MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF OUR RESULTS OF OPERATIONS SHOULD BE READ
TOGETHER WITH OUR INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND THE
RELATED NOTES, WHICH APPEAR ELSEWHERE IN THIS REPORT AND THE AUDITED
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO AND ITEM 5. "OPERATING AND
FINANCIAL REVIEW AND PROSPECTS" CONTAINED IN OUR ANNUAL REPORT ON FORM 20-F FOR
THE YEAR ENDED DECEMBER 31, 2006. THE DISCUSSION AND ANALYSIS WHICH FOLLOWS MAY
CONTAIN TREND ANALYSIS AND OTHER "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING
OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AND WITHIN THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995, AS AMENDED. SUCH FORWARD-LOOKING STATEMENTS REFLECT OUR
CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL RESULTS. THESE INCLUDE
STATEMENTS REGARDING OUR EARNINGS, PROJECTED GROWTH AND FORECASTS, AND SIMILAR
MATTERS THAT ARE NOT HISTORICAL FACTS. FORWARD-LOOKING STATEMENTS USUALLY
INCLUDE THE VERBS, "ANTICIPATES," "BELIEVES," "ESTIMATES," "EXPECTS," "INTENDS,"
"PLANS," "PROJECTS," "UNDERSTANDS" AND OTHER VERBS SUGGESTING UNCERTAINTY. WE
REMIND SHAREHOLDERS THAT FORWARD-LOOKING STATEMENTS ARE MERELY PREDICTIONS AND
THEREFORE ARE INHERENTLY SUBJECT TO UNCERTAINTIES AND OTHER FACTORS THAT COULD
CAUSE THE ACTUAL RESULTS, PERFORMANCE, LEVELS OF ACTIVITY, OR OUR ACHIEVEMENTS,
OR INDUSTRY RESULTS, TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY THE
FORWARD-LOOKING STATEMENTS. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON
THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF. WE
UNDERTAKE NO OBLIGATION TO PUBLICLY RELEASE ANY REVISIONS TO THESE
FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE
HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS. WE HAVE ATTEMPTED
TO IDENTIFY SIGNIFICANT UNCERTAINTIES AND OTHER FACTORS AFFECTING
FORWARD-LOOKING STATEMENTS IN THE SECTION ENTITLED "RISK FACTORS" AND ELSEWHERE
IN OUR 2006 ANNUAL REPORT ON FORM 20-F.
OVERVIEW
We are a worldwide provider of solutions for telecommunications expense
management, or TEM, used by enterprises, and business support systems, or BSS,
used by information and telecommunication service providers, or ITSPs. Our TEM
solutions assist enterprises and organizations to make smarter choices with
their telecommunications spending at each stage of the service lifecycle,
including allocation of cost, proactive budget control, fraud detection,
processing of payments and spending forecasting. Our TEM solutions support our
clients on an ongoing basis with both sophisticated software applications and a
variety of managed services relationship models. Our converged BSS solutions for
ITSPs have been successfully implemented worldwide by wireless providers, Voice
over Internet Protocol, Internet Protocol Television, and content service
providers. Our converged BSS solutions include applications for charging and
invoicing customers, interconnect billing and partner revenue management using
pre-pay and post-pay schemes. Our pre-configured BSS solutions have been
designed to be implemented quickly and are competitively priced.
We have wholly owned subsidiaries in the United States, Hong Kong, the
Netherlands and Brazil, MTS IntegraTRAK Inc., MTS Asia Ltd., JARAGA B.V. and
TABS Brazil Ltda., respectively, which act as marketing and customer service
organizations in those countries.
On July 31, 2006, we completed the acquisition of certain assets and
liabilities of TelSoft Solutions Inc., or TelSoft, a California based provider
of call accounting and TEM products. The TelSoft products offer a complementary
solution to our products. We believe that the acquisition of TelSoft's TEM and
call accounting software will enable us to expand our TEM solutions and will
assist us to strengthen our growing business in the United States. In connection
with the acquisition, we paid an initial consideration of $1.1 million and
agreed to pay additional contingent consideration based on post acquisition
revenue performance during the 12 month period following the acquisition. As of
September 30, 2007, based on the post acquisition revenue performance during the
12 month period following the acquisition, we have accumulated an aggregate
$606,000 of additional contingent consideration, which is to be paid in
installments through July 31, 2008.
