[TYPE]
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, 1997
Commission File Number: 1-11020
Micel Corp.
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(Exact name of Small Business Issuer as specified in its charter)
NEW YORK 11-2882297
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(State of other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
445 Central Ave., Cedarhurst New York 11516
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(Address of Principal executive offices) (Zip Code)
(516) 569-3500
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(Registrant's telephone number, including area code)
(Former name, former address, and former fiscal
year, if changed since last report)
Indicate by 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 $.01 5,565,380
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(Title of each Class) (Outstanding at March 31, 1997)
<PAGE>
2
MICEL CORP. AND SUBSIDIARIES
CONSOLIDATED REPORT
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
Item 1. Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets as of
March 31, 1997 and September 30, 1996. 3
Condensed Consolidated Statements of Income (loss)
for the six and three months ended March 31, 1997
and 1996. 4
Condensed Consolidated Statements of Cash Flows
for the six months ended March 31, 1997 and 1996. 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations 9-12
PART II - OTHER INFORMATION 13
Exhibit 27 14
Signatures 15
<PAGE>
3
MICEL CORP. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
MICEL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31 SEPTEMBER 30
1997 1996
(UNAUDITED) (AUDITED)
------------------- --------------
ASSETS
----------
CURRENT ASSETS
Cash and cash equivalents $ 176,406 $ 81,089
Accounts receivable 883,469 1,339,159
Investment in affiliated company 96,296 -
Inventories 827,823 708,925
------- -------
Total current assets 1,983,994 2,129,173
--------- ---------
Deposits in insurance
companies and pension funds 220,110 181,369
PLANT AND EQUIPMENT (net) 259,602 209,329
------- -------
Total assets 2,463,706 2,519,871
========= =========
LIABILITIES AND SHAREHOLDERS EQUITY
- -------------------------------------
CURRENT LIABILITIES:
Short term bank credit 57,513 321,057
Current maturities of long term debt 23,594 106,957
Accounts payable and accrued
liabilities 1,211,112 1,398,632
Advances from customers 203,835 177,109
------- -------
Total current liabilities 1,496,054 2,003,755
------- -------
LONG TERM DEBT:
net of current maturities 41,355 44,508
ACCRUED SEVERANCE PAY 272,303 226,582
OTHER LONG TERM LIABILITIES - 45,172
------- -------
Total liabilities 1,809,712 2,320,017
--------- ----------
SHAREHOLDERS' EQUITY:
Common Stock 55,654 53,654
Additional paid-in capital 6,183,986 5,785,986
Accumulated deficit (5,585,646) (5,639,786)
----------- -----------
Total shareholders' equity 653,994 199,854
---------- --------
Total liabilities and shareholders'
equity 2,463,706 2,519,871
========= =========
<PAGE>
4
MICEL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
6 Months Ended March 31 3 Months Ended March 31
-------------------------------- ---------------------------
1997 1996 1997 1996
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
Sales 2,651,030 1,373,954 835,848 586,800
Cost Of Sales 2,009,976 980,434 521,538 428,566
------- --------- --------- ---------
Gross Profit 641,054 393,520 314,310 158,234
Research and Development
Expenses (net) 248,153 179,715 106,634 69,513
Marketing and Selling
Expenses (net) 63,081 86,570 29,049 39,443
General and Administrative
Expenses 240,222 115,731 136,161 58,505
------- ------- ------- -------
Total operating
expenses 551,456 382,016 271,844 167,461
Income (loss)
From Operations 89,598 11,504 42,466 (9,277)
Interest and
Other Income 9,791 3,552 8,103 1,857
Interest and
Other Expense (41,545) (48,880) (6,404) (17,096)
Profit (loss)
in affiliated
company (3,704) 982
------- --------- ------- ---------
Net Income
(Loss) 54,140 (33,824) 45,147 (24,466)
====== ====== ====== ======
Weighted average
common shares
outstanding 5,430,175 5,029,463 5,430,175 5,037,797
========= ========= ========= =========
Income (Loss) per
common share 0.01 (0.01) 0.01 (0.00)
========= ========= ========= =========
<PAGE>
5
MICEL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
6 MONTHS ENDED MARCH 31
--------------------------
1997 1996
(Unaudited) (Unaudited)
Cash Flows From Operating Activities:
Net income (loss) $ 54,140 $ (33,824)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation & amortization 45,021 48,000
Loss in affiliated company 3,704 -
Changes in Operating assets and liabilities:
Accounts receivable 455,690 60,576
Inventories (118,898) 51,675
Accounts payable and accrued liabilities (232,692) (128,438)
