REG - MTI Wireless Edge - Financial results for H1 2018
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR)
28 August 2018
MTI Wireless Edge Ltd
("MTI" or the "Company")
Financial results for H1 2018
MTI Wireless Edge Ltd. (AIM: MWE), a market leader in the manufacture of flat panel antennas for fixed wireless broadband and a wireless irrigation solutions provider, today announces its unaudited results for the six months ended 30 June 2018.
As the merger (the "Merger") between the Company and MTI Computers and Software Services (1982) Ltd. ("MTIC") completed on 20 August 2018 the Company is presenting in this announcement the financial results as if the Merger was in effect as of the establishment of the Company. The financial statements for the six months ended 30 June 2018 (which are further below within this announcement) are for the Company on a pre-Merger basis (i.e. they do not contain any contribution from MTIC).
Highlights for the merged companies:
· H1 2018 revenues increased by 3% year-on-year to $17.1m (H1 2017: $16.55m)
· Q2 2018 revenues increased 12% year-on-year to $9.27m and 18% over Q1 2018 (Q1 2018:$7.84m, Q2 2017: $8.26m)
· H1 2018 profit from operations decreased year-on-year by $0.2m to $1.06m mainly due to one-time Merger expenses of $0.16 million (2017: $1.26m)
· Q2 profit from operations increased 16% year-on-year to $0.7m and doubled over Q1 2018 (Q1 2018: $0.35m, Q2 2017: $0.6m)
· H1 2018 cash flow from operations increased 16% to $2.2m (2017: $1.9m)
Zvi Borovitz, Chairman of MTI Wireless, commented:
"We are very pleased to have completed the merger and are excited with the opportunities in each of our business segments. During the first six months of 2018 and especially in the second quarter we continued to see good progress. The general and administration costs in the six months include a one-time Merger cost of approximately $160,000. Going forward we will not only save these costs but expect to save an additional $100,000 annually due to the Merger.
During the first half of 2018, we continued to see good progress in meeting our internal goals in all areas of our business. In our wireless controller segment, via Mottech, we grew by 15% year-on-year and we continue to see opportunities to grow the business. In the antenna segment, we continue to see good demand in our military and Millimetre Wave solutions. While H1 revenue in this segment was 7% below last year, we believe that by the end of the year, we will also see growth in this segment. Our representation division had a small growth in revenue in the first half of the year, and given the design win achieved and the pipeline of opportunities, we expect to end this year with higher revenue growth. Our system engineering division continues to progress focusing on securing its growth for 2019 and beyond. Overall, in all segments, we have a strong belief that our growth will continue into 2019 and beyond".
A. Proforma interim consolidated statements of comprehensive income for the merged companies
Six month period
ended June 30,
Year ended December 31,
2018
2017
2017
U.S. $ in thousands
Unaudited
Revenues
17,112
16,550
34,653
Cost of sales
11,437
10,861
23,430
Gross profit
5,675
5,689
11,223
Research and development expenses
561
461
927
Distribution expenses
2,037
2,083
4,085
General and administrative expenses
2,019
1,885
3,795
Loss (gain) from sale of property
(3)
-
6
Profit from operations
1,061
1,260
2,410
Finance expense
227
115
249
Finance income
25
239
287
Profit before income tax
859
1,384
2,448
Tax (income) expense
(147)
183
440
Profit
1,006
1,201
2,008
Other comprehensive income (loss) net of tax:
Items that will not be reclassified to profit or loss:
Re-measurement of defined benefit plans
-
-
53
Items that may be reclassified to profit or loss:
Adjustment arising from translation of financial statements of foreign operations
(200)
31
61
Total other comprehensive income
(200)
31
114
Total comprehensive income
806
1,232
2,122
Profit attributable to:
Owners of the parent
1,004
1,140
1,949
Non-controlling interest
2
61
59
1,006
1,201
2,008
Total comprehensive income attributable to:
Owners of the parent
804
1,171
2,063
Non-controlling interest
2
61
59
806
1,232
2,122
Earnings per share (dollars)
Basic
0.0117
0.0136
0.0231
Diluted
0.0116
0.0134
0.0230
B. Proforma interim consolidated statements of financial position of the merged companies
