MTS Announces Half Year 2018 Financial Results

RA'ANANA, Israel and RIVER EDGE, New Jersey, Sept. 7, 2018 /PRNewswire/ -- Mer Telemanagement Solutions Ltd. (MTS) (Nasdaq Capital Market: MTSL), a global provider of telecommunications expense management (TEM) and call accounting, today released its financial results for the six months ended June 30, 2018.

The Company recorded revenues of $2.9 million for the six months ended June 30, 2018 compared with $3.6 million for the six months ended June 30, 2017. The Company incurred a net loss of $1 million for the six months ended June 30, 2018, or $(0.34) per diluted share compared with a net loss of $(808,000), or $(0.28) per diluted share, for the comparable period in 2017. On a non-GAAP basis (as described and reconciled below), the Company posted a net loss of $785,000, or $(0.25) per diluted share, for the six months ended June 30, 2018 compared with net income of $65,000, or $0.02 per diluted share, for the comparable period in 2017.

Commenting on the results, Mr. Roy Hess, Chief Executive Officer of MTS, said, "Our results in 2018 reflect our efforts to maintain our operating margins in light of the business pressures that we face. As a result of the continuing weakness in the Vexigo business unit and the industry in which it operates during 2018, we, as previously announced, sold its operation to a third party. The telecommunications side of our business continues to be stable as we have maintained a high level of customer satisfaction. As further indicated below, we are now focused on regaining compliance with NASDAQ's listing requirements."

As previously announced, the Company received a NASDAQ Staff Determination letters indicating that it is not in compliance with NASDAQ's minimum shareholders' equity and share price continued listing requirements. The Company submitted its plan to regain compliance with the minimum $2.5 million in shareholders' equity requirement as set forth in NASDAQ Marketplace Rule 4320(e)(2)(B), and it received a notice from the Listing Qualifications Department of NASDAQ advising that it has until November 5, 2018 to regain compliance. The Company's plan to regain compliance is based in part on various cost-cutting measures, including a reduction in number of personnel that was implemented in the second quarter of this year, and other steps to regain profitability in 2018. In addition, the Company has entered into a letter of intent with an institutional investor that has agreed to invest $1,500,000 in consideration for the Company issuing a new class of convertible preferred stock. Such issuance, which was approved by the Board of Directors of the Company on June 18, 2018, will require shareholder approval, which is expected to be obtained in the early Fall. The investor has also already invested an additional $200,000 in consideration for the issuance of 175,439 of the Company's Ordinary Shares at the end of June, 2018. As a result of this expected aggregate capital infusion of $1.7 million, the Company expects to regain compliance with the $2.5 million stockholders' equity requirement. No assurance can be given that the Company and the investor will enter into a definitive agreement or that shareholder approval will be obtained to effectuate the proposed issuance.

The Company's history of losses from operations, accumulated deficit and its cash position as of June 30, 2018 of approximately $680,000 raise substantial doubt about the Company's ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due.

Non-GAAP Financial Measures: This release includes non-GAAP net loss and basic and diluted net loss per share. These non-GAAP measures exclude the following items:

    --  Amortization of purchased intangible assets (net of tax effect)
    --  Stock based compensation expenses
    --  Reorganization and other non-recurring costs
    --  Loss from discontinued operation

MTS's management believes that the presentation of non-GAAP measures provides useful information to investors and management regarding financial and business trends relating to the Company's results of operations as well as the net amount of cash generated by its business operations. These non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. MTS believes that non-GAAP financial measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures. See below for a reconciliation of GAAP to non-GAAP measures.

About MTS

Mer Telemanagement Solutions Ltd. (MTS) is focused on innovative products and services for enterprises in the area of telecom expense management (TEM) and call accounting. Headquartered in Israel, MTS markets its solutions through wholly-owned subsidiaries in Israel, the U.S and Hong Kong, as well as through distribution channels. For more information please visit the MTS web site: www.mtsint.com.

Certain matters discussed in this news release are forward-looking statements that involve a number of risks and uncertainties including, but not limited to, risks in product development plans and schedules, rapid technological change, changes and delays in product approval and introduction, customer acceptance of new products, the impact of competitive products and pricing, market acceptance, the lengthy sales cycle, proprietary rights of the Company and its competitors, risk of operations in Israel, government regulations, dependence on third parties to manufacture products, general economic conditions and other risk factors detailed in the Company's filings with the United States Securities and Exchange Commission.


    CONSOLIDATED BALANCE SHEETS
    ---------------------------

    U.S. dollars in thousands


                                                    June 30,   December 31,
                                                    --------   ------------

                                                          2018           2017
                                                          ----           ----

                                                     Unaudited       Audited
                                                   ---------      -------

    ASSETS


    CURRENT ASSETS:

    Cash and cash equivalents                             $679         $1,175

    Restricted cash                                      1,138          1,058

    Trade receivables, net                                 299            564

    Other accounts receivable and prepaid expenses          92             63

    Assets of discontinued operations                      278          1,301
                                                           ---          -----

    Total current assets                                 2,486          4,161
    --------------------                                 -----          -----


    LONG-TERM ASSETS:

    Severance pay fund                                     677            856


    PROPERTY AND EQUIPMENT, NET                             87            108
                                                           ---            ---



    OTHER ASSETS:

    Goodwill                                             3,479          3,479

    Other intangible assets, net                            31             42
                                                           ---            ---


