REG - MTI Wireless Edge - Final Results, Scrip Dividend Alternative <Origin Href="QuoteRef">MWEE.L</Origin> - Part 1

MTI Wireless EdgeAnnouncement

16/02/2017 07:06

RNS Number : 0192X
MTI Wireless Edge Limited
16 February 2017
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR)
16 February 2017
MTI Wireless Edge Ltd 
("MTI" or the "Company")
Financial results for 2016 
Declaration of final dividend with scrip dividend alternative
MTI Wireless Edge Ltd. (MWE), a market leader in the manufacture of flat panel antennas for fixed wireless broadband and a wireless irrigation solution provider, today announces its audited results for the year ended 31 December 2016 (the "Period").
Highlights: 
 Revenues increased by 19% during the Period to $23.3m (2015: $19.6m)
 Gross profit increased during the Period by 11% to $8.6m (2015: $7.7m)
 Generated over $1.2m of cash from operation (2015: $0.2m)
 Profit before tax remains strong at $1.2m (2015: $1.4m) 
 Earnings per share of 1.81 US Cents (2015: 2.37 US Cents)
 Shareholder's equity grew during the Period to $18.9m (31 December 2015: $18.4m)
 Dividend of $0.01 per share declared with a scrip dividend alternative offered to all shareholders
Zvi Borovitz, Non-Executive Chairman of MTI Wireless, commented:
"During 2016 we completed the integration in our recently acquired Mottech Water Solutions and we strengthened our sales and marketing in key territories. The steps we took returned the business to growth and laid the foundations to capitalize on the enormous opportunities and the future growth. 
We enter 2017 with confidence in the growth prospects of our business and its ability to increase its revenues and generate cash. In our wireless controller segment, via Mottech, we see many opportunities to grow the business and we remain focused on building our offering for various markets in the water management segment. In the antenna military segment we continue to see good demandand, given the current backlog and pipeline of opportunities in this segment, we have a strong belief that the growth will continue in 2017 and beyond. In the broadband wireless access sector the pipeline of opportunities we currently see in the market should produce a return to growth in 2017, including from the millimetre wave (including 60 - 80 GHz and 5G) where we see slow improvement in demand and where our key advantage of flat antenna remains solid. 2016 brought new significant potential for this segment with new customer wins. We are confident that this will be part of MTI's growth in the future". 
 
Declaration of final dividend with a scrip dividend alternative
The Board of MTI is pleased to announce a final dividend in respect of the year ended 31 December 2016 (the "2016 Dividend") of US$0.01 per ordinary share in the Company ("Ordinary Share"). It is intended that the 2016 Dividend will be paid on 5 April 2017 to holders of Ordinary Shares recorded on the register as at the close of business on 3 March 2017.
The Company will also be offering a scrip dividend alternative to the 2016 Dividend (the "Scrip Dividend Alternative") to certain qualifying shareholders ("Qualifying Shareholders"). Under the Scrip Dividend Alternative, Qualifying Shareholders may elect to receive new ordinary shares (or new depositary interests, as applicable) (the "Scrip Dividend Shares") in place of their cash dividend. Qualifying Shareholders may only elect to receive Scrip Dividend Shares in respect of their entire 2016 Dividend entitlement and may not split their 2016 Dividend entitlement between the two alternative options. A circular and form of election (the "Scrip Election Form") will be posted to Shareholders today to explain how Qualifying Shareholders may elect to take up the Scrip Dividend Alternative. Scrip Election Forms or, for Shareholders with interests held through CREST, the CREST dividend election input message must be submitted and returned by the deadline of 5.00 p.m. on 15 March 2017.
The Board believes that the Scrip Dividend Alternative is likely to benefit both the Company and shareholders. MTI will be able to retain the cash that otherwise would be paid out as cash dividends and re-invest into the Company. Qualifying Shareholders will be able, inter alia, to increase their interests in MTI without incurring dealing costs or paying stamp duty reserve tax.
The Scrip Dividend Alternative is conditional on:
(a) admission of the Scrip Dividend Shares to trading on AIM; and
(b) the Board not deciding to revoke its decision to offer Scrip Dividend Shares.
Each Qualifying Shareholder's entitlement to Scrip Dividend Shares is to be calculated based on the Scrip reference price per ordinary share, which will be calculated based on the mean closing mid-market price of an Ordinary Share between 2 March 2017 and 8 March 2017 (the "Scrip reference Price"). 
Expected timetable
Event
Date
Record date
3 March 2017
Expected date for confirmation of the Scrip reference Price per Ordinary Share
8 March 2017
Final time and date for receipt of Scrip Election Forms (for Ordinary Shares held in certificated form) and dividend election input messages in CREST (for Depositary Interests)
5.00 p.m. on 
15 March 2017
Posting of cheques for payment of cash dividends
4 April 2017
Dispatch of certificates for Scrip Dividend Shares that are to be held in certificated form
5 April 2017
CREST accounts credited with Depositary Interests in respect of Scrip Dividend Shares
5 April 2017
Expected date for admission of Scrip Dividend Shares to trading on the Alternative Investment Market 
5 April 2017
For further information please contact:
MTI Wireless Edge
Dov Feiner, CEO
Moni Borovitz, Financial Director
http://www.mtiwe.com/
+972 3 900 8900
Allenby Capital Limited (Nominated adviser and broker)
Nick Naylor
Alex Brearley
+44 20 3328 5656
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 include 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. 
Via its subsidiary, Mottech Water Solutions Ltd ("Mottech"), MTI is also a leading provider of remote control solutions for water and irrigation applications based on Motorola's IRRInet state of the art control, monitoring and communication technologies. Mottech, headquartered in Israel, is the global prime distributor of Motorola for the IRRInet remote control solutions serving its customers worldwide through its subsidiaries and a global network of local distributers and representatives.It utilizes over 25 years of experience in providing its customers with remote control and management systems which ensure constant, reliable and accurate water usage, while reducing operational costs and maintenance costly expenses. Mottech's activities are focused in the market segments of agriculture, water distribution, Municipal and Commercial Landscape and Wastewater and Storm Water Reuse.


Chairman's statement
I am pleased to report on our audited results for the financial year ended 31 December 2016, during which we completed the integration in our recently acquired Mottech Water Solutions and we strengthened our sales and marketing in key territories. The steps we took returned the business to growth and laid the foundations to capitalize on the enormous opportunities and the future growth. We were able to further develop our management software to support Mottech's existing and potential customers under tight control to assure our operating profits in this segment continue to grow. As water is becoming more critical natural resource and as its management is becoming essential we will see more demand for our solutions. Our offices on different continents (including representatives around the world) continues to provide an enormous opportunity for Mottech.
In the antenna military segment we continue to see good demand and, given the current backlog and pipeline of opportunities in this segment, we have a strong belief that the growth will continue in 2017 and beyond. In the broadband wireless access sector the pipeline of opportunities we currently see in the market should produce a return to growth in 2017, including from the millimetre wave (including 60 - 80 GHz and 5G) where we see slow improvement in demand and where our key advantage of flat antenna remains solid. 2016 brought new significant potential for this segment with new customer wins. We are confident that this will be part of MTI's growth in the future and we believe the underlying drivers of our business, such as continued growth in data usage and increasing subscriber numbers, are part of long-term trends that we expect to continue for the foreseeable future. This, together with the requirement for efficient water management, provides us with confidence in both the Company's short and long term growth prospects.
Following a review of the business, the Board decided to declare a final dividend of $0.01 per share. We strongly believe it is in the interest of Shareholders to receive a yearly yield on their investment, while at the same time the Company manages its earnings and cash generation and therefore decided to offer a scrip dividend alternative to Shareholders. The Board believes that the ability for qualifying shareholders to elect to receive dividends from the Company in the form of new Ordinary Shares or new Depositary Interests rather than cash is likely to benefit both the Company and Shareholders. If qualifying shareholders do elect to receive scrip dividend shares, the Company will benefit from the ability to retain the cash which would otherwise have been paid out as dividends. A circular regarding the scrip dividend alternative will be issued shortly.
I would like to thank our employees for their contribution to the Company and for their dedication and creativity, which has enabled us to achieve these results. I would also like to acknowledge with thanks the employees' families for their continued support. 
Zvi Borovitz
Non-Executive Chairman 