30.06.2018
30.06.2017
31.12.2017
U.S. $ in thousands
Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
3,946
5,690
3,508
Other current financial assets
2,031
-
2,011
Trade receivables
10,143
10,999
11,027
Other receivables
717
856
979
Current tax receivables
532
863
619
Inventories
4,746
4,849
5,481
22,115
23,257
23,625
NON-CURRENT ASSETS:
Long term prepaid expenses
35
49
45
Property, plant and equipment
4,229
4,272
4,211
Deferred tax assets
601
633
600
Intangible assets
940
1,051
995
5,805
6,005
5,851
Total assets
27,920
29,262
29,476
30.06.2018
30.06.2017
31.12.2017
U.S. $ In thousands
Unaudited
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current maturities and short term bank credit and loans
836
1,082
869
Trade payables
3,878
4,360
4,186
Other accounts payables
2,225
2,487
2,520
Current tax payables
34
254
237
6,973
8,183
7,812
NON- CURRENT LIABILITIES:
Loans from banks, net of current maturities
547
1,345
955
Employee benefits, net
706
751
734
1,253
2,096
1,689
Total liabilities
8,226
10,279
9,501
EQUITY
Equity attributable to owners of the parent
Share capital
205
200
200
Additional paid-in capital
22,388
21,629
21,716
Capital reserve from share-based payment transactions
361
337
352
Translation differences
(95)
75
105
Retained earnings
(3,550)
(3,643)
(2,781)
19,309
18,598
19,592
Non-controlling interest
385
385
383
Total equity
19,694
18,983
19,975
Total equity and liabilities
27,920
29,262
29,476
For further information please contact:
MTI Wireless Edge Ltd
Dov Feiner, CEO
Moni Borovitz, Financial Director
http://www.mtiwe.com/
+972 3 900 8900
Nomad and Joint Broker
Allenby Capital Limited
Nick Naylor, Alex Brearley
+44 20 3328 5656
Joint Broker
Peterhouse Capital LimitedLucy Williams, Eran Zucker
+44 20 7469 0930
About MTI Wireless Edge
Headquartered in Israel, MTI is a multi-faceted Group offering comprehensive technology solutions through four core divisions:
Antennas Division
MTI Wireless Edge is a world leader in the design, development and production of high quality, state-of-the-art, and cost effective antenna solutions including Smart Antennas, MIMO Antennas and Dual Polarity Antennas for wireless applications. MTI supplies antennas for both military and commercial markets from 100 KHz to 90 GHz.
Internationally recognized as a producer of commercial off-the-Shelf and custom-developed antenna solutions in a broad frequency range, MTI Wireless Edge addresses both commercial and military applications.
MTI supplies directional and omnidirectional antennas for outdoor and indoor deployments, including smart antennas for WiMAX, Broadband access, public safety, RFID, base stations and terminals for the utility market.
Military applications include a wide range of broadband, tactical and specialized communication antennas, antenna systems and DF arrays installed on numerous airborne, ground and naval, including submarine platforms worldwide.
Aerostat Operation Division
Via its system engineering division, the Group offers design and integration of aerostat operation systems along with the ongoing operation of Platform subsystems, SIGINT, RADAR, communication and observation systems.
Water Control & Management Division
Via its subsidiary, Mottech Water Solutions Ltd ("Mottech"), the Group provides high-end remote control solutions for water and irrigation applications based on Motorola's IRRInet state-of-the-art control, monitoring and communication technologies.
As Motorola's global prime-distributor Mottech serves its customers worldwide through its international subsidiaries and a global network of local distributors and representatives. With over 25 years of experience in providing customers with irrigation remote control and management, Mottech solutions ensure constant, reliable and accurate water usage, while reducing operational and maintenance costs. Mottech activities are focused in the market segments of agriculture, water distribution, municipal and commercial landscape as well as wastewater and storm-water reuse.
RF and Microwave Representative and Consultation Division
Via its subsidiary, MTI Summit Electronics Ltd. the group offers representative and expert consultation services specializing in RF and Microwave solutions and applications. It provides its services to international electronics suppliers operating in Israel, Eastern Europe, and Russia.
MTI WIRELESS EDGE LTD.
