REG - MTI Wireless Edge - Final Results and Scrip Dividend Alternative <Origin Href="QuoteRef">MWEE.L</Origin> - Part 3
16/02/2018 07:05
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and
2. 60,000 NIS to Mr. Moni Borovitz for his service as 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 of
the 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 in section 25 above.
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 at a shareholders' meeting held on May 18,
2016. According to the amendment, the agreement is in place for 3 years
starting June 1, 2016, 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:
1. 25,000 NIS to Mr. Zvi Borovitz (raised from 20,000 NIS prior to
this approval) for his service as a chairman of the board of the Company in
capacity of at least 25% and
2. 65,000 NIS to Mr. Moni Borovitz (raised from 60,000 NIS prior to
this approval) for his service as 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 with 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 US$400,000 per
year (raised from US$250,000 prior to this approval), prior to any bonuses
grant in the Company. In case of a loss in a year the bonus for the next year
will be for a net profit exceeding US$400,000 above the loss made in the
previous year. In addition Mr. Moni Borovitz shall be entitled to a bonus
equal to two months 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
US$100,000 for Mr. Zvi Borovitz.
The agreement also states that the Company shall reimburse the management of
the 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.
On January 12, 2016, following an approval of the remuneration committee, the
board of directors and shareholder's meeting a bonus of 120,000 NIS was
granted to the Company's CFO for his contribution on the acquisition made.
B. Transaction with the Parent Group:
The Parent Group and other related party provides certain services to the
Group as follows:
2017 2016
$'000 $'000
Purchased Goods 252 369
Management Fee 498 428
Services Fee 259 249
Lease (72) (72)
Compensation of key management personnel of the Group:
2017 2016
$'000 $'000
Short-term employee benefits *) 920 810
*) Including Management fees for the CEO, Directors Executive Management and
other related parties.
All Transactions are made on market value. As of December 31, 2017 and 2016
the Group owed to the parent group and related party US $467,000 and US
$207,000 respectively.
28. Subsequent events
A. The Board of directors has decided to declare a dividend of 2 cent
per share being approximately $1,072,000 the dividend has a scrip option (see
note 9).
B. The financial statements were authorized for issue by the board as
a whole following their approval on February 15, 2018.
This information is provided by RNS
The company news service from the London Stock Exchange
As at December 31
2017 2016
$'000 $'000
Year begin 977 983
Foreign exchange loss 107 15
Interest cost 36 30
Current service cost 37 17
Benefits paid (31) (78)
Re measurements loss (gain)
Actuarial loss (gain) from financial assumptions 35 (16)
Adjustments (experience) (38) 26
Year end 1,123 977
19. Employee benefits (cont.)
Supplementary information
1. The Group's liabilities for severance pay retirement and pension
pursuant to Israeli law and employment agreements are recognized by full - 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 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.
