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FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Quarterly Report Under to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: March 31, 1996
Commission File Number: 1-11020
Micel Corp
(Exact name of Small Business Issuer as specified in its charter)
NEW YORK 11-2882297
(State of other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
170 53rd street, Brooklyn New York 11232 .
(Address of Principal executive offices) (Zip Code)
(718) 492-8400
(Registrant's telephone number, including area code)
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(Former name, former address, and former fiscal
year, if changed since last report)
Indicate be check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing requirements for
past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Common Stock, Par Value $.001 51,211,300
(Title of each Class) (Outstanding at March 31, 1996)
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<PAGE>
MICEL CORP. AND SUBSIDIARY
CONSOLIDATED REPORT
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
Item 1. Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets at
March 31, 1996 and September 30, 1995. 3
Condensed Consolidated Statements of Income (loss)
for the three and six months ended March 31, 1996 and 1995. 4
Condensed Consolidated Statements of Cash Flows
for the six months ended March 31, 1996 and 1995 5
Condensed Consolidated statements of changes in shareholders'
equity. 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations 8-11
PART II - OTHER INFORMATION 12
Signatures 13
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MICEL CORP. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
<PAGE>
MICEL CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31 September 30
1996 1995
(Unaudited) (Audited)
----------- ---------
A S S E T S
CURRENT ASSETS
Cash and cash equivalents 158,634 202,327
Accounts receivable 689,418 729,994
Inventories 612,812 664,487
---------- ----------
Total current assets 1,460,864 1,596,808
PLANT AND EQUIPMENT:
Cost 2,513,583 2,510,115
Less - accumulated depreciation 2,328,418 2,282,698
---------- ----------
185,165 227,417
Total assets 1,646,029 1,824,225
========== ==========
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
Short-term bank credits - secured 314,071 283,511
Current maturities of long term liabilities 121,084 223,659
Accounts payable and accrued liabilities 976,856 1,085,294
Advances from customers 166,657 103,572
---------- ----------
Total current liabilities 1,578,668 1,696,036
LONG TERM LIABILITIES
net of current maturities 66,612 123,967
ACCRUED SEVERANCE PAY 33,269 49,918
SHAREHOLDERS' EQUITY:
Preferred stock of $0.001 per value - redeemable or
convertible: 5,000,000 shares authorized;
10 shares issued and outstanding,
(liquidation preference - $11,200)
Common stock of $0.001 par value - 85,000,000 shares
authorized; 51,211,300 shares issued and outstanding 51,211 50,211
Additional paid-in capital 5,604,422 5,558,422
---------- ----------
Retained earnings (accumulated deficit) (5,688,153) (5,654,329)
---------- ----------
Total shareholders' equity (32,520) (45,696)
---------- ----------
Total Liabilities and shareholders' equity 1,646,029 1,824,225
========== ==========
3
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MICEL CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
<TABLE>
<CAPTION>
6 months ended March 31 3 months ended March 31
----------------------- -------------------------
1996 1995 1996 1995
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
$ $ $ $
<S> <C> <C> <C> <C>
Sales 1,373,954 1,353,643 586,800 653,148
Cost Of Sales 980,434 1,006,718 428,566 423,679
----------- ----------- ----------- -----------
Gross Profit 393,520 346,925 158,234 229,469
Research and Development
Expenses 179,715 284,580 69,513 160,307
Selling Expenses 86,570 70,395 39,443 50,984
General and Administrative
Expenses 115,731 206,323 58,505 129,606
----------- ----------- ----------- -----------
Total operating expenses 382,016 561,298 167,461 340,897
Income (Loss) From Operation-
Before Financial Income and
Expenses 11,504 (214,373) (9,227) (111,428)
Financial Expenses (48,880) (57,794) (17,096) (29,379)
Financial Income 3,552 4,371 1,857 1,088
Other Income (Expenses) - Net -- 36,313 -- 26,182
----------- ----------- ----------- -----------
Net (Loss) (33,824) (231,483) (24,466) (113,537)
Weighted average common
shares outstanding 50,294,633 25,827,300 50,377,966 25,827,300