(An Israeli Corporation)
INTERIM CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
Six month period ended
June 30,
Year ended December 31,
2018
2017
2017
U.S. $ in thousands
Unaudited
Revenues
13,236
12,758
26,376
Cost of sales
8,233
7,896
16,828
Gross profit
5,003
4,862
9,548
Research and development expenses
561
461
927
Distribution expenses
1,938
1,912
3,796
General and administrative expenses
1,704
1,610
3,216
loss from sale of property, plant and equipment
-
-
6
Profit from operations
800
879
1,603
Finance expenses
178
101
216
Finance income
25
205
242
Profit before income tax
647
983
1,629
Income tax expenses (income)
(203)
111
320
Profit
850
872
1,309
Other comprehensive income (loss) net of tax:
Items that will not be reclassified to profit or loss:
Re-measurement of defined benefit plans
-
-
12
Items that may be reclassified to profit or loss:
Adjustment arising from translation of financial statements of foreign operations
(200)
31
61
Total other comprehensive income
(200)
31
73
Total comprehensive income
650
903
1,382
Profit attributable to:
Owners of the parent
848
811
1,250
Non-controlling interests
2
61
59
850
872
1,309
Total comprehensive income attributable to:
Owners of the parent
648
842
1,323
Non-controlling interests
2
61
59
650
903
1,382
Earnings per share (dollars)
Basic
0.0156
0.0155
0.0236
Diluted
0.0154
0.0153
0.0234
Weighted average number of shares outstanding
Basic
54,480,915
52,346,974
52,866,352
Diluted
54,936,165
53,167,096
53,309,196
The accompanying notes form an integral part of the financial statements.
MTI WIRELESS EDGE LTD.
(An Israeli Corporation)
INTERIM CONSOLIDATED STATEMENTS OF
CHANGES IN EQUITY
For the six month period ended June 30, 2018 (Unaudited):
Attributed to owners of the parent
Share capital
Additional paid-in capital
Capital Reserve
for share-based
payment
transactions
Translation differences
Retained earnings
Total attributable to owners of the parent
Non-controlling interest
Total equity
U.S. $ in thousands
Balance at January 1, 2018
114
15,343
352
105
4,212
20,126
383
20,509
Changes during the Six month period
ended June 30, 2018:
Comprehensive income
Profit for the period
-
-
-
-
848
848
2
850
Other comprehensive loss
Translation differences
-
-
-
(200)
-
(200)
-
(200)
Total comprehensive income (loss) for the period
-
-
-
(200)
848
648
2
650
Dividend
5
672
-
-
(1,073)
(396)
-
(396)
Share based payment
-
-
9
-
-
9
-
9
Balance at June 30, 2018
119
16,015
361
(95)
3,987
20,387
385
20,772
The accompanying notes form an integral part of the financial statements.
INTERIM CONSOLIDATED STATEMENTS OF
CHANGES IN EQUITY (CONT.)
For the six month period ended June 30, 2017 (Unaudited):
Attributed to owners of the parent
Share capital
Additional paid-in capital
Capital Reserve
for share-based
payment
transactions
Translation differences
Retained earnings
Total attributable to owners of the parent
Non-controlling interest
Total equity
U.S. $ in thousands
Balance at January 1, 2017
109
14,964
323
44
3,468
18,908
324
19,232
Changes during the six month period
ended June 30, 2017:
Comprehensive income
Profit for the period
-
-
-
-
811
811
61
872
Other comprehensive income
Translation differences
-
-
-
31
-
31
-
31
Total comprehensive income for the period
-
-
-
31
811
842
61
903
Exercise of options to share capital
(*)
14
(*)
-
-
14
-
14
Dividend
3
280
-
-
(518)
(235)
-
(235)
Share based payment
-
-
14
-
-
14
-
14
Balance at June 30, 2017
112
15,258
337
75
3,761
19,543
385
19,928
(*) less than one thousand dollars
The accompanying notes form an integral part of the financial statements.
INTERIM CONSOLIDATED STATEMENTS OF
CHANGES IN EQUITY (CONT.)
For the year ended December 31, 2017 :
Attributable to owners of the parent
Share capital
Additional paid-in capital
Capital Reserve from share-based payment transactions
Translation differences
Retained earnings
Total attributable to owners of the parent
Non-controlling interest
Total equity
U.S. $ in thousands
Balance as at January 1, 2017
109
14,964
323
44
3,468
18,908
324
19,232
Changes during 2017:
Comprehensive income
Profit for the year
-
-
-
-
1,250
1,250
59
1,309
Other comprehensive income
Re measurements on defined benefit plans
-
-
-
-
12
12
-
12
Translation differences
-
-
-
61
-
61
-
61
Total comprehensive income for the year
-
-
-
61
1,262
1,323
59
1,382
Exercise of options to share capital
2
99
(*)
-
-
101
-
101
Dividend
3
280
-
-
(518)
(235)
-
(235)
Share based payment
-
-
29
-
-
29
-
29
Balance as at December 31, 2017
114
15,343
352
105
4,212
20,126
383
20,509
(*) less than one thousand dollars
The accompanying notes form an integral part of these financial statements.
