MICEL CORP, 10KSB40, 1997-01-13

MICEL CORP
10KSB40, 1997-01-13
INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-KSB

Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the Fiscal Year ended
September 30, 1996 Commission File No. 1-11020

MICEL CORP.

(Exact name of registrant as specified in its charter)

NEW YORK 11-2882297
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

(Address of principal executive offices) (Zip Code)

Registrant's telephone number,
including area code: (516) 569-3500

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
NONE NONE
---- ----

Securities registered pursuant to Section 12(g) of the Act:

Title of Each Class

Common Stock, $.01 par value

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 for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

YES X NO

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation SB (229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

Registrant's revenues for fiscal year ended September 30, 1996 was $3,105,392.

The aggregate market value of voting stock held by non-affiliates of the
registrant is $12,324,000 as of December 31, 1996.

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The number of shares outstanding of the registrant's Common Stock as of December
31, 1996 is:
Class Outstanding at December 31, 1996
----- --------------------------------
Common Stock, $.01 par value 5,365,380

PART 1

ITEM 1. BUSINESS

The Company is engaged in the development, manufacture and sale of radio
frequency ("RF") microwave components and custom made integrated assemblies for
commercial and military applications. These wireless applications include radio
communications, electronic warfare ("EW") and radar.

Other applications that the Company are developing are microwave products for
the commercial telecommunications field, such as radios for rural
telecommunications and point to point communications. The Company possesses the
product and technology base necessary for the production of certain microwave
components and complete subsystems.

The Company's corporate strategy is to create a series of separate operating
divisions to support the manufacture, marketing/sales, and distribution of
specific commercial technologies.

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.

MICROKIM, LTD., a wholly-owned subsidiary located in Israel, acts as the
Company's manufacturing, research and development arm, in addition to developing
innovative technologies for commercial use by other operating divisions.
Microkim has commercialized specialized RF and microwave products for
telecommunication applications, electronic warfare systems and radar systems.

MICEL WIRELESS CORP., a joint venture between Micel Corp. 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 loopmarkets 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.

PRODUCTS

The Company began operations through its wholly owned Israeli subsidiary,
Microkim Ltd., by manufacturing microwave components such as ferrite devices
including isolators and control devices such

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as switches. Subsequently, the Company developed a line of microwave circuit
assemblies, subsystems and subassemblies for advanced electronic defense and
certain medical products. More recently, the Company has introduced stand-alone
products to be marketed directly to end users. The Company maintains its
technological knowhow and infrastructure for manufacturing RF components to
support its highly integrated products.

The Company focuses its activities in two main product lines:
-Products for the commercial market.
-Products for the military market.

I.COMMERCIAL PRODUCTS

The following are the Company's products for the commercial communications
market.

RADIO MODULE. The Company has developed a radio module together with AIL
Systems Inc., a company located in Deer Park, New York, and delivered it to
Teledata Communication Ltd. ("Teledata"). This product is a part of an Exchange
Radio Concentrator being sold by Teledata. As of October 1, 1995, the parties
executed an agreement which would provide for the delivery of approximately
1,012 upgraded radio modules to Teledata during Fiscal 1996 and 1997. In
addition, Microkim was granted the worldwide rights to the radio module. The
Company ,Teledata and Microkim Ltd. has agreed in principal to grant Teledata an
option to purchase 12.5% of the outstanding Common Stock of Microkim at the
price of 80% of the price to the public in the event that Microkim consummates
an Initial Public Offering. The terms of this Option have not been finalized
and there are no arrangements at this time to consummate an Initial Public
Offering of Microkim.

The Company is establishing the production capability for the Radio Module
in Israel and intends to market and sell the product world wide. The Radio
Module is suited for digital wireless systems, mainly for telecommunication
applications such as rural-telephones or Wireless Local Loop systems. The
market for such applications is believed to be very large. The Radio Module
will be the basic building block for the communication systems developed by
RadioTel. In addition to the Radio Module, the Company has developed a diplexer
and an antenna for the same frequency band and applications.

VXI SWITCH MATRIX. State-of-the-art RF switch matrix that allows for the
automation and computer supervision of testing in the manufacturing process of
RF products - primarily wireless products. This product is targeted to the large
volume wireless product manufacturers including:

1. Wireless LANs
2. Cellular phones
3. GPS products
4. DBS, cellular, and data communication products
5. PCS

II.MILITARY PRODUCTS

The products for the military market include:

RADAR SIGNAL SIMULATOR. The Company manufactures, markets and sells a
portable microwave Radar Signal Simulator ("RSS") used for testing an
airplane's electronic warfare system's ability to detect the presence of
threat radar by simulating the electronic signals emanating from such radar.
The RSS is portable, weighing approximately 25 pounds and is light enough to
be carried by one person. The RSS operates from a rechargeable battery or
from a 115 Volt/400 Hz external electrical source. It contains several
microwave frequency sources, switches, amplifiers, and other components as
well as a

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microprocessor and logic circuits which are programmed to control the unit. It
contains an optional remote control which enables the RSS to be operated by one
person from the cockpit of an airplane and operates independently from the
aircraft electronic system. Several different simulated radar threats can be
programmed into the RSS unit that can simulate two radar threats simultaneously.
During the fiscal year ended September 30,1996 ("Fiscal 1996") the Company sold
nine units to three customers. The sales price for the RSS may vary depending
on a variety of factors including volume and market conditions. The Company
currently has permission from the Ministry of Defense of Israel to sell this
product to certain foreign countries. The Company expects to continue sales of
the RSS at the rate of four to eight units per annum.