Earnings (loss) per share
of Common Stock $ (0.001) $ (0.009) $ (0.001) $ (0.005)
</TABLE>
4
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MICEL CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
6 months ended March 31
-----------------------
1996 1995
(Unaudited) (Unaudited)
----------- -----------
CASH FLOWS From Operating Activities:
Net (loss) (33,824) (231,483)
Adjustments to reconcile net income or loss
to net cash provided by or used in
operating activities:
Depreciation 48,000 51,000
(Decrease) in accrued severance pay (16,649) (24,151)
Capital (gain) on sale of fixed assets -- (36,313)
Decrease in accounts receivable 40,576 330,706
Decrease (Increase) in inventory 51,675 (19,840)
(Decrease) in accounts
payable and accrued liabilities (108,438) (245,235)
Increase (Decrease) in advances from
customers 63,085 (55,021)
Exchange loss -- 4,114
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Total adjustments 78,249 5,260
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Net cash provided by (used in)
operating activities 44,425 (226,223)
CASH FLOWS From Investing Activities:
Purchase of equipment (5,748) (202)
Proceeds from sale of equipment -- 46,411
-------- --------
Net cash provided by (used in)
investing activities (5,748) 46,209
CASH FLOWS From Financing Activities:
Issuance of Common Stock (net of issurance
expenses) (47,000) 5,100
Repayment of long term liabilities (159,930) (128,864)
Increase (Decrease) in short term
bank credits 30,560 (222,084)
-------- --------
Net cash (used in) financing activities (82,370) (345,848)
Effect of exchange rate change on cash -- 68
-------- --------
(Decrease) In Cash and
Cash Equivalents (43,693) (525,794)
Cash and Cash Equivalents at
Beginning of Period 202,327 717,542
-------- --------
CASH and CASH EQUIVALENTS at
End of period 158,634 191,748
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5
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<TABLE>
<CAPTION>
MICEL CORPORATION AND SUBSIDARY CONSOLIDATED STATEMENTS
OF CHANGES IN SHAREHOLDERS' EQUITY
For the six months ended March 31, 1996
---------------------------------------------
Prefferred Stock Common Stock
--------------------- --------------------- Additional Paid in Accumulated
No. Of Shares Value No. Of Shares Value Capital Deficit Total
------------- ----- ------------- ----- ------------------ ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1995 10 -- 50,211,300 50,211 5,558,422 (5,654,329) (45,696)
Issuance of Common Stock (Net
of issuance expenses)
in a private placement -- -- 1,000,000 1,000 46,000 -- 47,000
Net loss -- -- -- -- -- (33,824) (33,824)
---------- --- ---------- ------ ---------- ---------- --------
Balance, March 31, 1996 10 -- 51,211,300 51,211 5,604,422 (5,688,153) (32,520)
6
</TABLE>
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MICEL CORP. AND SUBSIDIARY NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet at March 31, 1996, the
consolidated statements of income (loss) for the three and six months
ended March 31, 1996 & 1995 the consolidated statements of cash flows
for the six months ended March 31, 1996 and 1995, and the consolidated
statements of changes in shareholders' equity, have been prepared by
the Company, and are unaudited.
Reference should be made to the notes to the Company's September 30,
1995 consolidated financial statements for additional details of the
company's consolidated financial condition, results of operations and
cash flows. The details in those notes have not changed except as a
result of normal transactions in the interim. All adjustments (of
normal recurring nature) which are, in the opinion of management,
necessary to a fair presentation of the results of the interim period
have been included.
The results of operations for the period ended March 31, 1996, are not
necessarily indicative to the operating results for the full year.
2. Preferred Stock
The company redeemed the 400 shares of 1990 preferred Stock along with
accrued dividends for 9,800,000 shares of Common Stock, effective as
of April 1, 1995. The redemption price was $ .05 per share of Common
Stock. In addition, holders of 410 shares of 1993 preferred stock
converted such shares along with accrued dividends, as of April 1,
1995 for 9,184,000 shares of Common Stock at the conversion price of
$.05 per share of Common Stock.
3. Common Stock.
During the quarter ended March 31, 1996, the company raised $50,000 in
a private placement of Common Stock at $0.05 per share or 1,000,000
shares.