GENERAL
Our interim consolidated financial statements are prepared in U.S. dollars
and in accordance with generally accepted accounting principles in the United
States, or U.S. GAAP. Transactions and balances originally denominated in
dollars are presented at their original amounts. Transactions and balances in
other currencies are remeasured into dollars in accordance with the principles
set forth in Financial Accounting Standards Board Statement No. 52. The majority
of our sales are made outside Israel in dollars. In addition, substantial
portions of our costs are incurred in dollars. Since the dollar is the primary
currency of the economic environment in which we and certain of our subsidiaries
operate, the dollar is our functional and reporting currency and, accordingly,
monetary accounts maintained in currencies other than the dollar are remeasured
using the foreign exchange rate at the balance sheet date. Operational accounts
and non-monetary balance sheet accounts are measured and recorded at the
exchange rate in effect at the date of the transaction. The financial statements
of certain subsidiaries and an affiliate, whose functional currency is not the
dollar, have been translated into dollars. All balance sheet accounts have been
translated using the exchange rates in effect at the balance sheet date.
Statement of operations amounts have been translated using the average exchange
rate for the period. The resulting translation adjustments are reported as a
component of shareholders equity in accumulated other comprehensive income
(loss).
DISCUSSION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATIONS
Except as described below, there has been no change to our critical
accounting policies and estimates, contained in Item 5. "Operating and Financial
Review and Prospects" of our Annual Report on Form 20-F for the year ended
December 31, 2006, filed with the Securities and Exchange Commission.
GOODWILL AND OTHER INTANGIBLE WRITE-OFF
As of March 31, 2007, we had recorded goodwill of $1.9 million attributable
to the acquisition of the billing activity of the Teleknowledge Group Ltd., or
Teleknowledge, in December 2004. On January 1, 2002, we adopted Financial
Accounting Standards Board, or FASB, Statement of Financial Accounting
Standards, or SFAS, No. 142, "GOODWILL AND OTHER INTANGIBLE ASSETS," or SFAS No.
142. SFAS No. 142 requires goodwill to be tested for impairment on adoption of
the statement, at least annually thereafter, and between annual tests if certain
circumstances or indicators of impairment occur, and written down when impaired,
rather than being amortized as previous accounting standards required. Goodwill
is tested for impairment by comparing the fair value of our reportable units
with their carrying value. Fair value is determined using discounted cash flows.
Significant estimates used in the methodologies include estimates of future cash
flows, future short-term and long-term growth rates, weighted average cost of
capital and estimates of market multiples for the reportable units. During the
second quarter of 2007, we reviewed our goodwill and determined that there was
an indication that the goodwill relating to the acquisition of the Teleknowledge
billing activity had been impaired due to the significant decrease in revenues
from the activity and delay in receipt of new purchase orders. We assessed the
recoverable amount of such goodwill, based on our projections and using expected
future discounted cash flows. Based on such review, as of September 30, 2007, we
determined that the goodwill in the amount of $1.9 million relating to the
acquisition of the Teleknowledge billing activity had been impaired and the
carrying value was written off.
Our long-lived assets and certain identifiable intangibles are reviewed for
impairment in accordance with SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of the carrying amount of assets to be held and used is measured
by a comparison of the carrying amount of the assets to the future undiscounted
cash flows expected to be generated by the assets. If assets are considered to
be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets. During
the second quarter of 2007, we reviewed our goodwill and determined that there
was an indication that the goodwill relating to the acquisition of the
Teleknowledge billing activity had been impaired due to the significant decrease
in revenues from the activity and delay in receipt of new purchase orders. As of
September 30, 2007, we determined that intangible assets relating to the
Teleknowledge acquisition has been impaired, and as a result, we recorded an
impairment loss in the amount of $434,000.
