable to:
Owners of the parent	(529)		(2)		17
Non-controlling interest	(6)		(5)		(5)
	(535)		(7)		12
Earnings per share
Basic and Diluted (dollars per share)	(0.0103)		(0.0001)		0.0003
Weighted average number    of shares outstanding
Basic and Diluted	51,571,990		51,571,990		51,571,990

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

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the three months ended June 30, 2010:

	Attributed to owners of the parent
	Share capital		Additional paid-in capital		Employee equity benefits reserve		Retained earnings		Total		Non-controlling interest		Total equity
	U.S. $ in thousands
	Unaudited
Balance at January 1, 2010 (Audited)	109		14,945		88		4,433		19,575		-		19,575
Changes during the three months     ended June 30, 2010:
Total comprehensive loss for the period	-		-		-		(529)		(529)		(6)		(535)
Share based payment	-		-		21		-		21		-		21
Balance at June 30, 2010	109		14,945		109		3,904		19,067		(6)		19,061

The ac companying notes form an integral part of the financial statements.

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended June 30, 2009:

	Attributed to owners of the parent
	Share capital		Additional paid-in capital		Employee equity benefits reserve		Retained earnings		Total		Non-controlling interest		Total equity
	U.S. $ in thousands
	Unaudited
Balance at January 1, 2009 (Audited)	109		14,945		29		5,014		20,097		-		20,097
Changes during the six months     ended June 30, 2009:
loss for the period	-		-		-		(2)		(2)		(5)		(7)
Total comprehensive loss for the period	-		-		-		(2)		(2)		(5)		(7)
Issue of capital to non-controlling interest in     subsidiary	-		-		-		-		-		5		5
Dividends	-		-		-		(598)		(598)		-		(598)
Share based payment	-		-		30		-		30		-		30
Balance at June 30, 2009	109		14,945		59		4,414		19,527		-		19,527

The ac companying notes form an integral part of the financial statements.

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended December 31, 2009:

	Attributed to owners of the parent
	Share capital		Additional paid-in capital		Employee equity benefits reserve		Retained earnings		Total		Non-controlling interest		Total equity
	U.S. $ in thousands
	Audited
Balance at January 1, 2009	109		14,945		29		5,014		20,097		-		20,097
Changes during 2009:
Total comprehensive loss 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 at December 31, 2009	109		14,945		88		4,433		19,575		-		19,575

The ac companying notes form an integral part of the financial statements.

INTERIM CONSOLIDATED STATMENT OF FINANCIAL POSITION

	30.6.2010		30.6.2009		31.12.2009
	U.S. $ in thousands
	Unaudited				Audited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	12,295		3,080		3,212
Other financial assets	-		10,420		10,346
Trade receivables	4,653		4,939		4,405
Other receivables	404		144		198
Current taxes receivables	9		-		-
Inventories	2,702		2,236		2,318
Total current assets	20,063		20,819		20,479
LONG TERM PREPAID EXPENSES	63		44		51
PROPERTY AND EQUIPMENT, NET	1,567		1,674		1,621
GOODWILL	406		406		406
DEFERRED TAX ASSETS	138		108		121
	22,237		23,051		22,678

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

INTERIM CONSOLIDATED STATMENTE OF FINANCIAL POSITION

	30.6.2010		30.6.2009			31.12.2009
	U.S. $ In thousands
	Unaudited				Audited
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables	2,025		2,070		1,974
Other accounts payables	789		791		633
Other financial liabilities	35		-		-
Tax liability	-		368		173
Total current liabilities	2,849		3,229		2,780
NON- CURRENT LIABILITIES:
Employee benefits	248		217		243
Provisions	79		78		80
Total non-current liabilities	327		295		323
EQUITY
Share capital	109		109		109
Additional paid-in capital	14,945		14,945		14,945
Employee equity benefits reserve	109		59		88
Retained earnings	3,904		4,414		4,433
Equity attributable to owners of the parent	19,067		19,527		19,575
Non-controlling interest	(6)		-		-
Total equity	19,061		19,527		19,575
	22,237		23,051		22,678

August 5, 2010
Date of approval of financial statements		Moshe Borovitz Finance Director	Dov Feiner Chief Executive Officer	Zvi Borovitz Non-executive Chairman

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

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

			Six months ended June 30,						Year ended December 31,
		2010			2009			2009
		U.S. $ in thousands
		Unaudited			Unaudited			Audited
Cash Flows from Operating Activities:
Net profit (loss)		(535)			(7)			12
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		184			184			374
Loss (gain) from short-term investments		40			(156)			(71)
Equity settled share-based payment expense		21			30			59
Tax expense (Income)		(17)			126			34
Changes in operating assets and  liabilities:
Decrease (increase) in inventories		(384)			335			253
Decrease (increase) in trade receivables		(248)			959			1,493
Decrease (increase) in other accounts    receivables for short and long term		(218)			78			17
Increase (decrease) in trade payables		47			(482)			(905)
Increase (decrease) in  other accounts payables		156			(176)			-
Increase (decrease) in provisions		(1)			51			11
Increase (decrease) in employee benefits		5			(14)			50
Income tax paid		(182)			(123)			(239)
Net cash (used in) provided by operating activities		(1,132)			805			1,088

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

 INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

		Six months ended June 30,					Year ended December 31,
		2010		2009			2009
		U.S. $ in thousands
		Unaudited				Audited
Cash Flows From Investing Activities:
Sale (purchase) of short-term investment, net		10,341		(737)			(748)
Purchase of property and equipment		(126)		(201)			(341)
Net cash (used in) provided    by investing activities		10,215		(938)			(1,089)
Cash Flows From Financing Activities:
Dividend paid to the owners of the parent		-		(598)			(598)
Issue of capital to minority in subsidiary		-		5			5
Net cash used in financing activities		-		(593)			(593)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		9,083		(726)			(594)
CASH AND CASH EQUIVALENTS  AT BEGINNING OF PERIOD		3,212		3,806			3,806
CASH AND CASH EQUIVALENTS   AT END OF PERIOD		12,295		3,080			3,212

Appendix A - Non-cash activities:

		Six months ended June 30,				Year ended December 31,
		2010		2009			2009
		U.S. $ in thousands
		Unaudited				Audited
Purchase of property and equipment   against trade payables		11		10			7

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

Note 1 - General:

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

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

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

Note 2 - Significant Accounting Policies:

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

The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2009 are applied consistently in these interim consolidated financial statements, except for the impact of the adoption of the Standards and Interpretations described below.