Chief Executive's review
During 2015 we made a profit enhancing acquisition that seems today, a year and a half post it, as a true step up in the value-chain and provides wireless control solutions and services. We continued, in 2016, our positive momentum in this segment and were able to grow the overall business despite difficulties in our broadband access antenna business. 
Our wireless controller segment completed its integration into the Company and we were able to bring more enthusiasm into our sales and distribution partners around the globe - this increased our business and brought new opportunities which we aim to capitalize in the near future. We see many opportunities to grow this business and remain focused on building our offering for various markets in the water management segment.
In the antenna military segment, we continued to see good demand and were able to grow the business in 2016 and given the current backlog and pipeline of opportunities in this segment we have strong belief that the growth will continue in 2017 and beyond. We continue to build the capabilities and offerings in order to have a larger share in this market. 
Our RFID segment showed over 20% growth in 2016, passing the US $2m revenue for the first time. We see more applications which require the use of such solutions and our position in this market, still in its initial stages, remains strong and our key goal is to ensure that MTI remains well positioned in this market and to maximise the benefits of RFID technology continuing its world-wide growth.
In broadband wireless access we saw a revenue decrease in 2016 - the legacy part of broadband access had been slow in 2016 and from the pipeline of opportunities we currently see in the market we believe 2017 would be much better. In the millimeter wave (including 60 - 80 GHz and 5G) we see slow improvement in demand coupled with cost reduction initiatives of all players in the market. Our key advantage of flat antenna remains solid and we expect to be with full line ready for production in the second half of 2017. Nevertheless, 2016 brought new significant potential for this segment with new customer wins. We are confident that this will be part of MTI's growth in the future. 
To achieve future growth, the Company aims to expand its leadership in the antenna markets and further develop Mottech's control software to make sure we continue to lead the offering in this market and bring our customer added value. 
 
Dov Feiner 
Chief Executive Officer


Consolidated Statements of Comprehensive Income 



For the year ended December 31,



2016

2015

Note

$'000

$'000






Revenues
3, 5

23,276

19,579
Cost of sales


14,728

11,870






Gross profit


8,548

7,709
Research and development expenses


1,079

1,216
Distribution expenses


3,346

2,408
General and administrative expenses


2,640

2,323






Profit from operations
4

1,483

1,762
Finance expense
6

334

432
Finance income 
6

57

44






Profit before income tax


1,206

1,374
Income tax expense
7

222

110






Profit


984

1,264






Other comprehensive income (loss) net of tax:





Items that will not be reclassified to profit or loss:





Re measurements on defined benefit plans


(16)

(42)



(16)

(42)
Items that may be reclassified to profit or loss:





Adjustment arising from translation of financial statements of foreign operations


121

(77)



121

(77)
Total other comprehensive income (loss)


105

(119)






Total comprehensive income 


1,089

1,145












profit attributable to:





Owners of the parent


936

1,222
Non-controlling interest 


48

42









984

1,264
Total comprehensive income attributable to:





Owners of the parent


1,041

1,103
Non-controlling interest 


48

42









1,089

1,145






Earnings per share (dollars)





Basic
8

0.0181

0.0237






Diluted
8

0.0178

0.0235







Consolidated Statements of Changes in Equity 
For the year ended December 31, 2016 :

Attributable to owners of the parent


Share capital
Additional paid-in capital
Capital Reserve from share-based payment transactions
Adjustment arising from translation of financial statements of foreign operations
Retained earnings
Total attributable to owners of the parent
Non-controlling interest
Total equity

$'000






Balance as at January 1, 2016
109
14,945
304
(77)
3,116
18,397
266
18,663




Changes during 2016:








Comprehensive income


Profit for the year
-
-
-
-
936
936
48
984
Other comprehensive income


Re measurements on defined benefit plans
-
-
-
-
(16)
(16)
-
(16)
Translation differences
-
-
-
121
-
121
-
121








Total comprehensive income for the year
-
-
-
121
920
1,041
48
1,089
Share issuance to non-controlling interest in subsidiary
-
(10)
-
-
-
(10)
10
-
Exercise of options to share capital
*
29
(1)
-
-
28
-
28
Dividend paid
-
-
-
-
(568)
(568)
-
(568)
Share based payment 
-
-
20
-
-
20
-
20
Balance as at December 31, 2016
109
14,964
323
44
3,468
18,908
324
19,232











(*) less than 1 thousand dollar 
Consolidated Statements of Changes in Equity (Cont.) 
For the year ended December 31, 2015 :
 

Attributable to owners of the parent


Share capital
Additional paid-in capital
Capital Reserve from share-based payment transactions
Adjustment arising from translation of financial statements of foreign operations
Retained earnings
Total attributable to owners of the parent
Non-controlling interest
Total equity

$'000






Balance as at January 1, 2015
109
14,945
286
-
2,287
17,627
216
17,843




Changes during 2015:








Comprehensive income


Profit for the year 
-
-
-
-
1,222
1,222
42
1,264
Other comprehensive income


Re measurements on defined benefit plans
-
-
-
-
(42)
(42)
-
(42)
Translation differences
-
-
-
(77)
-
(77)
-
(77)








Total comprehensive income for the year
-
-
-
(77)
1,180
1,103
42
1,145
Non-controlling Interest of newly purchased subsidiary
-
-
-
-
-
-
8
8
Dividend paid
-
-
-
-
(351)
(351)
-
(351)
Share based payment 
-
-
18
-
-
18
-
18
Balance as at December 31, 2015
109
14,945
304
(77)
3,116
18,397
266
18,663












Consolidated Statements of Financial Position 


As at December 31,
As at December 31,


2016
2016
2015
2015

Note
$'000
$'000
$'000
$'000
ASSETS





Non-current assets:





Property, plant and equipment 
10
5,453

5,643

Investment property
11
630

656

Deferred tax assets
13
500

393

Goodwill

573

573

Intangible assets
12
321

 429

Long-term prepaid expenses

48

28







Total non-current assets


7,525

7,722






Current assets:





Inventories
14
4,910

4,426

Currenttax receivables

455

139

Trade and other receivables
15
8,865

9,370

Other current financial assets

-

2,086

Cash and cash equivalents
16
4,428

2,634







Total current assets


18,658

18,655






TOTAL ASSETS


26,183

26,377






LIABILITIES





Non-current liabilities:





Loans from banks
17
1,664

2,381

Employee benefits, net
18
405

387

Other liabilities
19
-

92







Total Non-current liabilities


2,069

2,860






Current Liabilities:





Currenttax payables

3

192

Trade and other payables
20
4,077

3,870

Current maturities and short term Loans 
21
802

792







Total current liabilities


4,882

4,854




Total liabilities


6,951

7,714












TOTAL NET ASSETS


19,232

18,663














As at December 31,
As at December 31,


2016
2016
2015
2015

Note
$'000
$'000
$'000
$'000






Capital and reserves attributable to 
 owners of the parent
23




Share capital

109

109

Additional paid-in capital

14,964

14,945

Capital reserve from share-based payment transactions

323

304

Translation differences

 44

 (77)

Retained earnings

3,468

3,116










18,908

18,397






Non-controlling interests


324

266






TOTAL EQUITY


19,232

18,663






The financial statements were approved by the Board of Directors and authorised for issue on February 15, 2017, and were signed on its behalf by:
February 15, 2017

Date of approval

Moshe Borovitz
Dov Feiner
Zvi Borovitz
of financial statements

Chief Finance Director
Chief Executive Officer
Non-executive Chairman
The accompanying notes form an integral part of these financial statements.