RECENTLY ISSUED ACCOUNTING STANDARDS
In September 2006, the FASB issued SFAS No.157, "FAIR VALUE MEASUREMENTS,"
or SFAS No. 157, which defines fair value, establishes a framework for measuring
fair value in generally accepted accounting principles, and expands disclosures
about fair value measurements. SFAS No. 157 applies to other accounting
pronouncements that require or permit fair value measurements. SFAS No. 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007 and interim periods thereafter. We are currently assessing the
impact of SFAS No. 157 on our consolidated financial position and results of
operations.
In February 2007, the FASB issued SFAS No. 159, "THE FAIR VALUE OPTION FOR
FINANCIAL ASSETS AND FINANCIAL LIABILITIES," or SFAS No. 159. SFAS No. 159
permits entities to choose to measure many financial assets and financial
liabilities at fair value. Unrealized gains and losses on items for which the
fair value option has been elected are reported in earnings. SFAS No. 159 is
effective for fiscal years beginning after November 15, 2007. We are currently
assessing the impact of SFAS No. 159 on our consolidated financial position and
results of operations.
In June 2007, the FASB ratified Emerging Issues Task Force, or EITF, Issue
No. 07-3, "ACCOUNTING FOR NON REFUNDABLE ADVANCE PAYMENTS FOR GOODS OR SERVICES
RECEIVED FOR USE IN FUTURE RESEARCH AND DEVELOPMENT ACTIVITIES," or EITF 07-3.
EITF 07-3 requires that nonrefundable advance payments for goods or services
that will be used or rendered for future research and development activities be
deferred and capitalized and recognized as an expense as the goods are delivered
or the related services are performed. EITF 07-3 is effective, on a prospective
basis, for fiscal years beginning after December 15, 2007 and will be adopted in
the first quarter of fiscal year 2008. We are currently evaluating the impact of
the pending adoption of EITF 07-3 on our consolidated financial statements.
OPERATING RESULTS
The following table presents certain financial data expressed as a
percentage of total revenues for the periods indicated:
Nine months ended September 30,
----------------------------
2006 2007
---------- ----------
Revenues from products and services 100.0% 100.0%
Cost of revenues from products and services (32.3) (30.4)
---------- ----------
Gross profit 67.7 69.6
Operating expenses:
Selling and marketing (29.3) (37.1)
Research and development, net (35.2) (29.3)
General and administrative (23.9) (38.0)
Impairment of goodwill and other intangible assets - (32.4)
---------- ----------
Operating loss (20.7) (67.2)
Financial expenses, net (0.6) (0.4)
Capital loss on the sale of an affiliate - (3.3)
---------- ----------
Loss before taxes (21.3) (70.9)
Taxes on income (*) (0.0)
---------- ----------
Net loss before equity in earnings of affiliate (21.3) (70.9)
Equity in earnings of affiliate 2.1 (*)
---------- ----------
Net loss (19.2)% (70.9)%
========== ==========
*) less than 0.01%
NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
REVENUES FROM PRODUCTS AND SERVICES. Revenues from products and services
consist primarily of software license fees sales, hardware sales and revenues
from services, including service bureau, maintenance, training, professional
services and support. Revenues from products and services decreased by 12.6% to
$7.14 million in the nine months ended September 30, 2007 from $8.17 million
reported for the same period in 2006. Revenues from products and services from
our wholly owned U.S. subsidiary, MTS IntegraTRAK, increased by 2.9 % in the
nine months ended September 30, 2007 compared to the nine months ended September
30, 2006 and accounted for 56.1% of our total revenues in the nine months ended
September 30, 2007. The decrease in revenues from products and services in the
2007 period is primarily attributable to a longer sales cycle for our solutions
during the nine months ended September 30, 2007 compared to the nine months
ended September 30, 2006.
COST OF REVENUES FROM PRODUCTS AND SERVICES. Cost of revenues from products
and services consists primarily of (i) production costs (including hardware,
media, packaging, freight and documentation); (ii) certain royalties and
licenses payable to third parties (including the Office of the Chief Scientist
of the Ministry of Industry and Trade of the State of Israel), (iii)
professional services costs; and (iv) warranty and support costs for up to one
year for end-users and up to 15 months for our original equipment manufacturer,
or OEM distributors. Cost of revenues from products and services decreased by
17.8% to $2.17 million in the nine months ended September 30, 2007 from $2.64
million reported in the nine months ended September 30, 2006. This decrease is
consistent with the decrease in revenues and principally a result of a reduction
in the number of employees in professional services and technical support
departments and their related expenditures.