4. Litigation
In April 1994, a former President of the company, commenced an action
against the company for approximately $91,200 in back wages, bonuses
and unused vacation days. Although the company believes that the claim
is substantially meritless, the Company is unable to predict the
possible outcome of this litigation. See Form 10KSB for year ended
September 30, 1995 for description of the litigation which the Company
is involved in.
5. Shareholders Equity
As at March 31, 1996, the shareholders' equity is $ (32,520).
7
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Item 2
Management's Discussion and Analysis of
Financial Conditions and Results of Operations
General
Impact of inflation, devaluation and fluctuation of currencies on the results
operations.
All of the Company's operations are conducted through its Israeli subsidiary,
Microkim. A substantial portion of sales and purchases of materials are in, or
linked to the United States dollar. Most of other expenses are linked to the
Israeli Shekel. Transactions and balances originally denominated in dollars are
presented at their original amounts. Transactions and balances in currencies
other than the dollar are translated into dollars in accordance with the
principles set forth in statement No. 52 of the Financial Accounting Standards
Board.
Fluctuations in the rate of exchange between the dollar and such other
currencies result in the recognition of financial income or loss. The Company
manages its Israeli operations with the object of protecting against material
net financial loss in U.S. dollar terms from the impact of Israeli inflation and
currency devaluation on its non - U.S. dollar assets and liabilities. In the six
month period ended March 31, 1996, the Israeli Consumer Price Index ("ICPI")
increased by 5.81% , as compared with a devaluation of the Shekel of 3.87%
against the U.S dollar. In the three months period ended March 31, 1996, the
Israeli consumer price Index increased by 2.78% as compared with a evaluation of
the shekel of 0.8% against the U.S. dollar. There can be no assurance that the
Government of Israel will devalue the shekel from time to time to offset the
effects of inflation in Israel.
As a result of non devaluation of the U.S dollar company's expenses that are
linked to the Israeli Shekel increase when translated to U.S. dollar.
8
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Financial Condition:
The company's operations in the first six month of Fiscal 1996 have been
financed principally from revenues from sales, research and development grants
and by a private placement of shares of common stock.
In Fiscal 1995, the Company issued 18,984,000 Shares of Common Stock upon
conversion of the 1990 and 1993 Preferred Stock In addition, the Company issued
5,400,000 Shares of Common Stock in a Private Placement at $.05 per share. In
Fiscal 1996 the company issued 1,000,000 shares of common stock in a private
placement at $ 0.05 per share.
The total amount of outstanding loans, credit facilities and guarantees from
banks are approximately $725,000 and is secured by liens on certain Microkim's
property and equipment, share capital and insurance rights, and by a secured
interest in all of Microkim's assets. This amount includes approximately
$188,000 of long term borrowings from Israel Industrial Development Bank Ltd, to
be repaid between 1996 and 2000. This also includes approximately $223,000
performance guarantees pursuant to contracts with customers. The company does
not have any unused lines of credit.
During Fiscal 1995, the Company's Israeli subsidiary reached an agreement with
its lessor to repay approximately $130,000 in back rent in 51 monthly
installments. The Company guaranteed this agreement. As of March 31, 1996 the
outstanding balance of back rent is approximately $94,000.
In the six months ended March 31, 1996 net cash equivalents decreased by $43,693
as a result of repayment of long term liabilities of $159,930, partially offset
by $47,000 net proceeds from issuance of common stock, increase of $30,560 in
short term bank credits and $44,425 cash provided by operating activities.
The Company has been experiencing difficulty in making timely payments to its
trade and other creditors. As of March 31, 1996, the Company had past due
payable in the amount of approximately $120,000. Deferred payment terms have
been negotiated with most of these vendors. However, certain vendors have
suspended parts deliveries to the Company. As a result, the Company may not
always be able to make all shipments on time, although no orders have been
canceled to date. Were significant volumes of orders to be canceled, the
Company's ability to continue to operate would be jeopardized.
9
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Due to the weakness of the defense market, the Company intends to place emphasis
on increasing its commercial line of products and commercial market base. It is
the policy of the Company to accept only those orders which are worthwhile
economically and the Company has also tended to accept mainly larger orders for
a limited number of projects, the most important of which tend to be with
strategic partners as with the project with ASDI. The company is establishing
the production capability for the Radio Module (developed together with AIL),
and intends to market and sell the product worldwide. A significant portion of
the future revenues of the Company will be dependent on the success of these two
projects.