Consolidated Statements of Cash Flows 


For the year ended December 31,

For the year ended December 31,


2016

2016

2015

2015


$'000

$'000

$'000

$'000









Operating Activities:








Profit for the year

984



1,264











Adjustments for:








Depreciation and amortization

635



593


Gain from investments in financial assets

(57)



(36)


Equity settled share-based payment expense

20



18


Finance expenses, net

122



113


Income tax expense 

222



110











Changes in working capital and provisions



1,926



2,062









Decrease (increase) in inventories 

(466)



90


Decrease (increase) in trade receivables

19



(1,136)


Decrease (increase) in other accounts receivables

572



(326)


Increase (decrease) in trade and other payables

105



(98)


Increase (decrease) in employee benefits, net 

2



(54)


Interest paid

(122)



(113)


Income tax paid

(837)



(214)















(727)



(1,851)









Net cash provided by operating activities



1,199



211






































Consolidated Statements of Cash Flows (Cont.)


For the year ended December 31,

For the year ended December 31,


2016

2016

2015

2015


$'000

$'000

$'000

$'000


















Investing Activities:








Proceeds from sale of investments in financial assets, net

2,142



1,639


Acquisition of subsidiary, net of cash acquired (App. B)

-



(3,042)


Acquisition of Property, plant and equipment

(314)



(297)











Net cash provided by (used in) investing activities



1,828



(1,700)
Financing Activities:








Proceeds from exercise of share options

28



-


Proceeds of long term loan received from banks

87



2,090


Dividend paid to the owners of the parent

(568)



(351)


Repayment of long-term loans from banks

(793)



(526)











Net cash provided by (used in) financing activities



(1,246)



1,213









 Increase (decrease) in cash and cash equivalents



1,781



(276)
Cash and cash equivalents at the beginning of the year



2,634



2,918
Exchange differences on balances of cash and cash equivalents



13



 (8)









Cash and cash equivalents at the end of the year



4,428



2,634















Appendix A - Non-cash transactions:







For the year ended December 31,






2016

2015






$'000

$'000
Purchase of property, plant and equipment with credit





5

8


















Transfer from investment property to property, plant and equipment

-

552









Consolidated Statements of Cash Flows (Cont.)
Appendix B - Acquisition of subsidiary, net of cash acquired:


For the year ended December 31,

For the year ended December 31,


2016

2016

2015

2015


$'000

$'000

$'000

$'000









Working capital (excluding cash and cash equivalents)

-



2,530


Property, plant and equipment

-



95


Intangible assets

-



483


Goodwill

-



167


Deferred taxes

-



(66)


Non-current liabilities

-



(67)











The subsidiaries' assets (excluding cash and cash equivalents) and liabilities at date of acquisition



-



3,142









Non-controlling interests



-



(8)
Contingent consideration



-



(92)









Total



-



3,042









Notes forming part of the consolidated financial statements for the year ended December 31, 2016
1. Accounting policies
General description of the Group and its operations
M.T.I Wireless Edge Ltd. (hereafter - the "Company") is an Israeli corporation. The Company 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), commenced operations on July 1, 2000 andsince March 2006, the Company's shares are 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.
Via its subsidiary, Mottech Water Solutions Ltd., MTI is also a leading provider of remote control solutions for water and irrigation applications based on Motorola IRRInet state of the art control, monitoring and communication technologies.
Certain operational and administrative services are provided by the Parent Company. 
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. 
Basis of preparation
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The financial statements have been prepared under the historical cost convention, as modified by the measurement of Employee benefit assets and certain financial assets and financial liabilities at fair value through profit or loss.
The Company has elected to present the statement of comprehensive income using the function of expense method.
Details of the changesin foreign currency:
Henceforth are the details of the foreign currency of the main currency and the changes in the reporting period:

December 31,

2016

2015




NIS (in Dollar per 1 NIS)
0.260

0.256

Year ended December 31,

2016

2015

%

%
NIS 
0.015

(0.003)
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 and thereafter. 
The key assumptions made in the financial statements concerning uncertainties at the end of the reporting period and the critical estimates used by the the Companyand its subsidiaries (hereafter - 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.
- Deferred tax assets:Deferred tax assets are recognized for unused carryforward tax losses and deductible temporary differences to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the estimatedtiming and level of future taxable profits together with future tax planning strategies. 
Revenue recognition
Revenues are recognized in profit or loss when the revenues can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the Company and the costs incurred or to be incurred in respect of the transaction can be measured reliably. In cases where the Company acts as an agent or as a broker without being exposed to the risks and rewards associated with the transaction, its revenues are presented on a net basis. Revenues are measured at the fair value of the consideration received or receivables less any trade discounts, volume rebates and returns. 
Following are the specific revenue recognition criteria which must be met before revenue is recognized:
1. Revenues from services are recognized as follows:
- Provided the amount of revenue can be measured reliably and it is probable that the Group will receive any consideration, revenue from services is recognised in the period in which they are rendered.
- In fixed fee contracts - according to IAS11 "ConstructionContracts" pursuant to which revenues are reported by the "percentage of completion" method.The percentage of completion is determined by dividing actual completion costs incurred to date by the total completion costs anticipated. 
When a loss from a contractis anticipated, a provision is made in the period in which it first becomes evident, for the entire loss anticipated, as assessed by the Group's management.
2. Revenues from the sale of goods 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 delivery date is usually the date on which risks and rewards pass. 
Customer discounts
Customer discounts given at year end in respect of which the customer is not obligated to comply with certain targets, are recognized in the financial statements as the sales entitling the customer to said discounts are made. 
Customer discounts for which the customer is required to meet certain targets, such as a minimum amount of annual purchases (either quantitative or monetary), an increase in purchases compared to previous periods, etc. are recognized in the financial statements in proportion to the purchases made by the customer during the year that qualify for the target, provided that it is expected that the targets will be achieved and the amount of the discount can be reasonably estimated.
Basis of consolidation
The Group controls an investee if and only if the Group has:
- Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities ofthe investee)
- Exposure, or rights, to variable returns from its involvement with the investee, and
- The ability to use its power over the investee to affect its returns.
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers allrelevant facts and circumstances in assessing whether it has power over the investee, including: the contractual arrangement with the other vote holders of the investee, the Group's potential voting rights.
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there arechanges to one or more of the three elements of control. Consolidation of a subsidiary begins when the Groupobtains control over the subsidiary and ceases when the Group loses control over the subsidiary. 
Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders ofthe parent and to the non-controlling interests, even if this results in the non-controlling interestshaving a deficit balance.All intra-group assets andliabilities, income, expenses and cash flows relating to transactions between members of the Group areeliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it (i) derecognises the assets (including goodwill) and liabilities of the subsidiary, the carrying amount of any non-controlling interests and the cumulative translation differences recorded in equity. (ii) Recognises the fair value of the consideration received, recognises the fair value of any investment retained and recognises any surplus or deficit in profit or loss. (iii) reclassifies the parent's share 
of components previously recognised in OCI to profit or loss or retained earnings, as appropriate, as would be required if the Company had directly disposed of the related assets or liabilities.
Consolidated financial statements
Where relevant, the accounting policy in the financial statements of the subsidiaries is changed to confirm with the policy applied in the financial statements of the Group.
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 of a business combination comprises the fair values of assets given, liabilities assumed and equity instruments issued. Any costs of acquisition are charged to profit or loss. 
Goodwill is recognized as an intangible asset with any impairment in carrying value being charged to profit or loss. Goodwill is not systematically amortized and the company reviews goodwill for impairment once a year or more frequently if events or changes in circumstances indicate that there may be impairment.
Intangible assets
Separately acquired intangible assets are measured on initial recognition at cost including directly attributable costs. Intangible assets acquired in a business combination are measured on initial recognition at fair value at the acquisition date. Expenditures relating to internally generated intangible assets, excluding capitalized development costs, are recognized in profit or loss when incurred. 
Intangible assets with a finite useful life are amortized over their useful life and reviewed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset are reviewed at least at each year end. 
Intangible assets with indefinite useful lives are not systematically amortized and are tested for impairment annually or whenever there is an indication that the intangible asset may be impaired. The useful life of these assets are reviewed annually to determine whether such assessment continues to be supportable. If the events and circumstances do not continue to support the assessment, the change in the useful life assessment from indefinite to finite is accounted for prospectively as a change in accounting estimate and on that date the intangible asset is tested for impairment. 
Impairment of non-financial assets
Impairment tests on goodwill and infinite useful life assets are undertaken annually on December 31 or sooner when there are indicators 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 value of the non-financial asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to dispose), the asset is written down and impairment charge is recognized accordingly in the profit or loss. Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is performed on the asset's cash-generating unit (i.e. the smallest Group of assets to which the asset belongs that generates cash inflow that are largely independent of cash inflows from other assets). Goodwill is allocated at initial recognition to each of the Group's cash-generating units that are expected to benefit from the synergies of the business 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) is lower 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 allocated to goodwill cannot be reversed in subsequent periods.
An impairment loss allocated to asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, is limited to the lower of the carrying amount of the asset that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and the assets recoverable amount. The reversal of impairment loss of an asset is recognized in profit or loss. 
Impairment charges are included in general and administrative expenses line item in the statement of comprehensive income. During the years 2015 and 2016 no impairment charges of non-financial assets were recognized.
Foreign currency transactions
Transactions denominated in foreign currency (other than the functional currency) are recorded on initial recognition at the exchange rate as of the date of the transaction. After initial recognition, monetary assets and liabilities denominated in foreign currency are translated at the end of each reporting period into the functional currency at the exchange rate as of that date. Exchange differences, other than those capitalized to qualifying assets are recognized in profit or loss. Non-monetary assets and liabilities measured at cost are retranslated Non-monetary assets and liabilities denominated in foreign currency and measured at fair value are translated into the functional currency using the exchange rate prevailing at the date in which the fair value was determined.
Exchange differences arising on the retranslation of monetary assets and liabilities are recognized immediately in profit or loss.
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 marketable securities. These assets are carried at fair value with changes in fair value recognized in profit or loss. 
Loans and receivables: Loans and receivables are investments with fixed or determinable payments that are not quoted in an active market and they are initially recognized at fair value plus directly attributable transaction costs. After initial recognition, loans and receivables are measured using the effective interest method and less any impairment losses. Short-term borrowings are measured based on their terms, normally at face value. 
Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
A. In the principal market for the asset or liability, or
B. In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
Classification by fair value hierarchy: 
The financial instruments presented in the statement of financial position 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 Liabilities
The Group classifies its financial liabilities as follows:
Financial liabilities at fair value through profit or loss: Financial liabilities at fair value through profit or loss include financial liabilities classified as held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.
Other financial liabilities: Other financial liabilities include the following items:
 Bank borrowings are initially recognized at fair value less 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 method, which ensures that any interest expense over the period is at a constant interest rate on the balance of the liability carried in the statement of financial position. 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 and subsequently measured at amortized cost using the effective interest rate method.
De-recognition 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 Group 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 creditor.
 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 existing liability and new liability 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.
Financial assets carried at amortized cost:
There is objective evidence of impairment of loans and receivables if one or more loss events have 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 at initial recognition). The carrying amount of the asset is reduced through the use of an allowance account. 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, which is limited to the amount of any previous impairment, is recognized in profit or loss.
Government grants
grants received from the Israel-U.S. Bi-national Industrial Research and Development Foundation (henceforth "BIRD") as support for a research and development projects include an obligation to pay back royalties conditional on future sales arising from the project. Grants received from the BIRD on or after January 1, 2009, are accounted for as forgivable loans, in accordance with IAS 20 (Revised), pursuant to the provisions of IAS 39. Accordingly, when the liability for the loan is first recognized, it ismeasured at fair value using a discount rate that reflects a market rate of interest. The difference between the amount of the grants received and the fair value of the liability is accounted for upon recognition of the liability as a grant and recognized in profit or loss as a reduction of research and development expenses. After initial recognition, the liability is measured at amortized cost using the effective interest method. Changes in the projected cash flows arediscounted using the original effective interest and recorded in profit or loss in accordance with the provisions of IAS 39.
At the end of each reporting period, the Group 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. If there is such reasonable assurance, the appropriate amount of the liability is derecognized and recorded in profit or loss as an adjustment of research and development expenses. If the estimateof 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 tax
Deferred taxes are computed in respect of temporary differences between the carrying amounts of assets and liabilitiesin the financial statements and the amounts attributable for tax purposes. Deferred taxes are recognized in other comprehensive income or directly in equity if the tax relates to those items. 
Deferred taxes are measured at the tax rates that are expected to apply in the period when the temporary differences are reversed in profit or loss, other comprehensive income or equity, based on tax laws that have been enacted or substantively enacted at 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 in other comprehensive income or directly in equity.
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. In addition, temporary differences (such as carryforward losses) for which deferred taxassets have not been recognized are reassessed and deferred tax assets are recognized to the extent that their recoverability is probable. Any resulting reduction or reversal is recognized on " income tax" within the statement of comprehensive income. Taxes that would apply in the event of the disposal of investments in investees have not been taken into account, as long as the disposal of such investments is not expected in the foreseeable future and the group has control over such disposal. In addition, deferred taxes that would apply in the event of distribution of dividends have not been taken into account, if distributions of dividends involve anadditional tax liability; the Group's policy is not to initiate distribution of dividends that triggers an additional tax liability. All deferred tax assets and liabilities are presented in the statement of financial position as non-current items, respectively. Deferred taxes are offset if 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.
Inventories
Inventories are recognized at the lower of cost and net realizable value. Cost is calculated according to weighted average model.
Property, plant and equipment
Items of property, plant and equipment are initially recognized at cost. Depreciation is calculatedona straight line basis, over the useful lives of the assets at annual rates as follows:

Rate of depreciation
Mainly %
buildings
3 - 4 %
3.13
Machinery and equipment
6 - 20%
10
Office furniture and equipment
6 - 15 %
6
Computer equipment
10 - 33 %
33
Vehicles
15 %