RESEARCH AND DEVELOPMENT, NET. Research and development expenses consist
primarily of salaries of employees engaged in on-going research and development
activities, outsourcing subcontractor development and other related costs, net
of grants that were approved by the Office of the Chief Scientist. Research and
development costs decreased by 27.1% to $2.1 million in the nine months ended
September 30, 2007 (net of an approved grant from the Office of the Chief
Scientist in the amount of $347,000) from $2.87 million reported in the nine
months ended September 30, 2006 (net of an approved grant from the Office of the
Chief Scientist in the amount of $445,000). Total research and development
expenses decreased in the 2007 period primarily due to the reduction in the
number of research and development employees and their related expenditure and
reduction in costs related to research and development subcontractors.
SELLING AND MARKETING. Selling and marketing expenses consist primarily of
costs relating to sales representatives and their travel expenses, trade shows
and marketing exhibitions, advertising and presales support. Selling and
marketing expenses were $2.65 million in the nine months ended September 30,
2007, an increase of 10.6% from $2.4 million reported in the nine months ended
September 30, 2006. This increase in selling and marketing expenses during the
2007 period is primarily attributable to the integration of the activity of
TelSoft and additional state sales taxes that we recorded as a result of a state
sales tax assessment of our U.S. subsidiary, which increase was off-set in part
by a reduction in the number of sales and marketing employees worldwide and
related expenditures during the third quarter of 2007.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of compensation costs for administration, finance and general
management personnel, professional fees and office maintenance and
administrative costs. General and administrative expenses increased by 38.8% to
$2.71 million in the nine months ended September 30, 2007 from $1.95 million
reported in the nine months ended September 30, 2006. This increase in general
and administrative expenses in the 2007 period is primarily attributable to the
integration of the activity of TelSoft and increase in the allowance for
doubtful accounts.
FINANCIAL EXPENSES, NET. Financial expenses, net consist primarily of gains
on marketable securities, interest income on bank deposits, bank commissions,
bank interest and foreign currency translation adjustments. Financial expenses
were $31,000 in the nine months ended September 30, 2007 compared with financial
expenses of $49,000 reported in the nine months ended September 30, 2006.
CAPITAL LOSS ON THE SALE OF AN AFFILIATE. Other expenses for the nine
months ended September 30, 2007 consist of an accrued capital loss of $233,000
as a result of the then anticipated sale of our 50% ownership interest in Jusan
S.A., our Spanish affiliate, in consideration of 700,000 Euros (approximately
$992,000) plus the payment of 25% of the net income of Jusan S.A. during the
period commencing upon completion of the sale and ending June 30, 2008. The
transaction was consummated on November 29, 2007. We did not record other
expenses for the nine months ended September 30, 2006.
NET LOSS. Net loss for the nine months ended September 30, 2007 was $5.06
million, or $0.88 per ordinary share on a basic and diluted basis, compared to a
net loss of $1.58 million, or $0.27 per ordinary share on a basic and diluted
basis, reported for the nine months ended September 30, 2006. The increase in
net loss in the 2007 period compared to the 2006 period is primarily
attributable to the impairment of goodwill and other intangible assets relating
to the billing activity that we acquired from Teleknowledge, in accordance with
SFAS No. 142 "GOODWILL AND OTHER INTANGIBLE ASSETS," the accrued capital loss of
$233,000 from the then anticipated sale of our 50% interest in Jusan S.A., an
increase in our bad debt allowance and a state sales tax expense that we
recorded as a result of a state sales tax assessment of our U.S. subsidiary in
the nine month period ended September 30, 2007.
SEASONALITY
Our operating results are generally not characterized by a seasonal pattern
except that our volume of sales in Europe is generally lower in the summer
months.