3. Principal nominal actuarial assumptions:
As at December 31,
2017 2016
Discount rate on plan liabilities 3.02% 3.31%
Expected increase in pensionable salary 2% 2%
4. Sensitivity test for changes in the expected rate of salary increase or
in the discount rate of the plan assets and liability:
Change in defined benefit obligation
As at December 31,
2017 2016
$'000 $'000
The change as a result of:
Salary increase of 1 % 58 66
Salary decrease of 1 % (49) (54)
The change as a result of:
Increase of 1% in discount rate (47) (50)
Decrease of 1% in discount rate 56 63
Year ended December 31,
2017 2016
$'000 $'000
Expenses in respect of defined contribution plans 352 325
20. Trade and other payables
As at December 31,
2017 2016
$'000 $'000
Trade payables 2,239 2,285
Employees' wages and other related liabilities 1,062 776
Advances from trade receivables 21 28
Accrued expenses 431 534
Government authorities 101 20
Others 707 434
4,561 4,077
21. Current maturities
As at December 31,
Interest rateas at December 31, 2017 2017 2016
% $'000 $'000
Current maturities In NIS Prime+0.6 7 15
Current maturities In NIS 3.5 577 520
Current maturities In SA ZAR 10 14 17
Current maturities In US $ 4.9 250 250
Total Current maturities and short-term bank loans 848 802
Changes in liabilities arising from financing activities
Reconciliation of the changes in liabilities for which cash flows have been,
or will be classified as financing activities in the statement of cash flows
Loans and borrowings
$'000
At 1 January 2017 2,466
Changes from financing cash flows:
Proceeds from long term loan received from banks 60
Repayment of long-term loans from banks (829)
Total changes from financing cash flows (769)
Effects of foreign exchange 86
At 31 December 2017 1,783
22. Financial instruments - Risk Management
The Group is exposed through its operations to the following financial risks:
Foreign currency risk
Liquidity risk
Credit risk
Foreign currency risk
Foreign exchange risk arises when Group companies enter into transactions
denominated in a currency other than their functional currency. Management
mitigates that risk by holding some cash and cash equivalents and deposit
accounts in NIS. The company also purchases from time to time some forwards on
the NIS/$ exchange rate to hedge part of the salaries costs. As of December
2017 no such transactions were open.
Since the purchase of Mottech the Group has an additional currency risk due to
its subsidiaries activity.
Liquidity Risk
Liquidity risk is the risk that arises when the maturity of assets and
liabilities does not match. An unmatched position potentially enhances
profitability, but can also increase the risk of insufficient liquid means to
fulfil its immediate obligations. The Group's objective is to maintain a
balance between continuity of funding and flexibility. The Group have
sufficient availability of cash including the short-term investment of cash
surpluses and the raising of loans to meet its obligations by cash management,
subject to Group policies and guidelines.
The table below summarizes the maturity profile of the Group's financial
liabilities based on contractual undiscounted payments (including interest
payments):
December 31, 2017 Less than one year 1 to 2 years 2 to 3years 3 to 4 years > 4 years Total
$'000
Loans from banks 907 607 300 63 - 1,877
Trade payables 2,239 - - - - 2,239
Payables 1,138 - - - - 1,138
4,284 607 300 63 - 5,254
December 31, 2016 Less than one year 1 to 2 years 2 to 3years 3 to 4 years > 4 years Total
$'000
Loans from banks 889 862 566 261 64 2,642
Trade payables 2,285 - - - - 2,285
Payables 968 - - - - 968
4,142 862 566 261 64 5,895
Credit risks
Financial instruments which have the potential to expose the Group to credit
risks are mainly deposits accounts, trade receivables and other receivables.
The Group holds cash and cash equivalents and deposit accounts in big banking
institutions in Israel and in the Switzerland, thereby substantially reducing
the risk to suffer credit loss. With respect to trade receivables, the Group
believes that there is no material credit risk which is not provided in light
of 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.
Fair value
The carrying amount of cash and cash equivalents, trade receivables, other
accounts receivable, credit from banks and others, trade payables and other
accounts payable approximate their fair value.
Sensitivity tests relating to changes in market price of listed securities
The Group has performed sensitivity tests of principal market risk factors
that are liable to affect its reported operating results or financial
position. The sensitivity tests present the profit or loss and change in
equity (before tax) in respect of each financial instrument for the relevant
risk variable chosen for that instrument as of each reporting date.
The test of risk factors was determined based on the materiality of the
exposure of the operating results or financial condition of each risk with
reference to the functional currency and assuming that all the other variables
are constant. The sensitivity tests for listed investments with quoted market
price (bid price) were performed on possible changes in these market prices.
The Group is not exposed to cash flow risk due to interest rate since the
long-term loan bares fixed interest.
The following table demonstrates the carrying amount and fair value of the
groups of financial instruments that carrying amounts does not approximate
fair value:
Carrying amount Fair value
2017 2016 2017 2016
Financial liabilities: $'000
Long-term loan with interest (1) 1,783 2,466 1,785 2,456
(1) The fair value of long-term loan received with fixed interest is
based the present value of cash flows using interest rate currently available
for loan with similar terms.
