<PAGE>
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: December 31, 1996
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 December 31, 1996)
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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 at
December 31, 1996 and September 30, 1996. 3
Condensed Consolidated Statements of Income (loss)
for the three months ended December 31, 1996 and 1995. 4
Condensed Consolidated Statements of Cash Flows
for the three months ended December 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
Exhibit 27 13
Signatures 14
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3
MICEL CORP. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
MICEL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31 SEPTEMBER 30
1996 1996
(UNAUDITED) (AUDITED)
----------- --------
A S S E T S
------------
CURRENT ASSETS
Cash and cash equivalents $ 456,352 $ 81,089
Accounts receivable 1,533,684 1,339,159
Inventories 772,788 708,925
------- -------
Total current assets 2,762,824 2,129,173
--------- ---------
Deposits with insurance companies
and pension funds 209,737 181,369
PLANT AND EQUIPMENT (net) 218,902 209,329
Total assets 3,191,463 2,519,871
========= =========
LIABILITIES AND SHAREHOLDERS EQUITY
- -----------------------------------
CURRENT LIABILITIES:
Short-term bank credits - secured 378,466 321,057
Current maturities of long term liabilities 72,794 106,957
Accounts payable and accrued liabilities 1,662,521 1,398,632
Advances from customers 119,416 177,109
------- -------
Total current liabilities 2,233,197 2,003,755
LONG TERM DEBT:
net of current maturities 83,531 89,680
ACCRUED SEVERANCE PAY 265,891 226,582
------- -------
Total liabilities 2,582,619 2,320,017
--------- ---------
SHAREHOLDERS' EQUITY:
Share capital 55,654 53,654
Additional paid-in capital 6,183,986 5,785,986
Retained earnings (accumulated deficit) (5,630,796) (5,639,786)
----------- -----------
Total shareholders' equity 608,844 199,854
------- ------
Total liabilities and shareholders' equity 3,191,463 2,519,871
========= =========
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4
MICEL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
3 MONTHS ENDED DECEMBER 31
--------------------------
1996 1995
(Unaudited) (Unaudited)
----------- -----------
Sales 1,815,182 787,154
Cost Of Sales 1,488,438 551,868
--------- -------
Gross Profit 326,744 235,286
------- -------
Research and Development
Expenses (net) 126,701 110,202
Selling Expenses (net) 48,850 47,127
General and Administrative
Expenses 104,061 57,226
Total operating expenses 279,612 214,555
Income From Operations-Before
Financial Income and Expenses 47,132 20,731
Financial Expenses (35,141) (30,089)
-------- --------
11,991 (9,358)
Other Income - Net 1,685 --
Equity in Net (Loss) of Affiliate (4,686) ______
Net profit (Loss) 8,990 (9,358)
====== ======
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5
MICEL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
3 MONTHS ENDED DECEMBER 31
----------------------------
1996 1995
(Unaudited) (Unaudited)
CASH FLOWS From Operating Activities:
Net income (loss) $ 8,990 $ (9,358)
Adjustments to reconcile net income or loss
to net cash provided by or used in
operating activities:
Depreciation 21,774 24,000
Increase (Decrease) in accrued severance pay 10,941 (4,335)
(Decrease) Increase in accounts receivable (194,525) 104,414
Decrease (Increase) in inventory (63,863) 1,695
Increase in accounts
payable and accrued liabilities 263,889 93,554
Decrease (Increase) in advances from
customers (57,693) 31,099
Total adjustments (19,477) 250,427
------- -------
Net cash provided by (used in)
operating activities (10,487) 241,069
------- -------
CASH FLOWS From Investing Activities:
Purchase of equipment (31,347) (406)
-------- -----
Net cash (used in) investing activities (31,347) (406)
-------- -----
CASH FLOWS From Financing Activities:
Issuance of Common Stock 400,000 --
Repayment of long term debt (40,312) (66,907)
Increase (Decrease) in short term bank credits 57,409 (108,338)
------ ---------
Net cash provided by (used in) financing
activities 371,925 (175,245)
Increase In Cash and
Cash Equivalents 375,263 65,418
Cash and Cash Equivalents at
Beginning of Period 81,089 202,327
------ -------
CASH and CASH EQUIVALENTS at
End of period 456,352 267,745
======= =======
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6
<TABLE>
<CAPTION>
MICEL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS
OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996
Common Stock Additional Paid in Accumulated
------------ ------------------ -----------
No. of Shares Value Capital Deficit Total
------------- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance, September 30, 1996 5,365,380 53,654 5,785,986 5,639,786 199,854
Issuance of Common Stock (Net
of issuance expenses) in a
private placement 200,000 2,000 398,000 __ 400,000
Net Income __ __ -- 8,990 8,990
Balance, December 31, 1996 5,565,380 55,654 6,183,986 (5,630,796) 608,844
========= ====== ========= ========== =======
</TABLE>
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7
MICEL CORP. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet at December 31, 1996, the
consolidated statements of income (loss) for the three months ended
December 31, 1996 and 1995, the consolidated statements of cash flows
for the three months ended December 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,
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 December 31, 1996, are
not necessarily indicative of the operating results for the full year.
