REG - MTI Wireless Edge - Final Results <Origin Href="QuoteRef">MWEE.L</Origin> - Part 3
20/02/2015 07:00
- Part 3: For the preceding part double click ID:nRST4157Fb
NIS/$ exchange rate to hedge part of the salaries costs.
Liquidity Risk
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.
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.
21. Financial instruments - Risk Management (Cont.)
Sensitivity tests relating to changes in marketprice of listed securities:
As at December 31, 2014 the Group investments were in various different liquid securities with maturity until June 2016.
Most of the securities are 100% capital guaranteed at maturity and therefore under the assumption that the Group will not
sell at loss before maturity and only one parameter (the relevant for each fund herein "market price") is changed, by
increase or decrease of 5% in the market price the gain and the change in equity would not be more than US$ 150 thousand or
0, receptivity, compared to the value at 31 December 2014.
The changes in the relevant risk variables were determined based on management's estimate as to reasonable possible changes
in these risk variables.
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
2014 2013 2014 2013
$'000
Financial liabilities:
Long-term loan with interest (1) 1,615 1,856 1,641 1,901
(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.
Financial assets measured at fair value:
December 31, 2014:
Level 1
$'000
Financial assets at fair value through profit or loss:
marketable securities 3,728
3,728
December 31, 2013:
Level 1
$'000
Financial assets at fair value through profit or loss:
marketable securities 5,753
5,753
21. Financial instruments - Risk Management (Cont.)
Linkage terms of financial liabilities by groups of financial instruments pursuant to IAS 39:
December 31, 2014:
NIS Unlinked Total
$'000
Financial liabilities measured at amortized cost 52 1,563 1,615
December 31, 2013:
NIS Unlinked Total
$'000
Financial liabilities measured at amortized cost 43 1,813 1,856
22. 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
2014 2013
AdvantCom Sarl Switzerland 100% 100%
Global Wave Technologies PVT Limited India 80% 80%
80%
On March 2008, the Company established 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.
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.
23. Share capital
Authorized
2014 2014 2013 2013
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
2014 2014 2013 2013
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
24. Share-based payment
An option scheme for key Directors and Employees was approved at the Company's Annual General Meeting on May 15, 2008.
Under the plan, options for 1.5 million of the Company 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) 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).
A second option scheme for key Directors and Employees was approved at the Company's Annual General Meeting on May 20,
2011. Under the plan, options to purchase 1.2 million ordinary shares of the Company were granted (each option to one
ordinary share). This represents approximately 2.3% of the Company's current issued and voting share capital. Among those
180,000 and 150,000 options were granted to the C.E.O and to the Finance Director respectively. Each option vest over a
period of three years ending May 31, 2014. the fair value for each option according Black and Scholes option pricing method
which was used is 7 pence (approximately 11 cents at the time of grant) and in an exercise price of 13.5 pence
(representing approximately 22 cents at the time of grant).
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 are cancelled and the new plan enter 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%
Expected dividends - 0%
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.
24. Share-based payment (Cont.)
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 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:
2014 2014 2013 2013
weighted average exercise price Number weighted average exercise price Number
$ $
Outstanding at beginning of year 0.15 1,920,000 0.34 2,441,000
Granted during the year - - 0.15 2,000,000
Cancelled during the year - - 0.34 (2,441,000)
Forfeited during the year - - 0.15 (80,000)
Exercised during the year - - - -
Lapsed during the year - - - -
Outstanding at the end of the year 0.15 1,920,000 0.15 1,920,000
Exercisable at the end of the year - - - -
-
The weighted average remaining contractual life for the share options outstanding as of December 31, 2014 was 4.66 years
(2013 - 5.66 years).
The expense recognized in the financial statements for employee services received for the year ended December 31, 2014 and
2013 was US $27,000 and US $39,000 respectively.
25. Commitments and guarantees
A. Royalty commitments
The Group is committed to pay royalties to the Government of Israel on proceeds from sales of products in the research and
development of which the Government participates by way of grants. Under the terms of Group's funding from the Israeli
Government, royalties of 2%-3.5% are payable on sales of products developed from a project so funded, up to 100% of the
amount of the grant received, including amounts received by the Parent Group through July 1, 2000.
The maximum royalty amount payable by the Group at December 31, 2014 is US$ 470,000.
A provision hasn't recognized due to the lack of expectation to sale this product in the near future.
During 2014 the Group did not pay any royalties due to lack of sales of the developed products.
25. Commitments and guarantees (Cont.)
B. Guarantees
The Group has guarantees in favour of customers in the amount of US$ 550,000. The guarantees are mainly to guarantee
advances received from customers and performance of contracts signed.
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 Companyhas 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.
In the event that the Company receives written notification from the Parent Company and/or the Lenderthat 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 not be
entitled to participate and vote on any such resolution.
C. Contingent liability
During 2014 an employee filed a suit against the Group in the Tel Aviv Court relating to termination of his employment for
an amount of 585,000 NIS. The Group filed a suit against the employee, in an amount of 290,000 NIS in connection with
damages arising from his performance during his employment period, hearing on both law suits have not started yet. The
group made a provision for this suit in an amount it believes to be sufficient. 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.
D. 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.
26. 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 coRecent news on MTI Wireless Edge
See all newsREG - MTI Wireless Edge - Holding(s) in Company
AnnouncementREG - MTI Wireless Edge - Trading Update and Notice of Final Results
AnnouncementREG - MTI Wireless Edge - Full ownership of Mottech Parkland
AnnouncementREG - MTI Wireless Edge - Transfer of shares to Directors/PDMR shareholdings
AnnouncementRCS - MTI Wireless Edge - MTI achieves AS9100D certification
Announcement