MTI WIRELESS EDGE LTD.
(An Israeli Corporation)
INTERIM CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
30.06.2018
30.06.2017
31.12.2017
U.S. $ in thousands
Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
3,363
4,786
2,642
Other current financial assets
2,031
-
2,011
Trade receivables
9,115
9,525
8,988
Other receivables
556
792
850
Current tax receivables
283
586
360
Inventories
4,476
4,605
5,281
19,824
20,294
20,132
NON-CURRENT ASSETS:
Long term prepaid expenses
28
39
34
Property, plant and equipment
5,275
5,328
5,302
Investment property
598
619
609
Deferred tax assets
583
617
582
Intangible assets
159
267
212
Goodwill
573
573
573
7,216
7,443
7,312
Total assets
27,040
27,737
27,444
The accompanying notes form an integral part of the financial statements.
MTI WIRELESS EDGE LTD.
(An Israeli Corporation)
INTERIM CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
30.06.2018
30.06.2017
31.12.2017
U.S. $ In thousands
Unaudited
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current maturities and short term bank credit and loans
817
1,018
848
Trade payables
2,606
2,621
2,239
Other accounts payables
1,871
2,247
2,322
Current tax payables
12
143
114
5,306
6,029
5,523
NON- CURRENT LIABILITIES:
Loans from banks, net of current maturities
509
1,321
935
Employee benefits, net
453
459
477
962
1,780
1,412
Total liabilities
6,268
7,809
6,935
EQUITY
Equity attributable to owners of the parent
Share capital
119
112
114
Additional paid-in capital
16,015
15,258
15,343
Capital reserve from share-based payment transactions
361
337
352
Translation differences
(95)
75
105
Retained earnings
3,987
3,761
4,212
20,387
19,543
20,126
Non-controlling interest
385
385
383
Total equity
20,772
19,928
20,509
Total equity and liabilities
27,040
27,737
27,444
August 28, 2018
Date of approval of financial statements
Moshe Borovitz
Chief Finance Director
Dov Feiner
Chief Executive Officer
Zvi Borovitz
Non-executive Chairman of the Board
The accompanying notes form an integral part of the financial statements.
MTI WIRELESS EDGE LTD.
(An Israeli Corporation)
INTERIM CONSOLIDATED STATEMENTS OF
CASH FLOWS
Six month period ended
June 30,
Year ended December 31,
2018
2017
2017
U.S. $ in thousands
Unaudited
Cash Flows from Operating Activities:
Profit for the period
850
872
1,309
Adjustments for:
Depreciation and amortization
296
326
637
Loss (gain) from investments in financial assets
(48)
133
-
Loss from sale of property, plant and equipment
-
-
6
Equity settled share-based payment expense
9
14
29
Finance expenses, net
36
56
162
Income tax expense (benefit)
(203)
111
320
Changes in operating assets and liabilities:
Decrease (increase) in inventories
742
372
(269)
Increase in trade receivables
(266)
(1,409)
(879)
Decrease (increase) in other accounts receivables and prepaid expenses
294
(34)
(88)
Increase (decrease) in trade and other accounts payables
(97)
700
396
Increase (decrease) in employee benefits, net
(24)
54
84
Cash from operations
1,589
1,195
1,707
Interest received
-
-
22
Interest paid
(36)
(56)
(109)
Income tax received (paid)
173
(215)
(190)
Net cash provided by operating activities
1,726
924
1,430
The accompanying notes form an integral part of the financial statements.
INTERIM CONSOLIDATED STATEMENTS OF
CASH FLOWS (cont.)