Advances from customers 26,726 63,085
Accrued severance pay 6,980 (16,649)
--------- --------
Net cash provided by
operating activities 240,671 44,425
------- -------
Cash Flows From Investing Activities:
Purchase of equipment (95,294) (5,748)
Investment in affiliated company (100,000) -
-------- ---------
Net cash used in investing activities (195,294) (5,748)
Cash Flows From Financing Activities:
Repayment of long term debt (86,516) (159,930)
Net change in short-term bank
credit (263,544) 30,560
Issuance of common stock 400,000 47,000
--------- --------
Net cash provided by (used in) financing
activities 49,940 (82,370)
Increase (Decrease) In Cash and Cash
Equivalents 95,317 (43,693)
Cash and Cash Equivalents, Beginning of
Period 81,089 202,327
-------- ---------
Cash and Cash Equivalents,
End of period 176,406 158,634
======= =======
Supplemental Cash Flow Information:
Interest Paid: 22,791 22,872
<PAGE>
6
MICEL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet at March 31, 1997, the
consolidated statements of income (loss) for the three and six months
ended March 31, 1997 and 1996, and the consolidated statements of
cash flows for the six months ended March 31, 1997 and 1996, have been
prepared by the Company, and are unaudited.
Reference should be made to the notes to the Company's September 30,
1996 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, 1997, are
not necessarily indicative of the operating results for the full year.
2. Common Stock
During the first quarter of 1997, the company raised
$400,000 in a private placement of Common Stock at $2.00 per share or
200,000 shares. During the three months ended March 31, 1997, there
were no changes in stock capital.
3. RadioTel
RadioTel, Ltd., was established to develop and manufacture point to
point and point to multipoint wireless radio links for various
applications. RadioTel expects to supply the full spectrum of
frequencies up to 38 GHz with data rates from E1 to 16 E1 including
ATM. RadioTel will attempt to address the market with unique low
cost and innovative solutions to wire-line services. The radio module
which it hopes to develop is expected to be suitable for digital
wireless systems, mainly for telecommunication applications such as
rural telephones and wireless local loop ("WLL") systems in remote
locations (simplified wireless telephone systems for remote
subscribers utilizing radio frequencies for connection into the
public telephone network).
RadioTel has received a purchase order for ISDN (Integrated Service
Digital Network) link from MadenTech Consulting Engineering Inc.,
of $ 46,370.
RadioTel signed an OEM (Original Equipment Manufacture) agreement with
International Communication Technologies, Inc.(ICTI). ICTI is a broad
based communications company which is actively involved in
communication projects in many developing countries worldwide.
RadioTel is currently in the process of recruiting new employees for the
R&D department.
RadioTel, a wholly-owned subsidiary located in Israel, was
incorporated in May 1996 and commenced operations in September 1996.
The financial statements of RadioTel are consolidated into the
Company's financial statements.
<PAGE>
8
4. MICEL Wireless Corp.
MICEL Wireless Corp. (formerly Milink), a Florida corporation and a joint
venture between the Company and Export Business & Services, Inc.
("EBS"), is an international telecommunications company engaged in the
sourcing, marketing and sales of wireless telephone terminals and
other related products. MICEL Wireless currently represents certain
manufacturing companies and telecom agencies as a purchasing agent and
sales representative.
MICEL Wireless Corp. designs, manufactures, and sells fixed cellular
terminals for WLL applications in developing countries. The Company
capitalizes on the technical capabilities of RadioTel, the existing
knowledge of the cellular and wireless local loop markets and a
network of distribution channels. Micel Wireless' initial focus has
been in Latin America, where Micel Wireless expects to take immediate
advantage of existing WLL opportunities.
The Company owns 50% of MICEL Wireless. Refer to the Company's Form
10-KSB for the period ended September 30, 1996 for additional details.
The Company is committed to provide to Micel Wireless a working capital
loan in the amount of $150,000. As of March 31, 1997 the outstanding loan
to Micel Wireless is $100,000. The working capital loan shall bear interest
at 12% per annum, payable annually. The loan will become due after 12
months from the date of the loan or when otherwise mutually agreed upon by
the Company and EBS. At a time and terms to be mutually agreed upon among
the Company, EBS and MICEL Wireless, the working capital loan may be
converted into nonvoting preferred stock of MICEL Wireless.