2. Common Stock
During the three months ended December 31, 1996, the company raised
$400,000 in a private placement of Common Stock at $2.00 per share or
200,000 shares.
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, 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.
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8
4. MICEL Wireless Corp.
MICEL Wireless Corp. (formerly Milink), a Florida corporation, 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 purchasing agents and
sales representatives.
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 will provide to MICEL Wireless a working capital loan in
the amount of $150,000. The working capital loan shall bear interest
at 12% per annum, payable annually. The loan will become due after 12
months 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 started its activities in the first quarter of Fiscal
1997. In the first quarter of Fiscal 1997 the Company lent MICEL
Wireless $50,000. The Company applies the equity method of accounting
for its investments in MICEL Wireless.
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. The motion is scheduled for
hearing on March 30, 1997.
See form 10-KSB for year ended September 30, 1996 for description of
the litigation which the Company is involved in.
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9
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
three month period ended December 31, 1996, the Israeli Consumer Price Index
("ICPI") increased by 2.21% , as compared with a devaluation of the Shekel of
1.88% against the U.S dollar. During the period starting January 1,1997 until
present the Israeli Shekel was devaluated approximately 2.46% 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 expenses that are
linked to the Israeli Shekel increase when translated to U.S. dollar.
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10
FINANCIAL CONDITION:
The company's operations in the first three 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 three 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 $667,000 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
$111,000 of long term borrowings from Israel Industrial Development Bank Ltd.,
to be repaid between 1997 and 2000. This also includes approximately $177,000
performance guarantees pursuant to contracts with customers. The company does
not have any unused lines of credit.
In the three months ended December 31, 1996 net cash equivalents increased by
$375,263 as a result of $400,000 proceeds from issuance of common stock,
increase of $57,409 in short term bank credits, partially offset by repayment of
long term liabilities of $40,312, investing activities of $31,347 and $10,487
cash used in operating activities.
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 guarantee 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.
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11
The Company believes, based upon the budget for Fiscal 1997, that its remaining
cash resources as of December 31, 1996, 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 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 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
Three months ended December 31, 1996 compared to the three months ended December
31, 1995
Sales in the three months ended December 31, 1996 were $1,815,182 as compared
with $787,154 in the three months ended December 31, 1995. The increase in sales
was caused by the completion of a certain project in the first three months of
1996, sales of which were U.S. $1,189,000. Cost of sales in the three months
ended December 31, 1996 was 81.98% of sales or $1,488,438 as compared with 70%
or $551,868 in the same period in 1995. 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 quarter of Fiscal 1997 are not indicative of sales for
the whole year.
Research and development expenses (net) increased to $126,701 or 7.0% of sales
in the three months ended December 31, 1996 from $110,202 or 14% of sales in the
same period in 1995. The increase was caused by new research and development
activities.
Selling expenses in the three months ended December 31, 1996 were $48,850 or
2.7% of sales compared to $47,127 or 5.97% of sales in the same period in 1995.
General and administrative expenses increased to $104,061 or 5.5% of sales in
the three months ended December 31, 1996 from $57,226 or 7.27% of sales in the
same period in 1995. The increase was mainly due to the operations of RadioTel.
Financial expenses in the three months ended December 31, 1996 were $35,141 or
2% of sales compared with $30,089 or 3.8% of sales in the same period in 1995.
In the three months ended December 31, 1996, the company reported a profit of
$8,990. In the same period in 1995, the Company incurred a loss of $9,358. 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.
No royalties were paid during the first three month of Fiscal 1997 and Fiscal
1996.
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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
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14
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: February 15th, 1997 By: /s/ Ron Levy
-------------------------------
President and
Chief Executive and Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 456,352
<SECURITIES> 0
<RECEIVABLES> 1,563,684
<ALLOWANCES> 30,000
<INVENTORY> 772,788
<CURRENT-ASSETS> 2,762,824
<PP&E> 2,214,263
<DEPRECIATION> 1,995,361
<TOTAL-ASSETS> 3,191,463
<CURRENT-LIABILITIES> 2,233,197
<BONDS> 0
0
0
<COMMON> 55,654
<OTHER-SE> 553,190
<TOTAL-LIABILITY-AND-EQUITY> 3,191,463
<SALES> 1,815,182
<TOTAL-REVENUES> 1,815,182
<CGS> 1,488,438
<TOTAL-COSTS> 1,488,438
<OTHER-EXPENSES> 279,612
<LOSS-PROVISION> 50,000
<INTEREST-EXPENSE> 35,141
<INCOME-PRETAX> 8,990
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,990
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,990
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