The Company needs funds of approximately $150,000 to be raised in the form of
equity or debt. The additional $150,000 will be used for repayment of current
maturities of long term liabilities. In the event that such additional financing
is not consummated, the Company will be required to renegotiate the repayment
with the Bank. There is no assurance that such renegotiation will be successful.
There can, however, be no assurance that current sales agreements will not be
canceled, and / or funding from the Chief Scientist will be received at all or
at anticipated levels, or that unanticipated events requiring the expenditure of
funds will not occur.
The Company does not have any additional arrangements for any equity or debt
financing at this time. The satisfaction of the Company's cash requirements
after September 30, 1996 will depend in large part on the ability of the Company
to raise capital or obtain loans from shareholders and to attain profitability.
In the event that the necessary cash resources are not received prior to
September 30, 1996, or in the event that any unforeseen events require an
unexpected outlay of cash resources prior to September 30, 1996, the Company
will need to substantially reduce its operations, including further reductions
in personnel, research and development and in other expenses.
10
<PAGE>
Results of Operations
Six months ended March 31, 1996 compared to the six months ended March 31, 1995
Sales in the six months ended March 31, 1996 were $1,373,954 as compared with
$1,353,643 in the six months ended March 31, 1995. Cost of sales in the six
months ended March 31, 1996 was 71.35% of sales or $980,434 as compared with
74.4% or $1,006,718 in the same period in 1995. The reduction in the cost of
sales was due to reduction in direct labor and expenses achieved by the cost
reduction program. Cost of sales may change as function of the specific items
sold in a given period.
Research and development expenses decreased to $179,715 or 13.1% of sales in the
six months ended March 31, 1996 from $284,580 or 21% of sales in the same period
in 1995. The decrease in R & D expenses is due to R & D grants of $82,759
received during the six months ended March 31, 1996 as compared to $665, in the
same period in 1995. The company records the R & D grants on a cash basis.
Selling expenses increased in the six months ended March 31, 1996 to $86,570 or
6.3% of sales from $70,395 or 5.2% of sales in the same period in 1995. The
increase resulted from an increase in salaries and marketing expenses due to
increase in marketing activities.
General and Administrative expenses decreased to $115,731 or 8.4% of sales in
the six months ended March 31, 1996 from $206,323 or 15.35% of sales in the same
period in 1995 as a result of the cost reduction program.
Financial expenses in the six months ended March 31, were $48,880 or 3.56% of
sales compared with $57,794 or 4.27% of sales in the same period in 1995. The
decrease in financial expenses is mainly due to repayment of long term
borowings.
Interest income in the six months ended March 31, 1996 decreased to $3,552 as
compared with $4,371 in the same period in 1995. This resulted from a decrease
in income from marketable securities.
In the six months ended March 31, 1996, the company reported a loss of $33,824
or $0.001 per share. In the same period in 1995, the Company incurred a loss of
$231,483 or $0.009 per share. The decreased loss in attributable mainly to the
decreased cost of sales decrease in research and development expenses and
decrease in general and administrative expenses.
The company is committed to pay royalties to the office of the Chief Scientist
of the State of Israel ("OCS") in respect to products under development for
which the OCS participated by way of grant. The royalty is computed at the rate
of 2% of proceeds from sales of such products up to the amount of such grant.
During the six months ended March 31, 1996 the amount royalties paid to the
"OCS" was $2,472. No royalties were paid during the first six months of Fiscal
1995.
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MICEL CORP. AND SUBSIDIARY
PART II - OTHER INFORMATION
Item 1. Legal Proceeding
Reference is made to Form 10K-SB for the year ended September
30, 1995.
Item 2. Changes in Securities
None.
Item 3. Default on Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
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MICEL CORP. AND SUBSIDIARY
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on behalf by the undersigned
hereunto duly authorized.
MICEL CORP.
Registrant
Date: May 15th, 1996 By: /s Joseph Moscovitz
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Joseph Moscovitz
President and
Chief Executive and Financial Officer