Six month period ended
June 30,
Year ended December 31,
2018
2017
2017
U.S. $ in thousands
Unaudited
Cash Flows From Investing Activities:
Purchase of investments in financial assets, net
-
-
(2,000)
Proceeds from sale of property, plant and equipment
-
-
100
Purchase of property, plant and equipment
(142)
(119)
(447)
Net cash used in investing activities
(142)
(119)
(2,347)
Cash Flows From Financing Activities:
Exercise of share options
-
14
101
Dividend
(396)
(235)
(235)
Short term loan from banks
-
166
-
Long term loan received from banks
-
-
60
Repayment of long-term loan from banks
(429)
(426)
(829)
Net cash used in financing activities
(825)
(481)
(903)
Increase (decrease) in cash and
cash equivalents during the period
759
324
(1,820)
Cash and cash equivalents
at the beginning of the period
2,642
4,428
4,428
Exchange differences on balances of cash and
cash equivalents
(38)
34
34
Cash and cash equivalents
at the end of the period
3,363
4,786
2,642
Appendix A - Non-cash transactions:
Six month period ended
June 30,
Year ended December 31,
2018
2017
2017
U.S. $ in thousands
Unaudited
Purchase of property, plant and equipment
against trade payables
84
6
3
Scrip dividend (Note 6 B)
677
283
283
The accompanying notes form an integral part of the financial statements.
MTI WIRELESS EDGE LTD.
(An Israeli Corporation)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - General:
Corporate information:
M.T.I Wireless Edge Ltd. (hereafter - the "Company", or collectively with its subsidiaries, the "Group") 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"), and commenced operations on July 1, 2000. Since March 2006, the Company's shares have been traded on the AIM market of the London 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. (hereafter "Mottech"), the Company 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.
Certain operational and administrative services are provided by the Parent Company.
Note 2 - Significant Accounting Policies:
The interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for the preparation of financial statements for interim periods, as prescribed in International Accounting Standard No. 34 ("Interim Financial Reporting").
The interim consolidated financial information set out above does not constitute full year-end accounts within the meaning of Israeli Companies Law. It has been prepared on the going concern basis in accordance with the recognition and measurement criteria of the International Financial Reporting Standards (IFRS). Statutory financial information for the financial year ended December 31, 2017 was approved by the board on February 15, 2018. The report of the auditors on those financial statements was unqualified.
The interim consolidated financial statements as of June 30, 2018 have not been audited.
The interim consolidated financial information should be read in conjunction with the annual financial statements as of December 31, 2017 and for the year then ended and with the notes thereto. The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2017 are applied consistently in these interim consolidated financial statements. except for the adoption of new standards effective as of 1 January 2018.
New IFRSs adopted in the period
1. IFRS 9 Financial Instruments
IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018, bringing together all six aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting.
The details of new significant accounting policies and the nature and effect of the changes to previous accounting policies are set out below:
(b) Classification and measurement
The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. Derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never separated. Instead, the hybrid financial instrument as a whole is assessed for classification.
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at fair value through profit or loss ("FVTPL"):
- it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A debt investment is measured at fair value through other comprehensive income ("FVOCI") if it meets both of the following conditions and is not designated as at FVTPL:
- it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment's fair value in OCI. This election is made on an investment-by-investment basis.
All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
A financial asset (unless it is a trade receivable without a significant financing component that is initially measured at the transaction price) is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition.
The following accounting policies apply to the subsequent measurement of financial assets.
Financial assets at FVTPL: These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.
Financial assets at amortized cost: These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses (see b below). Interest income,
foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.
Debt investments at FVOCI: These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On de-recognition, gains and losses accumulated in OCI are reclassified to profit or loss.
Equity investments at FVOCI: These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in OCI and are never reclassified to profit or loss.
The Company has implemented the classification and measurement requirements of IFRS 9 retrospectively on the basis of the facts and circumstances that existed as of January 1, 2018 by recognizing the cumulative effect of the retrospective application as an adjustment to the opening balance of retained earnings and other components of equity as of January 1, 2018.
(c) Impairment
IFRS 9 replaces the 'incurred loss' model in IAS 39 with an 'expected credit loss' (ECL) model. The new impairment model applies to financial assets measured at amortized cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit losses are recognized earlier than under IAS 39.
Under IFRS 9, loss allowances are measured on either of the following bases:
- 12-month ECLs: these are ECLs that result from possible default events within the 12 months after the reporting date; and
- lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a financial instrument.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company's historical experience and informed credit assessment and including forward-looking information.
The Company considers a debt security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of 'investment grade'.
The maximum period considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk.
Trade receivables
Exposures within each Company were segmented based on delinquency status, geographic region, age of relationship and type of product purchased.
Actual credit loss experience was adjusted by scalar factors to reflect differences between economic conditions during the period over which the historical data was collected, current conditions and the Company's view of economic conditions over the expected lives of the receivables.
