Mti Wireless Regulatory News (MWE)

27 August 2015

MTI Wireless Edge Ltd

("MTI" or the "Company")

Financial results for the six months ended 30 June 2015

MTI Wireless Edge Ltd., (MWE) ("MTI" or the "Company"), a market leader in the manufacture of flat panel antennas for fixed wireless broadband, and a wireless irrigation solution provider today announces its unaudited results for the six months ended 30 June 2015.

Highlights

· The results include one month consolidation of our newly acquired wireless irrigation solution provider, Mottech Water Solutions Ltd ("Mottech").

· Revenue increased by 13% to US$8m (H1 2014: US$7.1m).

· Operational profit increased by 150% to US$0.5m (H1 2014: US$0.2m).

· Total comprehensive income doubled to US$0.5m (H1 2014: US$0.25m).

· Dividend of US 0.68 cent per share paid on 2 April 2015.

· Shareholder's equity of US$17.8m (at March 31, 2015: US$17.8m), equivalent to 22.2 pence per share (a 100% premium to the closing mid-price on 26 August).

· Integration of Mottech is progressing well.

Dov Feiner, Chief Executive Officer, commented:

"I am pleased to announce that during the first half of 2015 the Company continued to increase its revenue and profits.

The antenna business has continued to grow, and we have recorded growth across the majority of our core product range compared with H1 2014 with the exception of the 80 GHz products. These 80 GHz products have nevertheless continued to gain traction in the market and we remain confident in the long term market opportunity for these multi-gigabit wireless backhaul solutions and their future contribution to the business.

On 10 of June 2015, the Company completed the earnings enhancing acquisition of Mottech and I am especially pleased to report that this has made an immediate profit contribution for the month of June, the last month of the H1 reporting period.

The integration of the Mottech business is proceeding well and we anticipate that the Mottech management office will move to MTI's facilities in September, which will accelerate the integration process and and help us achieve operational efficiencies. We continue to see many opportunities for Mottech's water management services, as well as applying Mottech's remote control and monitoring systems in other markets."

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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 includes 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 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 activities are focused in the market segments of agriculture, water distribution, Municipal and Commercial Landscape and Wastewater and Storm water Reuse.

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

INTERIM CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY

For the Six months period ended June 30, 2015:

INTERIM CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY

For the Six months period ended June 30, 2014:

The accompanying notes form an integral part of the financial statements.

INTERIM CONSOLIDATED STATEMENT OF

CHANGES IN EQUITY

For the year ended December 31, 2014:

INTERIM CONSOLIDATED STATEMENT OF

FINANCIAL POSITION

INTERIM CONSOLIDATED STATEMENTS OF

CASH FLOWS

Appendix A - Non-cash transactions:

Appendix B - Acquisition of subsidiary, net of cash acquired:

Note 1 - General:

Corporate information:

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) and commenced operations on July 1, 2000.

Since March 2006, the Company's shares have been 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, 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

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, 2014 was approved by the board on February 19, 2015. The report of the auditors on those financial statements was unqualified. The interim consolidated financial statements as of June 30, 2015 have not been audited.

The interim consolidated financial information should be read in conjunction with the annual financial statements as of 31 December, 2014 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, 2014 are applied consistently in these interim consolidated financial statements, except for the impact of the adoption of the Standards and Interpretations described below.

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 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 asset may be impaired. The amortization period and the amortization method for an intangible asset are reviewed at least at each year end.

Note 2 - Significant Accounting Policies (CONT.): 

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 is reviewed annually to determine whether their indefinite life 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 asset is tested for impairment. Commencing from that date, the asset is amortized systematically over its useful life.

Note 3 - BUSINESS CMBINATIONS:

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 rich 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 independent 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 separated financial statements of the Company:

· The amount of equity shall not be lower than 40% of total assets of the Company. As of June 30, 2015 the Company meets its obligations.

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.

Mottech was set up in May 2014 and acquired its business and assets at the same time from the Israeli court. The assets had been placed in the Israeli court following the previous owner going into administration as result of business failure of a subsidiary which is not part of Mottech or its business today.

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$ 417 thousands and goodwill in the total amount US$ 167 thousands. The customer relation is amortized over an economic useful life of up to 10 years.

Note 3 - BUSINESS CMBINATIONS (CONT.):

Acquisition cost of Mottech at the date of acquisition:

Set forth below are the assets and liabilities of Mottech at date of acquisition:

The result of the company were consolidated into the financial statement of the group commencing May 31, 2015 and from that date Mottech has contributed US$ 152 thousand to the consolidated profit and US$1,093 thousand to the consolidated revenue turnover. If the business combination had taken place at the beginning of the year, the consolidated net profit would have been US$ 32 thousand and the consolidated revenue turnover would have been US$ 12,275 thousand.

Cash outflow/inflow on the acquisition:

Note 3 - BUSINESS CMBINATIONS (CONT.):

Goodwill:

The goodwill arising on acquisition is attributed to the expected benefits from the synergies of the combination of the activities of the Company and the acquiree.

The goodwill recognized is expected to be deductible for income tax purposes.

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. The fair value was determined using the Monte-Carlo method.

The significant non-observable data used in measuring the fair value of the liability in respect of a contingent consideration are as follows:

Discount rate: 12.8%

A significant increase in the estimated amount of the acquired Company's pre-tax income will result in a significant increase (decrease) in the fair value of the liability in respect of the contingent consideration whereas a significant increase (decrease) in the discount rate and default risk rate will result in a decrease (an increase) in the fair value of the liability.

Note 4 - operating SEGMENTS:

Following the acquisition of the new operation the Group's chief operating decision maker examines operating segments differently from the past and therefore commencing the current financial statements the following table's present revenue and profit information regarding the Group's operating segments for the six months ended June 30, 2015 and 2014, respectively and for the year ended December 31, 2014.

(*) Reclassified.

(**) Results for one month ending on June 30, 2105.