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

These standards have been applied prospectively from 1 January 2010. The implementation of these standards will affect future acquisitions and transactions with non-controlling interests.

The principal changes following the adoption of these Standards are:

                                       (a) IFRS 3 previously prescribes that goodwill, as opposed to the acquiree's other identifiable assets and liabilities, should  be measured as the excess of the cost of the acquisition over the acquirer's share in the fair value of the identifiable assets, net on the acquisition date. According to the Revised Standards, goodwill can be measured at its full fair value and not only based on the acquired part, this in respect of each business combination transaction measured separately.

          (b) A 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 the acquisition cost in the measurement period, should not be simultaneously recognized as goodwill adjustment. Normally, the contingent consideration is considered a financial derivative within the scope of IAS 39 and presented at fair value through profit or loss.

          (c) Direct acquisition costs attributed to a business combination transaction is recognized in the comprehensive income statement as incurred as opposed to the previous requirement of  carrying them as part of the consideration of the cost of the business combination, which has been removed.

Note 2 - Significant Accounting POLICIES (Cont.):

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

          (d) A minority transaction, whether a sale or an acquisition, will be accounted for as an equity transaction and will therefore not be recognized in the statement of income or have any effect on the amount of goodwill, respectively.

          (e) A subsidiary's losses, although resulting in the subsidiary's deficiency, is allocated between the parent company and non-controlling interests, even if the non-controlling interests has not guaranteed or has no contractual obligation of sustaining the subsidiary or carrying out another investment.

          (f) On the loss of control of a subsidiary, the remaining investment in the subsidiary, if any, is revalued to fair value against gain and loss from the sale and this fair value will represent the cost basis for the purpose of subsequent treatment.

-        Amendments to IFRS 2 - Group Cash-settled Share-based Payment Transactions

In June 2009 the International Accounting Standards Board amended IFRS 2 to clarify its scope and the accounting for group cash-settled share-based payment transactions in the separate or individual financial statements of the entity receiving the goods or services when that entity has no obligation to settle the share based payment transaction. The amendments also incorporate the guidance contained in the following Interpretations:

• IFRIC 8 Scope of IFRS 2

• IFRIC 11 IFRS 2-Group and Treasury Share Transactions.

The implementation of Amendments to IFRS 2 has had no impact on the reported results or financial position of the Company.

-        Improvements to International Financial Reporting Standards 2009

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

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

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

Note 2 - Significant Accounting POLICIES (Cont.):

The following new standards, new interpretations and amendments to standards and interpretations have been issued but are not effective for the financial year beginning 1 January 2010 and have not been early adopted:

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

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

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

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

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

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

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

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

-    Revised IAS 24, 'Related party disclosures', issued in November 2009. It supersedes IAS 24, 'Related party disclosures', issued in 2003. The revised IAS 24 is required to be applied from 1 January 2011. Earlier application, in whole or in part, is permitted.

-    'Classification of rights issues' (Amendment to IAS 32), issued in October 2009. For rights issues offered for a fixed amount of foreign currency, current practice appears to require such issues to be accounted for as derivative liabilities. The amendment states that if such rights are issued pro rata to all the entity's existing shareholders in the same class for a fixed amount of currency, they should be

Note 2 - Significant Accounting POLICIES (Cont.):

The following new standards, new interpretations and amendments to standards and interpretations have been issued but are not effective for the financial year beginning 1 January 2010 and have not been early adopted(Cont.):

classified as equity regardless of the currency in which the exercise price is denominated. The amendment should be applied for annual periods beginning on or after 1 February 2010. Earlier application is permitted.

Note 3 - SEGMENTS:

The following tables present revenue and profit information regarding the Group's operating segments for the six months ended 30 June 2010 and 2009, respectively.

Six months ended June 30, 2010 (Unaudited)
		Commercial		Military		Total
		$'000
Revenue
External		4,824		1,321		6,145
Total		4,824		1,321		6,145
Results
Segment Profit (loss) from operations		(522)		58		(464)
Other
Depreciation and other    non-cash expenses		120		64		184

Six months ended June 30, 2009 (Unaudited)
		Commercial		Military		Total
		$'000
Revenue
External		5,227		1,638		6,865
Total		5,227		1,638		6,865
Results
Segment Profit (loss) from operations		61		52		113
Other
Depreciation and other    non-cash expenses		120		64		184

 (*) The Group cannot distinguish between Commercial and Military assets and liabilities, due to the fact that some of the assets and liabilitiesare used by both segments.

Note 4 -TRANSACTIONS WITH RELATED PARTIES:

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

		Six months ended June 30,				Year ended December 31,
		2010		2009			2009
		U.S. $ in thousands
		Unaudited				Audited
Purchased Goods		100		76			127
Management Fee		115		108			227
Services Fee		80		80			160
Lease		172		159			317
Total		467		423			831

All Transactions are made on market value.

As of June 30, 2010 the parent group and related party owes to the Group US $229,000. On 30 June 2009 the Group owed to the parent group and related party US $142,000.

 

END

 

 

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