Reconciliation of fair value measurements that are categorized within Level 3
of the fair value hierarchy:
For the year ended December 31,
2017 2016
$'000 $'000
Balance as of January 1 - 92
Profit recognized in Profit or loss: - (92)
Total contingent consideration liability - -
Linkage terms of financial liabilities by groups of financial instruments
pursuant to IAS 39
December 31, 2017:
NIS Unlinked S.A Rand Total
$'000
Financial liabilities measured at amortized cost 888 813 82 1,783
December 31, 2016:
NIS Unlinked S.A Rand Total
$'000
Financial liabilities measured at amortized cost 1,343 1,063 60 2,466
23. Subsidiaries:
The principal subsidiaries of Company, all of which have been consolidated in
these consolidated financial statements, are as follows:
Name Country of incorporation Proportion of ownership interest at 31 December Held by
2017 2016
AdvantCom Sarl Switzerland 100% 100% M.T.I Wireless Edge
Global Wave Technologies PVT Limited India 80% 80% AdvantCom Sarl
Mottech water solutions LTD Israel 100% 100% M.T.I Wireless Edge
Aqua water control solution LTD Israel 100% 100% Mottech water solutions
Mottech Water Management (pty) LTD South Africa 85% 85% Mottech water solutions
Mottech Water Management (pty) LTD Australia 97.5% 97.5% Mottech water solutions
Mottech USA Inc United states 100% 100% Aqua water control solution
24. Share capital
Authorized
2017 2017 2016 2016
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
2017 2017 2016 2016
Number NIS Number NIS
Ordinary shares of NIS 0.01 each at beginning of the year 51,779,490 517,795 51,571,990 515,720
Changes during the year
Scrip dividend 1,022,328 10,223 - -
Exercise of options to share capital 822,500 8,225 207,500 2,075
At end of the year 53,624,318 536,243 51,779,490 517,795
25. Share-based payment
An Option Plan was adopted by the Company at the shareholders meeting held on
July 5, 2013. Under the Plan, all previous plans cancelled and the new plan
entered into effect. The new plan includes total of 2 million options to be
converted to 2 million shares of the Company (approximately 4% of the
company's outstanding shares) at a price of 9.5 pence per share (approximately
15 cents).
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 22, 2013, providing the Company, the employees and the
trustee of the plan to submit the documentation required within 60 days from
approval. As part of the grant of this plan an allocation of 280,000, 250,000
and 200,000 options was granted to the CEO, CFO and the Chairman of the board,
respectively.
The weighted average fair value of the options as at the grant date was 2
pence (approximately 3 cents) per option, and was estimated using a Black and
Scholes option pricing model based on the following significant data and
assumptions:
Share price - 7 pence (representing approximately 11 cents)
Exercise price - 9.5 pence (representing approximately 15 cents)
Expected volatility - 25.90%
Risk-free interest rate - 0.8%
And expected average life of options 4.375 years
On May 18, 2016 a new option scheme for key Employees was approved at the
Company's Annual General Meeting. Under the plan, options to purchase 800
thousands ordinary shares were granted (each option to one ordinary share) at
a price of 27 pence per share (approximately 33 cents). This represents
approximately 1.5% of the Company's current issued and voting share capital on
a fully diluted basis. The vesting period of the options shall be as follows:
2 years for 50% of the options, 3 years for additional 25% of the options and
4 years for the reminder of the option.
Unexercised options expire nine years after date of the grant after which they
will be void. Options are forfeited when the employee leaves the Company.
There is no cash settlement of the options. The weighted average fair value of
the options as at the grant date is 6 pence (approximately 9 cents) per
option, and was estimated using a Black and Scholes option pricing model based
on the following significant data and assumptions:
Share price - 19.88 pence (representing approximately 29 cents)
Exercise price - 27 pence (representing approximately 39 cents)
Expected volatility - 45.34%
Risk-free interest rate - 0.85%
And expected average life of options 4.375 years
The volatility measured at the standard deviation of expected share price
returns is based on the historical volatility of the Company. The options were
granted as part of a plan that was adopted in accordance with the provision of
section 102 of the Israeli Income Tax Ordinance.