Investment property
An investment property is property (land or a building or both) held by the owner (lessor under an operating lease) or by the lessee under a finance lease to earn rentals or for capital appreciation or both rather than for use in the production or supply of goods or services, for administrative purposes or for sale in the ordinary course of business.
Investment property is measured initially at costincluding costs directly attributable to the acquisition. After initial recognition, investment property is measured at cost, lessaccumulated depreciation and accumulated impairment losses and accounted for similarly to property, plant and equipment measured at cost.Investment property is depreciated on a straight-line basis at annual rates of 3.13%.
Investment property is derecognized on disposal or when the investment property ceases to be used and no future economic benefits are expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss in the period of the disposal.
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 do 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.
Share-based payments
Where equity settled share options are awarded to employees, the fair value of the options calculated at the grant date is charged to the statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting 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. 
Employee benefits
1. Short-term employee benefits: Short-term employee benefits are benefits that are expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related services. These 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 since 2004 under which the Group pays fixed contributions to a specific fund 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 simultaneously with receiving the employee's services and no additional provision is required in the financial statements except for the unpaid contribution. 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 retirement and several other events prescribed by that Law. The liability for termination of employee-employer relationship 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 corporate bonds with a term that matches the estimated term of the benefit plan. In respect of its severance pay obligation to certain of its employees, the Company makes deposits into pension funds and insurance companies ("plan assets"). Plan assets comprise assets held by aLong-term employee benefits 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. 
Earnings per Share (EPS)
Earnings per share are calculated by dividing the net profit or loss attributable to owners of the parent 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 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 the diluted earnings per share only until the conversion date, and since that date they are included in the 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 allocated resources to the segment and assess its performance; and
3. For which separate financial information is available.
Segment revenue and segment costs include items that are attributable to the relevant segments and items that can be allocated to segments. Items that cannot be allocated to segments include the Group's financial income and expenses and income tax.
New IFRSs in the period prior to their adoption
- IFRS 9 Financial Instruments:
In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("IFRS 9"), which replaces IAS 39, "Financial Instruments: Recognition and Measurement". IFRS 9 mainly focuses on the classification and measurement of financial assets and it applies to all assets in the scope of IAS 39.
According to IFRS 9, all financial assets are measured at fair value upon initial recognition. In subsequent periods, debt instruments are measured at amortized cost only 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 and financial assets should be at fair value. 
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. If equity instruments are held for trading, they should be measured at fair value through profit or loss. 
According to IFRS 9, 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.
According to IFRS 9, changes in thefair value of financial liabilities which are attributable to the change in credit risk should be presented in other comprehensive income. All other changes in fair value should be presented in profit or loss. 
Impairment - The impairment model is a more 'forward looking' model in that a credit event no longer has to occur before credit losses are recognised. For financial assets measured at amortised cost or fair value through other comprehensive income, an entity will now always recognise (at a minimum) 12 months of expected losses in profit or loss. Lifetime expected losses will be recognised on these assets when there is a significant increase in credit risk after initial recognition.
Hedging - The new hedge accounting model introduced the following key changes:
- Simplified effectiveness testing, including removal of the 80-125% highly effective threshold. 
- More items will now qualify for hedge accounting, e.g. pricing components within a non-financial item, and net foreign exchange cash positions.
- Entities can hedge account more effectively the exposures that give rise to two risk positions (e.g. interest rate risk and foreign exchange risk, or commodity risk and foreign exchange risk) that are managed by separate derivatives over different periods. 
- Less profit or loss volatility when using options, forwards, and foreign currency swaps. 
- New alternatives available for economic hedges of credit risk and 'own use' contracts which will reduce profit or loss volatility.
IFRS 9 is to be applied for annual periods beginning on January 1, 2018. Early adoption is permitted.
The Company is evaluating the possible impact of IFRS 9 but is presently unable to assess its effect, if any, on the financial statements.
- IFRS 15 -Revenue from Contracts with Customers (hereafter - IFRS 15) 
IFRS 15 shall replace other IFRS provisions relating to revenue recognition. 
The core principle of IFRS 15 is that an entity will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. 
IFRS 15 sets out a single revenue recognition model, according to which the entity shall recognize revenue in accordance with the said core principle by implementing a five-step model framework: 
1) Identify the contract(s) with a customer.
2) Identify the performance obligations in the contract. 
3) Determine the transaction price. 
4) Allocate the transaction price to the performance obligations in the contract.
5) Recognize revenue when the entity satisfies a performance obligation. 
IFRS 15 provides guidance about various issues related to the application of the said model, including: recognition of revenue from variable consideration set in the contract, adjustment of the price of transaction set in the contract in order to reflect the effect of the time value of money and costs to obtain or fulfill a contract. 
IFRS 15 extends the disclosure requirements regarding revenue and requires, among other things, that entities disclose qualitative and quantitative information about significant judgments made by management in determining the amount and timing of the revenue. 
The standard shall be applied retrospectively for annual reporting periods starting on January 1, 2018 or thereafter, taking into account the reliefs specified in the transitional provisions of IFRS 15. Under these provisions, early adoption of the standard is allowed. 
The Group believes that IFRS 15 is not expected to have a material impact on the financial statements.
2. Business combination
On April 28, 2015 the Company signed an agreement for the purchase of 100% of the share capital of Mottech Water Solutions ltd ("Mottech"), a provider of wireless control products and services, for a consideration of approximately US$ 4 million (15.5 million New Israeli Shekels) plus an additional contingent payment based on performance which could reach up to about US$ 750 thousand (3 million New Israeli Shekels). The acquisition was completed on June 11, 2015 and funded by long-term bank loan and internal sources. To secure the long-term bank loan the Company recorded a charge on the share capital of Mottech and in addition has undertaken to meet the following financial covenant to be computed on the basis of the separate financial statements of the Company:
 The amount of equity shall not be lower than 40% of total assets of the Company. As of December 31, 2016 the Company meets the covenant.
Mottech is a global distributor and integrator of Motorola's wireless control solutions, which includes a portfolio of radio-enabled sensors and switches managed by control software. Mottech primarily operates in the water management sector and has developed proprietary wireless management solutions for commercial irrigation, municipal water authorities and water distributors. A typical solution reduces costs for the client, for example Mottech provides a commercial farm irrigation system that monitors the local environment, weather and soil sensors in real-time and Mottech's propriety software automatically operates irrigation and fertilizer pump stations to optimize these critical costs for the farm. 
The cost of acquisition was allocated to tangible assets, intangible assets and liabilities which were acquired based on their fair value at the time of the acquisition. The intangible assets recognized include customer relations in the total amount of US$ 483 thousands, deferred taxes in the total amount of US$ 66 thousands and goodwill in the total amount US$ 167 thousands. The customer relation is amortized over an useful life of up to 10 years.
Acquisition cost of Mottech at the date of acquisition: 


Fair value


$'000



Cash paid

4,003
Contingent consideration liability

92



Total acquisition cost

4,095
The result of the company were consolidated into the financial statement of the group commencing May 31, 2015 
Cash outflow/inflow on the acquisition: 


$'000



 Cash and cash equivalents acquired 
 at the acquisition date

961
Cash paid

(4,003)



Net cash

(3,042)
Set forth below are the assets and liabilities of Mottech at date of acquisition:


Fair value


$'000



Cash and cash equivalents 

961
Trade receivables

1,991
Other receivables

217
Inventories

1,586
Property, plant and equipment

95
Intangible assets

11
Trade payables

(268)
Other liabilities

(1,071)