Micel Wireless commenced activities in the first quarter of Fiscal
1997, in which the Company lent Micel Wireless $100,000. The Company
applies the equity method of accounting for its investments in Micel
Wireless.
During the three months ended March 31, 1997, Micel Wireless Corp.
established a base of operations including a range of products and a
target group through which those products are tested. MICEL Wireless
signed a few representation agreements in core countries such as Mexico,
Paraguay, Columbia, Ecuador, Argentina, the Dominican Republic and Brazil.
5. Legal Proceedings
In July 1994, the Company commenced a civil action in Israel in the
approximate amount of $3,000,000 against M/A Com and Hillel Weinstein
for false representations made by M/A Com and Dr. Weinstein in
connection with the purchase of MicroKim Ltd. from M/A Com and for
subsequent damages resulting from such misrepresentations. Dr.
Weinstein is no longer a defendant or counter claimant in this action
as a result of an agreement reached on May 27, 1996. M/A Com filed a
motion for cancellation of the Company's request for "out of
boundaries" jurisdiction. M/A Com denies the judicial competence of
the Israeli Court to deliberate the suit. M/A Com also claims
prescription and other preliminary claims. At the hearing held on
March 30, 1997, it was agreed that a new affidavit should be submitted
to the Court by someone with better knowledge about the case. After
submitting the new affidavit, a new date for hearing will be furnished
by the Court.
See form 10-KSB for year ended September 30, 1996 for description of
the litigation which the Company is involved in.
<PAGE>
6. Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings
Per Share. This Statement establishes standards for computing and
presenting earning per share (EPS), replacing the presentation of
currently required primary EPS with a presentation of Basic EPS. For
entities with complex capital structures, the statement requires the
dual presentation of both Basic EPS and Diluted EPS on the face of the
statement of operations. Under this new standard, Basic EPS is computed
based on weighted average shares outstanding and excludes any potential
dilution; Diluted EPS reflects potential dilution from the exercise or
conversion of securities into common stock or from other contracts to issue
common stock and is similar to the currently required fully diluted EPS.
SFAS 128 is effective for financial statements issued for periods ending
after December 15, 1997,including interim periods, and earlier application
is not permitted. When adopted, the Company will be required to restate its
EPS data for all prior periods presented. The Company does not expect the
impact of the adoption of this statement to be material to previously
reported EPS amounts.
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.
The Company's operations are conducted through its Israeli subsidiaries,
MicroKim and RadioTel. 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 months period ended March 31, 1997, the Israeli Consumer Price Index
("ICPI") increased by 4.86% , as compared with a devaluation of the Shekel of
6.29% against the U.S dollar. During the period starting April 1,1997 until
present the Israeli Shekel was devaluated approximately 1.25% against the U.S.
dollar. To the extent the rate of devaluation of the shekel with respect to the
U.S. dollar does not substantially offset the change in the rate of inflation in
Israel, the expenses in, or linked to, the shekel will be impacted when
translated to 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.
<PAGE>
10
FINANCIAL CONDITION:
The company's operations in the first six months of the fiscal year ending on
September 30, 1997 ('Fiscal 1997') have been financed principally from revenues
from sales, research and development grants and by a private placement of shares
of common stock.
In the first six months of Fiscal 1997 the company issued 200,000 shares of
common stock in a private placement at $2.00 per share.
The total amount of outstanding loans, credit facilities and guarantees from
banks are approximately $294,000 and is secured by liens on certain of
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
$65,000 of long term borrowings from Israel Industrial Development Bank Ltd.,
to be repaid between 1997 and 2000. This also includes approximately $171,000
of performance guarantees pursuant to contracts with customers. At March 31,
1997, the company had approximately $208,000 unused lines of credit.
In the six months ended March 31, 1997 net cash equivalents increased by
$95,317 as a result of $140,671 provided by operating activities, $400,000
proceeds from issuance of common stock offset by the repayment of long
term liabilities of $86,516, a decrease in bank overdraft facilities of
$263,544 and purchases of fixed assets of $95,294.
During Fiscal 1995, MicroKim reached an agreement with its landlord to repay
approximately $130,000 in back rent in 51 monthly installments. The Company
guaranteed this agreement. At September 30, 1996 the outstanding balance of
back rent was approximately $79,000. In January 1997, MicroKim settled the debt
in one installment of $50,000. The Company was released from its obligation to
the landlord.