Changes in accounting policies resulting from the adoption of IFRS 9 have been applied retrospectively, on the basis of the facts and circumstances that existed as of January 1, 2018 by recognizing the cumulative effect of the retrospective application as an adjustment to the opening balance of retained earnings and other components of equity as of January 1, 2018.
The adoption of IFRS 9 did not have an impact on the financial statements.
2. IFRS 15 Revenue from Contracts with Customers
IFRS 15 supersedes IAS 11 Construction Contracts, IAS 18 Revenue and related Interpretations and it applies to all revenue arising from contracts with customers, unless those contracts are in the scope of other standards. 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.
Below are the significant accounting policies and judgments applied by the Company in recognizing revenue from customer contracts in detail according to the Company's main activities:
(a) Sale of goods
The Company's contracts with customers for the sale of goods generally include one performance obligation. The Company has concluded that revenue from sale of goods should be recognized at the point in time when control of the asset is transferred to the customer, generally on delivery of the equipment.
Variable consideration
Under IFRS 15, volume rebates give rise to variable consideration. The variable consideration is estimated at contract inception and constrained until the associated uncertainty is subsequently resolved. The application of the constraint on variable consideration increases the amount of revenue that will be deferred.
To estimate the variable consideration to which it will be entitled, the Company applied the 'most likely amount method' for contracts with a single volume threshold and the 'expected value method' for contracts with more than one volume threshold. The selected method that best predicts the amount of variable consideration was primarily driven by the number of volume thresholds contained in the contract. The Company then applies the requirements on constraining estimates of variable consideration.
Warranty obligations
The Company generally provides warranties for general repairs of defects that existed at the time of sale, as required by law. As such, most warranties are assurance-type warranties under IFRS 15, which the Company accounts for under IAS 37 Provisions, Contingent Liabilities and Contingent Assets, consistent with its practice prior to the adoption of IFRS 15.
Financing components
The Company does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Company does not adjust any of the transaction prices for the time value of money.
(b) Rendering of services
Provided the amount of revenue can be measured reliably and it is probable that the Company will receive any consideration, revenue from services is recognized in the period in which they are rendered.
(c) Revenues from Construction Contracts
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 contract is anticipated, a provision is made in the period in which it first becomes evident, for the entire loss anticipated, as assessed by the company's management.
The Company recognizes income from construction contracts over time, since the Company's performance does not create an asset with alternative use to the Company and the Company has the right to enforce payment for performance completed up to that date.
The payment terms in the projects are based on milestones set at the date of signing the contract and are based mainly on the rate of progress. For this reason, the Company is not expected to recognize assets in respect of contracts and liabilities in respect of contracts in significant amounts in relation to these contracts.
Causes of uncertainty in material estimates
Measuring the progress of long-term performance commitments - the Company is required to estimate the total cost of completing each project based on estimates of material costs, labor costs, subcontractor performance, and more.
First time application
The Company elected to apply IFRS 15 retrospectively for the first time by recognizing the cumulative effect of the retroactive application as an adjustment to the opening balance of retained earnings as at January 1, 2018.
The adoption of IFRS 15 did not have an impact on the financial statements.
Note 3 - REVENUES:
Six month period ended
June 30,
Year ended December 31,
2018
2017
2017
U.S. $ in thousands
Unaudited
Revenues arises from:
Sale of goods
9,911
10,266
21,271
Rendering of services
1,334
1,175
2,492
Projects
1,991
1,317
2,613
13,236
12,758
26,376
Note 4 - operating SEGMENTS:
The following table's present revenue and profit information regarding the Group's operating segments for the six month period ended June 30, 2018 and 2017 respectively and for the year ended December 31, 2017.
Six month period ended June 30, 2018 (Unaudited)
Antennas
Water Solutions
Total
U.S. $ in thousands
Revenues
External
6,111
7,125
13,236
Total
6,111
7,125
13,236
Segment profit
228
572
800
Finance expense, net
153
Profit before income tax
647
Other
Depreciation and amortization
267
29
296
Six month period ended June 30, 2017 (Unaudited)
Antennas
Water Solutions
Total
U.S. $ in thousands
Revenues
External
6,579
6,179
12,758
Total
6,579
6,179
12,758
Segment profit
175
704
879
Finance income, net
104
Profit before income tax
983
Other
Depreciation and amortization
298
28
326
Year ended December 31, 2017
Antennas
Water Solutions
Total
U.S. $ in thousands
Revenue
External
13,267
13,109
26,376
Total
13,267
13,109
26,376
Segment profit
67
1,536
1,603
Unallocated corporate expenses
Finance expense, net
26
Profit before income tax
1,629
Other
Depreciation and amortization
586
51
637
Note 5 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES:
The following transactions occurred with the Parent Company and other related parties:
Six month period ended
June 30,
Year ended December 31,
2018
2017
2017
U.S. $ in thousands
Unaudited
Purchased Goods
102
103
252
Management Fee
231
221
498
Services Fee
143
130
259
Lease income
(36)
(36)
(72)
Compensation of key management personnel of the Group:
Six month period ended
June 30,
Year ended December 31,
2018
2017
2017
U.S. $ in thousands
Unaudited
Short-term employee benefits *)
471
417
920
*) Including Management fees for the CEO, Directors, Executive Management and other related parties.