    Total other assets                                   3,510          3,521
    ------------------                                   -----          -----


    Total assets                                        $6,760         $8,646
    ------------                                        ======         ======


    CONSOLIDATED BALANCE SHEETS
    ---------------------------

    U.S. dollars in thousands (except share and per share data)


                                                                June 30,    December 31,
                                                                --------    ------------

                                                                       2018          2017
                                                                       ----          ----

                                                                  Unaudited    Audited
                                                                ---------      -------

    LIABILITIES AND SHAREHOLDERS' EQUITY


    CURRENT LIABILITIES:

    Trade payables                                                     $201          $307

    Deferred revenues                                                 1,517         1,744

    Accrued expenses and other liabilities                            2,231         2,284

    Liabilities of discontinued operations                              631         1,380
                                                                        ---         -----


    Total current liabilities                                         4,580         5,715
    -------------------------                                         -----         -----


    LONG-TERM LIABILITIES

    Accrued severance pay                                               890         1,073

    Deferred tax liability                                              144           146
                                                                        ---           ---

    Total long-term liabilities                                       1,034         1,219
    ---------------------------                                       -----         -----


    COMMITMENTS AND CONTINGENT LIABILITIES


    SHAREHOLDERS' EQUITY:

    Share capital                                                        27            25

    Additional paid-in capital                                       28,439        28,188

    Treasury shares                                                    (29)         (29)

    Accumulated deficit                                            (27,291)     (26,472)
                                                                    -------       -------


    Total shareholders' equity                                        1,146         1,712
    --------------------------                                        -----         -----


    Total liabilities and shareholders' equity                       $6,760        $8,646
    ------------------------------------------                       ======        ======


    CONSOLIDATED STATEMENTS OF OPERATIONS
    -------------------------------------

    U.S. dollars in thousands (except share and per share data)


                                                                  Six months ended

                                                                      June 30,
                                                                      --------

                                                                     2018               2017
                                                                     ----               ----

    Revenues:

    Services                                                       $2,341             $2,918

    Product sales                                                     535                712
                                                                      ---                ---


    Total revenues                                                  2,876              3,631
    --------------


    Cost of revenues:

    Services                                                          935                734

    Product sales                                                     213                185
                                                                      ---                ---


    Total cost of revenues                                          1,148                919
    ----------------------                                          -----                ---


    Gross profit                                                    1,728              2,712
                                                                    -----              -----


    Operating expenses:

    Research and development                                          505                906

    Selling and marketing                                             857                764

    General and administrative                                      1,224                879
                                                                    -----                ---

    Total operating expenses                                        2,586              2,549
    ------------------------                                        -----              -----


    Operating profit (loss)                                         (858)               163

    Financial income, net                                               8                 12
                                                                      ---                ---

    Income (loss) before taxes on income                            (850)               175

    Taxes (benefit) on income                                         (5)                 2
                                                                      ---                ---

    Net income (loss) from continuing
     operations                                                    $(845)              $173
                                                                    -----               ----

    Loss from discontinued operations                               (204)             (981)
                                                                     ----               ----

    Net loss                                                     $(1,049)             (808)
                                                                  =======               ====


    Net loss per share:

    Basic net (loss) per Ordinary share
     from continuing                                              $(0.27)             $0.06
    operations


    Basic net loss per Ordinary share from                        $(0.07)           $(0.34)
    discontinued operations


    Basic net loss per Ordinary share                             $(0.34)           $(0.28)
                                                                   ======             ======

    Diluted net (loss) per Ordinary share
     from                                                         $(0.27)             $0.05
    continuing operations


    Diluted net loss per Ordinary share
     from                                                         $(0.07)           $(0.34)
    discontinued operations


    Diluted and net loss per Ordinary share                       $(0.34)           $(0.28)
                                                                   ======             ======

    Weighted average number of Ordinary
     shares used                                                3,120,833          2,909,515
    in computing basic net loss per share


    Weighted average number of Ordinary
     shares used                                                3,120,833          3,309,515
    in computing diluted net loss per share


    RECONCILIATION OF GAAP TO NON-GAAP RESULTS
    ------------------------------------------

    U.S. dollars in thousands (except share and per share data)


                                                                  Six months ended

                                                                      June 30,
                                                                      --------

                                                                     2018               2017
                                                                     ----               ----


    GAAP net income (loss) from continuing                          (845)               173
    operations


    Stock-based compensation expenses                                  50               (30)

    Intangible assets amortization, net of tax effects                 10                 11

    Reorganization and other non-recurring costs                        -              (89)
                                                                      ---               ---


    Non-GAAP net income (loss)                                     $(785)               $65
                                                                    =====                ===


    GAAP basic net earnings (loss) per ordinary                   $(0.27)             $0.06
    share from continuing operations



    GAAP diluted net earnings (loss) per ordinary                 $(0.27)             $0.05
    share from continuing operations



    Non-GAAP basic net earnings (loss) per                        $(0.25)             $0.02
    ordinary share



    Non-GAAP diluted net earnings (loss) per                      $(0.25)             $0.02
    ordinary share



    Weighted average number of ordinary shares                  3,120,833          2,909,515
    used in computing non-GAAP basic (loss) per
    share



    Weighted average number of ordinary shares                  3,120,833          3,309,515
    used in computing non-GAAP diluted net
    earnings (loss) per share

Contact:
Ofira Bar, CFO
Tel: +972-9-7777-540

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