LIQUIDITY AND CAPITAL RESOURCES
On September 30, 2007, we had $975,000 in cash and cash equivalents,
$171,000 in marketable securities and negative working capital of $1.6 million
as compared to $1.47 million in cash and cash equivalents, $100,000 in
short-term bank deposits, $159,000 in marketable securities and working capital
of $186,000 on December 31, 2006. The decrease in working capital as of
September 30, 2007 is attributable to our losses in 2007, the decrease in trade
receivables and to the increase in short term bank credit and current maturities
of a bank loan.
To improve our cash position and working capital, in November 2007, we sold
our 50% ownership interest in Jusan S.A. in consideration of 700,000 Euros
(approximately $992,000). Our Board of Directors has also approved the sale of
our ownership interest in cVidya Networks Inc., which is expected to close in
early January and result in a gain.
On December 10, 2007, we received notice that a privately-owned company in
which we hold approximately a 1% ownership interest will be sold in 2008,
subject to shareholder approval. Based on our current estimates, the sale will
result in our receiving proceeds of approximately $35,000 and recording a loss
of approximately $65,000. The general meeting of the shareholders of the online
advertising company and the separate class meetings of the Preferred A and
Preferred B shareholders has approved the Acquisition Agreement. Consequently,
the closing of the transaction is expected on December 31st.
The following table summarizes our cash flows for the periods presented:
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
2006 2007
---------- ----------
(in thousands)
Net cash used in operating activities $ (1,655) $ (674)
Net cash provided by (used in) investing activities $ (1,073) $ 197
Net cash provided by (used in) financing activities $ 1,094 $ (22)
Net decrease in cash and cash equivalents $ (1,634) $ (499)
Cash and cash equivalents at beginning of period $ 3,191 $ 1,474
Cash and cash equivalents at end of period $ 1,557 $ 975
One of the principal factors affecting our working capital is the payment
cycle on our sales. Any material change in the aging of our accounts receivable
could have an adverse effect on our working capital.
Our operations used $674,000 during the nine months ended September 30,
2007, compared to $1.66 million that was used in the nine months ended September
30, 2006. The decrease in the use of our funds in the 2007 period is primarily
attributable to our cash management efforts and our on-going monitoring and
reduction of expenses in order to achieve sustainable growth.
On July 27, 2006, we obtained a $1.0 million loan from Bank Hapoalim in
order to facilitate the funding of the TelSoft acquisition. The loan principal
is payable in 12 equal monthly installments commencing August 31, 2007 and bears
annual interest at the monthly London Inter Bank Offered Rate (LIBOR) plus 2%,
payable on a monthly basis commencing August 31, 2006. Under the terms of the
loan, we are required to maintain (i) shareholders' equity of not less than $5
million and 40% of our total assets; (ii) operating profit over two consecutive
quarters as of the second quarter of 2007; and (iii) cash and cash equivalents
of not less than $1 million. As a security interest for the repayment of the
loan, we agreed to grant Bank Hapoalim a floating-charge over all of our
company's assets, a fixed charge over our company's share capital, goodwill and
rights to an exemption from taxation or reduced tax, and a fixed charge over all
of the securities, documents and notes in the possession of Bank Hapoalim. We
are not in compliance with such covenants. As of September 30, 2007, we had
repaid two monthly installments in an aggregate amount of $167,000, in
accordance with the loan agreement and continued to make monthly payments in
October, November and December 2007.
We currently do not have significant capital spending or purchase
commitments, but we expect to continue to engage in capital spending consistent
with the level of our operations. We anticipate that our cash on hand and cash
flow from operations will be sufficient to meet our working capital and capital
expenditure requirements for at least 12 months. However, if we do not generate
sufficient cash from operations, we may be required to obtain additional
financing or to reduce level of expenditure. There can be no assurance that such
financing will be available in the future, or, if available, will be on terms
satisfactory to us.
OFF-BALANCE SHEET ARRANGEMENTS
We are not a party to any material off-balance sheet arrangements. In
addition, we have no unconsolidated special purpose financing or partnership
entities that are likely to create material contingent obligations.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
We are exposed to a variety of risks, including changes in interest rates
affecting primarily the interest received on short-term deposits, and foreign
currency fluctuations. We do not use derivative financial instruments to hedge
against such exposure.
