REG - MTI Wireless Edge - Final Results, Scrip Dividend Alternative <Origin Href="QuoteRef">MWEE.L</Origin> - Part 3
16/02/2017 07:06
- Part 3: For the preceding part double click ID:nRSP0192Xb
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 & Office Computer equipment Vehicles Total
equipment furniture & equipment
$'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
Net book value as of December 31, 2016
4,241
738
34
146
294
5,453
Building Machinery & Office Computer equipment Vehicles Total
equipment furniture & equipment
$'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
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 $'000
Cost:
Balance at January 1 and December 31 828 1,380
Disposals during the year:
Transfer to property, plant and equipment - (552)
Balance at December 31 828 828
Accumulated depreciation:
Balance at January 1 172 140
Additions during the year:
Depreciation 26 37
Disposals during the year:
Transfer to property, plant and equipment - (5)
Balance at December 31 198 172
Depreciated cost at December 31 630 656
656
On December 2011 the Company acquired from its controlling shareholder, MTI Computers & Software Services (1982) Ltd. ("MTI
Computers"), the leasehold interest of its head office located at 11 Hamelacha St., Afek Industrial Park, Rosh-Ha'Ayin,
48091, Israel (the "Property").
The Company occupies approximately 75 per cent of the Property; therefore, it had entered into a lease agreement with MTI
Computers (which can sub lease part of the area) occupying approximately 1,100 square meters of the Property. The term of
the lease is for an initial period of 5 years, with an option to extend the lease for an additional 5 year period (the
"Option Period"). The rent for the leased area is US$ 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 January 1 429 -
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 January 1 393 368
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 $841 and $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 Firstyear Second year Third year Fourth year Fifthyear 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
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%
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 rateas 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 3years 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
261
64
6,719
December 31, 2015 Less than one year 1 to 2 years 2 to 3years 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
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
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
900,000
The weighted average remaining contractual life for the share options outstanding as of December 31, 2016 was 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 December 31, 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
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
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