Net identifiable assets

3,522
Intangible assets arising on acquisition, net of 
deferred taxes

573



Total purchase cost

4,095
Contingent consideration:
As part of the purchase agreement with the previous owner of Mottech, it was agreed that the previous owner would be entitled to an additional contingent consideration ("the contingent consideration"). The Group will pay the contingent consideration to the previous owner based on calculation:
Up to US$ 720 thousand, if the acquired Company's accumulated revenue in 2016 - 2017 exceeds US$ 25.8 million (100 million New Israeli Shekels) ("the revenue target").
As of the acquisition date, the fair value of the contingent consideration was estimated at US$ 92 thousand. 
3. Revenues



For the year ended December 31,



2016

2015



$'000

$'000
 Revenues arises from:





Sale of goods


17,314

13,987
Rendering of services


 2,449

2,182
Projects


 3,513

 3,410



23,276

19,579






4. Profit from operations



For the year ended December 31,
 


2016

2015
This has been arrived at after charging:


$'000

$'000






Wages and salaries


7,962

6,525
Depreciation and amortization


635

593
Material and subcontractors


10,279

8,668
Operating lease expense


81

162
Plant, Machinery & Usage


1,024

681
Travel & Exhibition


474

260
Advertising & Commissions


417

207
Consultants


274

401
Others


647

320









21,793

17,817






5. Operating segments
1. Segment information


For the year ended December 31, 2016


Antennas

Water Solutions

Total


$'000
Revenue






External

11,427

11,849

23,276







Total

11,427
11,849
23,276














Segment profit (loss) 

(108)

1,591

1,483







Unallocated corporate expenses




















Finance expense, net





(277)







Profit before income tax





1,206







Other






Depreciation and amortization

591

44

635









For the year ended December 31, 2015


Antennas

Water Solutions*

Total


$'000
Revenue






External

13,305

6,274

19,579







Total

13,305
6,274
19,579














Segment profit 

859

903

1,762







Unallocated corporate expenses




















Finance expense, net





(388)







Profit before income tax





1,374







Other






Depreciation and amortization

561

32

593







(*) Results for seven month ending December 31, 2015.
2. Entity wide disclosures External revenue by location of customers.

For the year ended December 31,

2016

2015

$'000

$'000




Israel
10,856

9,658
North America
4,299

4,331
Europe
4,038

2,269
Africa
1,819

1,276
Asia
645

547
Other
1,619

1,498





23,276

19,579




3. 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
2016

2015

$'000

$'000
Customer A - Antennas segment
2,424

2,808
Others (non major customers)
20,852

16,771





23,276

19,579




6. Finance expense and income

For the year ended December 31,

2016
2015

$'000
$'000
Finance expense


Interest on bank loans 
122
113
Net Foreign exchange loss
51
146
Interest and bank fees
161
173




334 
432 
Finance income





Gains from financial assets classified as held for trading
57
44




57
44




277
388
7. Income Tax 
A. Tax Laws in Israel
1. Amendments to the Law for the Encouragement of Capital Investments, 1959 (the "Encouragement Law"):
In December 2010, the "Knesset" (Israeli Parliament) passed the Law for Economic Policy for 2011 and 2012 (Amended Legislation), 2011 ("the Amendment"), which prescribes, among others, amendments to the Law. The Amendment became effective as of January1, 2011. According to the Amendment, the benefit tracks in the Law were modified and a flat tax rate applies to the Company's entire preferred income. Commencing from the 2011 tax year, the Group will be able to opt to apply (the waiver is non-recourse) the Amendment and from the elected tax year and onwards, it will be subject to the amended tax rates that are: 2014 and thereafter will be 16% (in development area A - 9%).
The Group applied the Amendment effectively from the 2011 tax year. 
2. Tax rates:
On December 29, 2016, the Law Economic Efficiency (Legislative Amendments for Achieving the Budgetary Goals for 2017-2018) was published in Reshumot (the Israeli government official gazette), which enacts, among other things, the following amendments:
- Decreasing the corporate tax rate to 24% in 2017 and to 23% in 2018 and thereafter (instead of 25%).
- Commencing tax year 2017 and thereafter the tax rate on the income of preferred enterprises of a qualifying Company in Development Zone A as stated in the Encouragement of Capital Investment Law, shall decrease to 7.5% (instead of 9%) and for companies located in zones other than Zone A the rate shall remain 16%. 
- In addition, the tax rate on dividends distributed on January 1, 2014 and thereafter originating from preferred income under the Encouragement Law will be raised to 20% (instead of 15%).
Therefore the applicable corporate tax rate for 2014 and thereafter is 16%. The real capital gains tax rate and the real betterment tax rate for the years 2014-2015 -26.5% and 25% in 2016.
B. The principal tax rates applicable to the subsidiaries whose place of incorporation is outside Israel are: 
A company incorporated in India - The statutory tax rate is 36% and the company was in exempt zone until end of March 2013. Nevertheless in the absence of taxable income the Indian regulation states that the company had to pay Minimum Alternate tax rate which is 50% of the tax rate (the 36%) out of the accounting profit paid as an advanced for future years, if the Company becomes tax liable. 
A company incorporated in Switzerland - The weighted tax rate applicable to a company operating in Switzerland is about 25% (composed of Federal, Cantonal and Municipal tax). Provided that the company meets certain conditions, the weighted tax rate applicable to its income in Switzerland will not exceed 10%.
A company incorporated in South Africa - The statutory tax rate is 28%
A company incorporated in Australia - The statutory tax rate is 30%
A company incorporated in United States of America - The statutory tax rate is 21%
C. Income tax assessments
The Company has tax assessments considered as final up to and including the year 2011.

For the year ended December 31,

2016
2016
2015
2015

$'000
$'000
$'000
$'000
Current tax expense




Income tax on profits for the year
329

201



329

201
Deferred tax income




Origination and reversal of temporary differences
(107)

(91)



(107)

(91)





Total tax expense 

222

110
The adjustments 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:

For the year ended December 31,

2016
2015

$'000
$'000
Profit before income tax
1,206
1,374



Tax computed at the corporate rate in Israel of 16% 
193
220
Un deductible expenses (Income not subject to tax)
20
13
Taxes resulting from different tax rates applicable to foreign and other subsidiaries
40
22
Utilization of previously unrecognized tax losses
-
(102)
Other
(31)
(43)
Total income tax expense 
222
110
8. Earnings per share
Net earnings per share attributable to equity owners of the parent

For the year ended 
December 31,

2016

2015

$'000

$'000




Net Earnings used in basic EPS
936

1,222
Net Earnings used in diluted EPS
936

1,222




Weighted average number of shares used in basic EPS
51,687,853

51,571,990




Effects of:



Employee options
887,740

325,037




Weighted average number of shares used in diluted EPS
52,575,593

51,897,027








Basic net EPS (dollars)
0.0181

0.0237




Diluted net EPS (dollars)
0.0178

0.0235




The employee options have been included in the calculation of diluted EPS as the weighted average share price during the year greater than their exercise price (i.e. they are in-the-money) and therefore it would be advantageous for the holders to exercise those options. The total number of options in issue is disclosed in note 25.
9. Dividends

For the year ended
December 31,

2016

2015

$'000

$'000
Dividend of 1.1 cents (0.68 cents) per ordinary share proposed and paid during the year relating to the previous year's results
568