INTEREST RATE RISK
Our exposure to market risk for changes in interest rates relates primarily
to our long term loan. Our long term loan is held in dollars and bear annual
interest of the London Inter Bank Offered Rate (LIBOR) + 2%. For purposes of
specific risk analysis, we use sensitivity analysis to determine the impact that
market risk exposure may have on the financial income derived from our long term
loan. The potential annual increase in expenses that would result from a
hypothetical change of 10% in the LIBOR rate would be approximately $100,000.
FOREIGN CURRENCY EXCHANGE RISK
We have operations in several countries in connection with the sale of our
products. A substantial portion of our sales and expenditures are denominated in
dollars. We have mitigated, and expect to continue to mitigate, a portion of our
foreign currency exposure through salaries, marketing and support operations in
which all costs are local currency based. As a result, our results of operations
and cash flows can be affected by fluctuations in foreign currency exchange
rates (primarily the Euro and NIS). A hypothetical 10% movement in foreign
currency rates (primarily the Euro and NIS) against the dollar, with all other
variables held constant on the expected sales, would result in a decrease or
increase in expected 2007 sales revenues of approximately $200,000.
RISK FACTORS
Except as described below, there have been no material changes in our risk
factors reported in our Annual Report on Form 20-F for the year ended December
31, 2006.
WE ARE NOT IN COMPLIANCE WITH CERTAIN FINANCIAL COVENANTS AND MAY NOT BE ABLE TO
OBTAIN OR MAINTAIN COMPLIANCE WITH THOSE FINANCIAL COVENANTS IN THE FUTURE.
On July 27, 2006, we obtained a $1.0 million loan from Bank Hapoalim in
order to facilitate the funding of the TelSoft acquisition. Under the terms of
the loan, we are required to maintain (i) shareholders' equity of not less than
$5 million and 40% of our total assets; (ii) operating profit over two
consecutive quarters as of the second quarter of 2007; and (iii) cash and cash
equivalents of not less than $1 million. As a security interest for the
repayment of the loan, we agreed to grant Bank Hapoalim a floating-charge over
all of our company's assets, a fixed charge over our company's share capital,
goodwill and rights to an exemption from taxation or reduced tax, and a fixed
charge over all of the securities, documents and notes in the possession of Bank
Hapoalim. We are not currently in compliance with such covenants and may not be
able to achieve or maintain compliance with those financial covenants in the
future.
WE CURRENTLY DO NOT SATISFY NASDAQ'S REQUIREMENTS FOR CONTINUED LISTING AND OUR
REQUEST FOR AN EXTENSION OF TIME TO REGAIN COMPLIANCE HAS BEEN DENIED. IF OUR
APPEAL OF THIS DETERMINATION IS NOT SUCCESSFUL OUR ORDINARY SHARES WILL BE
DELISTED AND THE LIQUIDITY FOR OUR SHARES WILL LIKELY BE ADVERSELY AFFECTED.
Our ordinary shares are listed on The NASDAQ Capital Market under the symbol
MTSL. To continue to be listed on NASDAQ, we need to satisfy a number of
conditions, including minimum shareholders' equity of at least $2.5 million. We
fell below the minimum $2.5 million shareholders' equity in third quarter of
2007 and are currently working to regain compliance with this requirement. On
December 20, 2007 we received a NASDAQ Staff Determination letter indicating
that Staff is unable to accept our plan of compliance and our request for an
extension of time to regain compliance with the NASDAQ Stock Market continued
listing criteria. We were informed that trading of our ordinary shares will be
removed from listing and registration on the NASDAQ Capital Market on December
31, 2007 unless we choose to appeal the determination. We intend to appeal the
Staff's determination to a NASDAQ Listing Qualification Panel, but cannot assure
you that we will be successful in our appeal, or if successful, that we will be
able to maintain future compliance with all of the continued listing
requirements of NASDAQ. If we are delisted from NASDAQ, trading in our ordinary
shares would be conducted in a market where an investor would likely find it
significantly more difficult to dispose of, or to obtain accurate quotations as
to the value of, our ordinary shares.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MER TELEMANAGEMENT SOLUTIONS LTD.
(Registrant)
By: /s/ Eytan Bar
-----------------
Eytan Bar
President and
Chief Executive Officer
Date: December 26, 2007
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