All Transactions were made at market value.
Balances with related parties:
30.06.2018
30.06.2017
31.12.2017
U.S. $ in thousands
Unaudited
Other accounts payables
293
293
467
Note 6 - SIGNIFICANT AND SUBSEQUENT EVENTS:
A. During March 2018 the Company announced that it is in preliminary discussions with its majority shareholder, MTI Computers & Software Services (1982) Ltd ("MTIC"), regarding a potential merger between the two companies (the "Proposed Transaction"). MTIC, whose shares are listed on the Tel Aviv Stock Exchange, currently holds 53.2% of the Company's issued ordinary shares. Following the announcement on March 2018, on May 1, 2018 the Company announced that it had entered into a merger agreement (the "Merger Agreement") with its majority shareholder, MTIC and the Company together being the "Merging Companies", according to which, and in accordance with the provisions of Sections 350-351 of the Israeli Companies Law, 5759-1999 (the "Companies Law"), as a court approved scheme of arrangement between the Company, MTIC and their shareholders (the "Scheme of Arrangement"), MTIC will be merged into the Company in a statutory merger, so that MTIC will be dissolved and all of its activities, assets and liabilities, subject to certain qualifications, will be transferred to the Company in consideration for the allotment of new ordinary shares of the Company and the transfer of MTIC's existing holdings in the Company, to all of MTIC's shareholders (the "Merger").
As consideration for the Merger, the Company will allocate to the shareholders of MTIC 31,600,436 new ordinary shares in the Company, subject to a Conversion Ratio Mechanism (as defined below). In addition, MTIC's existing holdings in the Company will also be transferred to all of the shareholders in MTIC, pro rata to their holdings of shares in MTIC.
On the date of record for the Merger the Company will allocate to the shareholders of MTIC (the "Date of Record for the Merger" and the "Shareholders of MTIC" respectively) 31,600,436 new ordinary shares in the Company, according to the Conversion Ratio (as defined below) as of the date of the Merger Agreement, subject to the Conversion Ratio Mechanism (as defined below) (the "Allotted Shares") and will transfer them, together with MTIC's Holdings in the Company (the "Sold Shares"), to all of the shareholders in MTIC, pro rata to their holdings of shares in MTIC on the Date of Record for the Merger, according to the Conversion Ratio. With respect to the Merger Agreement, the "Conversion Ratio" - a ratio of 5.2689055 Sold Shares for each share in MTIC as of the date of entry into the Merger Agreement, which has been determined according to a valuation of the business activities of MTIC and the Company, on the basis of the consolidated and audited financial statements for the year ended 31 December 2017 of each company as valued by an independent appraiser (the "Appraiser"), which is subject to updates, as necessary, according to the Conversion Ratio Mechanism (as defined below). According to the aforesaid valuation, which constitutes part of the Merger Agreement (the "Valuation"), the equity ratio as of 31 December 2017, between the value of MTIC excluding MTIC's holdings in the Company (approximately US$ 10.7 million as of 31 December 2017) when compared with the value of the Company (approximately US$18.8 million as at 31 December 2017) is approximately 1.75: in favor of the Company. Following completion of the Merger, assuming the Conversion Ratio is not adjusted in accordance with the Conversion Ratio Mechanism (5.26891) and provided none of the options granted by the Company are exercised, the issued share capital of the Company will be 87,038,724 ordinary shares.
The Merger was completed on August 20, 2018.
B. On April 5, 2018 the Company paid a dividend of US 2 cents per share totaling approximately US$ 396,000 and in addition 1,813,970 new ordinary shares were issued to qualifying shareholders that chose the scrip dividend alternative.
-ENDS-
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