351




After the date of the financial statements the board of directors declared a dividend of 1 cent per share totaling US$ 518 thousands. This dividend has not been accrued at the reporting date (December 31, 2016).
On January 12, 2016, following the approval of its shareholders, the Company adopted a change to its article of association allowing the Company the ability to pay dividends by way of scrip, meaning the board would be able to announce a dividend which could be paid in cash or through the issue of new shares in the Company (the "Scrip Dividend Policy").Under the Scrip Dividend Policy, shareholders could, in the future, be given the option to elect to receive dividends in new shares of the Company rather than in cash. The default arrangement will be for the payment of dividends in cash, and if the shareholder prefers to receive their dividends in new shares of the Company, then they would have to make an election. There would be no ability to make mixed elections and each shareholder would be able to choose either cash or new shares but not both. The decision to offer shareholders a scrip dividend alternative for future dividend payments will be at the sole discretion of the Board.
10. Property, plant and equipment

Building
Machinery &
equipment
Office
furniture & equipment
Computer equipment
Vehicles 
Total

$'000
$'000
$'000
$'000
$'000
$'000
Cost:






Balance as of January 1, 2016
5,186
4,805
302
1,387
387
12,067 
Acquisitions
14
97
8
108
74
301
Exchange differences
-
-
4
5
15
24







Balance as of December 31, 2016
5,200
4,902
314
1,500
476
12,392







Accumulated Depreciation:






Balance as of January 1, 2016
814
3,924
261
1,289
136
6,424
Additions
145
239
17
65
35
501
Exchange differences
-
1
2
-
11
14







Balance as of December 31, 2016
959
4,164
280
1,354
182
6,939














Net book value as of December 31, 2016
4,241
738
34
146
294
5,453















Building
Machinery &
equipment
Office
furniture & equipment
Computer equipment
Vehicles 
Total

$'000
$'000
$'000
$'000
$'000
$'000
Cost:






Balance as of January 1, 2015
4,572
4,559
270
1,317
257
10,975 
Acquisitions
49
164
8
31
42
294
Transfer from Investment Property
552
-
-
-
-
552
Adjustment arising from acquisition 
of consolidated companies
13
82
24
39
87
245
Exchange differences
-
-
-
-
1
1







Balance as of December 31, 2015
5,186
4,805
302
 1,387
387
12,067







Accumulated Depreciation:






Balance as of January 1, 2015
676
3,620
230
1,211
29
5,766
Additions
132
239
20
54
62
507
Adjustment arising from acquisition 
of consolidated companies
6
65
10
24
45
150
Exchange differences
-
-
1
-
-
1







Balance as of December 31, 2015
814
3,924
261
1,289
136
6,424














Net book value as of December 31, 2015
4,372
881
41 
98
251
5,643














11. Investment Property
Composition and movement of Rental properties: 


2016

2015


$'000

$'000
Cost:




Balance at January1 and December 31

828

1,380
Disposals during the year:




Transfer to property, plant and equipment

-

(552)
Balance at December 31

828

828





Accumulated depreciation:




Balance at January1

172

140
Additions during the year:




Depreciation

26

37





Disposals during the year:




Transfer to property, plant and equipment

-

(5)





Balance at December 31

198

172





Depreciated cost at December 31

630

656





On December 2011 the Company acquired from its controlling 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 Company occupies approximately 75 per cent of the Property; therefore, it had entered into a lease agreement with MTI Computers (which can sub lease part of the area) occupying approximately 1,100 square meters of the Property. The term of the lease is for an initial period of 5 years, with an option 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 per cent for the Option Period.
In addition to the monthly rental payments, the tenants 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. Since the acquisition of Mottech and movement of its facility to the Property the Company entered into an agreement with Mottech instead of MTI Computers for about 40% of the area used by MTI Computers and therefore the lease with MTI Computers was reduced to $6,000 per month and $4,290 per month as a contribution towards certain expenses. 
The Group estimates that the fair value does not differ from the carrying amount as at December 31, 2016. 
12. Intangible assets


2016

2015


$'000

$'000





At January1

429

-
Acquisition of consolidated companies

-

483
amortization charge

(108)

(54)





At December 31

321

429





13. Deferred Tax Assets
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 in the deferred tax asset is as shown below:


2016

2015


$'000

$'000





At January1

393

368
Additional taxes as a result of acquisition of Subsidiaries

-

(66)
Profit charge 

107

91





At December 31

500

393





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.
 Composition:


31.12.2016

31.12.2015


$'000

$'000
Accrued severance pay

58

56
Other provisions and employee-related obligations

70

33
Research and development expenses deductible over 3 years 

170

189
Depreciable intangibles

(53)

(69)
Carry forward tax losses

255

184







500

393





Deferred tax assets relating to carry forward capital losses of the Group total approximately$841and$793 thousand as of December 31, 2016 and 2015 respectively were not recognized in the financial statements because their utilization in the foreseeable future is not probable.
14. Inventories


31.12.2016

31.12.2015


$'000

$'000





Raw materials and consumables

3,713

3,198
Work-in-progress

99

97
Finished goods and goods for resale

1,098

1,131







4,910

4,426





15. Trade and other receivables


31.12.2016

31.12.2015


$'000

$'000





Trade receivables

8,159

8,074
Other receivables

706

1,296







8,865

9,370





 Trade receivables:


31.12.2016

31.12.2015


$'000

$'000





Trade receivables (*)

5,227

5,602
Unbilled receivables - Projects

2,751

2,307
Notes receivable

315

247





Allowance for doubtful accounts

(134)

(82)


8,159

8,074





(*) Trade receivables are non-interest bearing. They are generally on 60-90 day terms.
As at 31 December 2016 trade receivables of $ 535K (2015 - $595K) were past due but not impaired.
They relate to the customers with no default history. The aging analysis of these receivables is as follows: 


31.12.2016

31.12.2015


$'000

$'000
Up to 3 months

514

477
3 to 6 months

13

43
6 to 12 months 

8

75







535

595





Unbilled receivables:


31.12.2016

31.12.2015


$'000

$'000





Actual completion costs

3,022

2,046
Profit recognised

1,608

1,466
Billed revenue

(1,879)

(1,205)





Total Unbilled receivables - Projects

2,751

2,307





Other receivables:


31.12.2016

31.12.2015


$'000

$'000





Prepaid expenses

127 

210 
Advances to suppliers

74

263
Employees 

73

54
Tax authorities - V.A.T

86

230
Other receivables 

346

539







706

1,296





16. Cash and cash equivalents


31.12.2016

31.12.2015


$'000

$'000





In U.S. dollars









Cash on hand and in banks

4,428

648
Deposits with banks

-

1,986 





Total

4,428

 2,634 





 The deposits are not linked and bear interest mainly up to 0.05% as of December 31, 2015.
17. Loans from banks 
Composition:


31.12.2016

31.12.2015


$'000

$'000





US Dollars - unlinked

1,063

1,313
NIS

1,343

1,860
South African Rand

60

-
Less - current maturities

802

792







1,664

2,381





In 2011 the Company received US$ 2.5 Million 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%.
On December 2013 and July 2014, the Company received NIS 150,000 (approximately US$ 39 thousand)and NIS 107,000 (approximately US$ 28 thousand)loans respectively for purchase of cars. The loans are for 4 and 3 years, respectively, with a monthly repayment starting January and July 2014, respectively and bear interest of Prime +0.75% (1.6% as of December 31, 2016). Each of these bank loans is secured by a fixed lien on the cars. 
On June 2015 the Company received NIS 8 Million(approximately US$ 2.08 Million)loan for funding the acquisition of Mottech. The loan is for 4 years, the repayment on a quarterly basis from September 2015 until June 2019 and bears interest at a fixed rate of 3.5%.
During 2016 Mottech South Africa had entered into loan agreement of approximately US$ 60 thousand for purchase of cars payable in 36 months on a quarterly basis. Interest rate is linked to the South Africa prime lending rate. 
At December 31 2016