The expense recognized in the financial statements for employee services
received for the year ended December 31, 2017 and 2016 was US $29,000 and US
$20,000 respectively.
The following table lists the number of share options, the weighted average
exercise prices of share options and modification in employee option plans
during the current year:
2017 2017 2016 2016
weighted average exercise price Number weighted average exercise price Number
$ $
Outstanding at beginning of year 0.23 2,342,500 0.23 1,800,000
Exercised during the year 0.12 (822,500) 0.15 (207,500)
Granted during the year - - 0.39 800,000
Forfeited during the year 0.12 (20,000) 0.15 (50,000)
Outstanding at the end of the year 0.27 1,500,000 0.23 2,342,500
Exercisable at the end of the year 0.15 700,000 0.15 1,142,500
The weighted average remaining contractual life for the share options
outstanding as of December 31, 2017 was 0.67 years (2016 - 2.33 years).
26. 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 of Israel participates by way of grants. Under the terms of Group's
funding from Government of Israel, 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 Company and its
subsidiaries through July 1, 2000.
The maximum royalty amount payable by the Group at December 31, 2017 is US$
470,000.
No provision is recognized due to the lack of expectation to sale relevant
products in the foreseeable future.
During 2017 the Group did not pay any royalties.
B. Guarantees
The Group has guarantees in favour of customers and government institutes in
the amount of US$ 2,100,000 and US$31,000 respectively. The guarantees are
mainly to guarantee advances received from customers and performance of
contracts signed.
C. Charges
In order to secure the Group's liabilities, real estate properties were
mortgaged and fixed charges were recorded on property and some bank deposits
(see also note 17).
27. Transactions with related parties:
A. 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:
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 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 of
the 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 in section 25 above.
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 at a shareholders' meeting held on May 18,
2016. According to the amendment, the agreement is in place for 3 years
starting June 1, 2016, 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:
1. 25,000 NIS to Mr. Zvi Borovitz (raised from 20,000 NIS prior to this
approval) for his service as a chairman of the board of the Company in
capacity of at least 25% and
2. 65,000 NIS to Mr. Moni Borovitz (raised from 60,000 NIS prior to this
approval) for his service as 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 with 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 US$400,000 per
year (raised from US$250,000 prior to this approval), prior to any bonuses
grant in the Company. In case of a loss in a year the bonus for the next year
will be for a net profit exceeding US$400,000 above the loss made in the
previous year. In addition Mr. Moni Borovitz shall be entitled to a bonus
equal to two months 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
US$100,000 for Mr. Zvi Borovitz.
The agreement also states that the Company shall reimburse the management of
the 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.
On January 12, 2016, following an approval of the remuneration committee, the
board of directors and shareholder's meeting a bonus of 120,000 NIS was
granted to the Company's CFO for his contribution on the acquisition made.
B. Transaction with the Parent Group:
The Parent Group and other related party provides certain services to the
Group as follows:
2017 2016
$'000 $'000
Purchased Goods 252 369
Management Fee 498 428
Services Fee 259 249
Lease (72) (72)
Compensation of key management personnel of the Group:
2017 2016
$'000 $'000
Short-term employee benefits *) 920 810
*) Including Management fees for the CEO, Directors Executive Management and
other related parties.
All Transactions are made on market value. As of December 31, 2017 and 2016
the Group owed to the parent group and related party US $467,000 and US
$207,000 respectively.
28. Subsequent events
A. The Board of directors has decided to declare a dividend of 2 cent per
share being approximately $1,072,000 the dividend has a scrip option (see note
9).
B. The financial statements were authorized for issue by the board as a
whole following their approval on February 15, 2018.
This information is provided by RNS
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