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 projects with ASDI and ArrayComm. A significant
portion of the future revenues of the Company will be dependent on the success
of these two projects.
<PAGE>
11
The Company believes, based upon the budget for Fiscal 1997, that its remaining
cash resources as of March 31, 1997, plus additional funds of up to $600,000
currently anticipated to be raised through the sale of stock at $2.00 per share
through September 1997, will be sufficient to fund the Company's operations
through September 30, 1997. The additional $600,000 will be used for financing
the development operations of RadioTel. In the event that such additional
financing is not consummated, the Company will be required to reduce the
activities of RadioTel. There can, however, be no assurance that current sales
agreements will not be canceled, and/or funding from the Chief Scientist of the
state of Israel or BIRD Foundation 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, 1997 will depend in large part on the
ability of the Company to raise capital or obtain loans from shareholders and
to maintain profitability.
In the event that the necessary cash resources are not received prior to
September 30, 1997, or in the event that any unforeseen events require an
unexpected outlay of cash resources prior to September 30, 1997, the Company
will need to substantially reduce its operations, including further reductions
in personnel, research and development and in other expenses, and reduce the
activities of RadioTel.
<PAGE>
12
RESULTS OF OPERATIONS
Six months ended March 31, 1997 compared to the six months ended March
31, 1996.
Sales in the six months ended March 31, 1997 were $2,651,030 as compared
with $1,373,954 in the six months ended March 31, 1996. The increase in sales
was caused by the completion of a certain project in the first quarter of
fiscal 1997, sales of which were U.S. $1,189,000. Cost of sales in the six
months ended March 31, 1997 was 75.82% of sales or $2,009,976 as compared with
71.36% or $980,434 in the same period in 1996. The decrease in the percentage
of gross profit was caused by the project mentioned above for which the cost
of sales was $1,062,000.
The sales in the first two quarters of Fiscal 1997 are not indicative of sales
for the whole year.
Research and development expenses (net) increased to $248,153 or 9.4% of sales
in the six months ended March 31, 1997 from $179,715 or 13% of sales in the
same period in 1996. The increase was caused by new research and development
activities.
Selling expenses in the six months ended March 31, 1997 were $63,081 or
2.4% of sales compared to $86,570 or 6.3% of sales in the same period in 1996.
General and administrative expenses increased to $240,222 or 9.1% of sales in
the six months ended March 31, 1997 from $115,731 or 8.4% of sales in the
same period in 1996. The increase was mainly due to the operations of RadioTel.
Financial expenses in the six months ended March 31, 1997 were $41,545 or
1.6% of sales compared with $48,880 or 3.6% of sales in the same period in
1996.
In the six months ended March 31, 1997, the company reported a profit of
$54,137. In the same period in 1996, the Company incurred a loss of $33,824. The
profit is attributable mainly to increase of gross profit.
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%-3% of proceeds from sales of such products up to the amount of such grant.
Royalties were paid during the first six months of Fiscal 1997 in the amount
of $3630.
<PAGE>
13
MICEL CORP. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceeding
Reference is made to Form 10-KSB for the year ended
September 30, 1996.
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
Exhibit 27
<PAGE>
15
MICEL CORP. AND SUBSIDIARIES
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, 1997 By: /s/ Ron Levy
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President and
Chief Executive and Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 176,406
<SECURITIES> 0
<RECEIVABLES> 979,765
<ALLOWANCES> 30,000
<INVENTORY> 827,823
<CURRENT-ASSETS> 1,983,994
<PP&E> 2,306,199
<DEPRECIATION> 2,046,597
<TOTAL-ASSETS> 2,463,706
<CURRENT-LIABILITIES> 1,496,054
<BONDS> 0
0
0
<COMMON> 55,654
<OTHER-SE> 598,340
<TOTAL-LIABILITY-AND-EQUITY> 2,463,706
<SALES> 2,651,030
<TOTAL-REVENUES> 2,651,030
<CGS> 2,009,976
<TOTAL-COSTS> 2,009,976
<OTHER-EXPENSES> 551,456
<LOSS-PROVISION> 37,000
<INTEREST-EXPENSE> 41,545
<INCOME-PRETAX> 54,140
<INCOME-TAX> 0
<INCOME-CONTINUING> 54,140
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,140
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0
</TABLE>