First
year

Second year

Third
year

Fourth year

Fifth
year and thereafter



$'000













Long-term loan

802

806

541

254

63

18. Employee benefits
A. Composition:

As at December 31

2016

2015

$'000

$'000




Present value of the obligations
977

983
Fair value of plan assets
(572)

(596)





405

387




B. Movement in plan assets:

As at December 31

2016

2015

$'000

$'000




Year begin 
596

488
Foreign exchange gain (loss)
8

(2)
Interest income 
11

9
Contributions
13

206
Benefit paid 
(50)

(41)
Re measurements loss 



Actuarial loss from financial assumptions
(1)

-
Return on plan assets (excluding interest)
(5)

(64)




Year end
572

596
C. Movement in the liability for benefit obligation:

As at December 31

2016

2015

$'000

$'000




Year begin
983

853
Foreign exchange loss (gain) 
15

(3)
Interest cost
30

28
Current service cost
17

123
Contributions
-

49
Benefits paid
(78)

(45)
Re measurements loss (gain) 



Actuarial loss (gain) from financial assumptions
(16)

5
Adjustments (experience) 
26

(27)




Year end
977

983




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,


2016

2015





 Discount rate on plan liabilities

3.31%

3.11%
 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 as at December 31, 2016:

Change in defined benefit obligation

$'000
The change as a result of:

Salary increase of 1 % 
(66)
Salary decrease of 1 %
54


The change as a result of:

Increase of 1% in discount rate
50 
Decrease of 1% in discount rate
(63)
19. Other liabilities
As part of the purchase agreement with the previous owner of Mottech, it was agreed that the previous owner would be entitled to an additional contingent consideration ("the contingent consideration"). The Group will pay the contingent consideration to the previous owner based on calculation up to US$ 720 thousand, if the acquired Company's accumulated revenue in 2016 - 2017 exceeds US$ 25.8 Million (100 million New Israeli Shekels) ("the revenue target").
As of the acquisition date, the fair value of the contingent consideration was estimated at US$ 92 thousand. The fair value was determined using the Monte-Carlo method. As at December 31, 2016 the fair value of the contingent consideration estimated at zero. 
20. Trade and other payables 


As at December 31,


2016

2015


$'000

$'000





Trade payables

2,285

1,772
Employees' wages and other related liabilities

776

772
Advances from trade receivables

28

114
Accrued expenses

534

775
Government authorities 

20

54
Others

434

383







4,077

3,870





21. Current maturities and short term Loans 



As at December 31,

Interest rate
as at December 31,02016

2016

2015

%

$'000

$'000






Current maturities In NIS
Prime+0.75

15

21
Current maturities In NIS
3.5

520

512
Current maturities In SA ZAR
10

17

9
Current maturities In US $
4.9

250

250












Total Current maturities and short-term bank loans


802

792






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 2016 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 losses. 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, 2016

Less than one year

1 to 2 years

2 to 3
years

3 to 4 years

> 5 
years

Total 



$'000














Loans from banks

889

862

566

261

64

2,642

Trade payables

2,285

-

-

-

-

2,285

Payables

1,792

-

-

-

-

1,792



4,966

862

566

261

64

6,719

December 31, 2015

Less than one year

1 to 2 years

2 to 3
years

3 to 4 years

> 5 
years

Total 



$'000














Loans from banks

907

883

819

534

321

3,464

Trade payables

2,029 

-

-

-

-

2,029

Payables

1,685 

156 

-

-

-

1,841

Contingent consideration

-

-

92

-

-

92



4,621 

1,039 

911

534

321

7,426

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. 
22. Financial instruments - Risk Management (Cont.)
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


2016

2015

2016

2015
Financial liabilities:

$'000
Long-term loan with interest (1)

2,642

3,173

2,656

3,202


















(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, 2015:


Level 1

Level 2

Level 3


$'000
Financial assets at fair value through profit or loss:






 Marketable securities

2,086

-

-







Financial liabilities






 Contingent consideration liability

-

-

92







Reconciliation of fair value measurements that are categorized within Level 3 of the fair value hierarchy:


For the year ended December 31,


2016

2015


$'000

$'000





Balance as of January 1

92

-
Re-measurement recognized in Profit or loss:




Purchases

-

92
Transfers out of Level 3

92

-










Total Contingent consideration liability

-

92





Linkage terms of financial liabilities by groups of financial instruments pursuant to IAS 39
December 31, 2016: 

NIS
Unlinked
S.A Rand
Total

$'000





Financial liabilities measured at amortized cost 
1,343
1,063
60
2,466





December 31, 2015: 

NIS
Unlinked
S.A Rand
Total

$'000





Financial liabilities measured at amortized cost 
1,860
1,313
-
3,173





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


2016
2015






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%
90%
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

2016
2016
2015
2015

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

2016
2016
2015
2015

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
207,500
2,075
-
-





At end of the year
51,779,490
517,795
51,571,990
515,720





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) 
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, 2016 and 2015 was US $20,000 and US $18,000 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:

2016

2016

2015

2015

weighted average exercise price

Number

weighted average exercise price

Number

$



$


Outstanding at beginning of year
0.15

1,800,000

0.15

1,920,000
Exercised during the year
0.15

(207,500)




Granted during the year
0.39

800,000

-

-
Forfeited during the year
0.15

(50,000)

-

(120,000)








Outstanding at the end of the year
0.23

2,342,500

0.15

1,800,000








Exercisable at the end of the year
0.15

1,142,500

0.15

900,000








The weighted average remaining contractual life for the share options outstanding as of December31, 2016was 2.33 years (2015 - 3.66 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 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 Company and its subsidiaries through July 1, 2000.
The maximum royalty amount payable by the Group at December31, 2016 is US$ 470,000.
No provision is recognized due to the lack of expectation to sale relevant products in the foreseeable future.
During 2016 the Group did not pay any royalties.
B. Guarantees
i. The Group has guarantees in favour of customers and government institutes in the amount of US$ 932,000 and US$77,000 respectively. The guarantees are mainly to guarantee advances received from customers and performance of contracts signed. 
ii. 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. 
On February 10, 2016 the parent Company notified the Company that the loan was totally returned and no further guaranty is needed.
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 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:

2016

2015

$'000

$'000




Purchased Goods
369 

328 
Management Fee
428 

410 
Services Fee
249

212 
Lease
(72)

(104)








Compensation of key management personnel of the Group:

2016

2015

$'000

$'000




Short-term employee benefits *)
810

738
*) Including Management fees for the CEO, Directors Executive Management and other related parties.
All Transactions are made on market value. As of December 31, 2016 and 2015 the Group owed to the parent group and related party US $207,000 and US $26,000 respectively.
28. Subsequent events
A. The Board of directors has decided to declare a dividend of 1 cent per share being approximately $518,000. The dividend has a scrip option (see note 9).
B. During January 2017 an employee exercised options to 60 thousand shares in exchange for an approximately of $7 thousand.
C. The financial statements were authorized for issue by the board as a whole following their approval on February 15, 2017.

This information is provided by RNS
The company news service from the London Stock Exchange
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