FLAMES. The Company entered into a Memorandum of Understanding on August
11, 1993 with Advanced Systems Development ("ASD"), a subsidiary of Comptek ,
located in East Elmhurst, New York, to develop and market the next generation of
RSS. The new simulator is designed to enable the user to select specific
desired frequencies under computer program control. The RSS 2000, currently
being offered for sale by the Company, includes fixed frequency sources whose
frequencies are tuned at the factory level. The feature of user-selected
frequencies will expand the range of applications of the radar simulator. The
system is designed to cover all frequency bands from 0.5 to 18 GHz. Development
continued in Fiscal 1994 through 1996. In November 1996, the company received an
order for two FLAMES units.

FLAMES is designed to be software compatible with a large simulator called
"AMES", manufactured by ASD. The Company believes that FLAMES addresses the
U.S. and European military markets, especially users of state of the art EW
equipment. FLAMES will enable those customers to simulate multiple emitter
scenarios at the flight line and use scenarios developed in the lab on the AMES
system.

ALTIMETER TESTER. The Company has developed under contract a device that
can be used to test a helicopter's altimeter on the flight deck without the
necessity of removing the altimeter from the helicopter and testing it in a
laboratory. In Fiscal 1996, the Company sold two units to a customer and
received orders for an additional four units to be delivered in Fiscal 1997.

In addition to the above mentioned systems, the Company has developed a
product line of various frequency sources. These products serve as the building
blocks for the RF simulators and the infrastructure for the commercial
communication equipment. The main products of this line are:

FREQUENCY SYNTHESIZERS. The Company manufactures, markets and sells
various frequency synthesizers. Frequency synthesizers are used to generate
microwave signals having discrete frequencies which can be selected by an
external electronic digital command. The ability to switch promptly from one
given frequency to another selected frequency while maintaining a stable
selected frequency is a desirable feature in modern electronic communication and
detection systems. The Company has developed a novel compact synthesizer on
behalf of a customer. At the end of Fiscal 1993, the Company received an order
for six units from the customer. By the end of 1994, the Company completed the
product development and delivered the synthesizers to the customer in fiscal
1995. In addition, the Company is developing a synthesizer for commercial
communication applications.

DIGITAL TUNED OSCILLATOR (DTO). The Company has developed a new highly
integrated assembly of 2-18GHz Digital Tuned Oscillator. The product is based
on the Company's ability to integrate various RF components such as: filters,
low-noise amplifiers, VCO's and switches into a highly integrated assembly. The
DTO is the main building block for the FLAMES and is sold as a stand-alone
device. The Company has delivered 25 units during Fiscal 1996 and received
orders for an additional 18 units to be delivered in Fiscal 1997.

VOLTAGE CONTROLLED OSCILLATORS (VCO). Voltage-controlled oscillators are
used to generate microwave energy having frequencies that can be varied by an
external variable voltage and in proportion to this

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voltage. Such devices are used extensively in electronic warfare communications
and radar systems to vary the frequency so that the enemy cannot detect the
carrier frequency in which one transmits or receives information.

DIELECTRIC RESONANCE OSCILLATORS (DRO). These devices are used to generate
microwave energy at high frequencies using small dielectric cylinders that
determine the precise frequency desired. Such small dielectric materials are
replacing older technologies where the mechanical dimensions of certain cavities
were used to determine the frequencies.

The following table sets forth the percentage of sales of the Company's products
in Fiscal 1996 and 1995.

PRODUCTS PERCENT OF SALES PERCENT OF SALES
1996 1995

DIGITAL RADIO 38% 23%
RADAR SIGNAL SIMULATOR 23% 14%
FREQUENCY SOURCES 20% 40%
OTHER PRODUCTS 19% 23%
TOTAL 100% 100%

BACKLOG. At September 30, 1996 the approximate backlog of orders of the
Company's products and services was $2,500,000. The backlog at September 30,
1995 was approximately $1,600,000. Backlog includes only those customer
commitments for which a delivery schedule has been established by the Company
and the customer. It is expected that most of the current backlog will be
shipped or completed within the ensuing twelve months. In the Company's
experience, its backlog at a given time is not necessarily indicative of
prospective revenue for any respective period.

RESEARCH AND DEVELOPMENT

The Company is engaged in a continuing program of research and development
aimed at developing certain new and improved products. Whenever possible, the
Company attempts to obtain customer funding to adapt the Company's basic
technology to specialized customer requirements.

In September 1996, Microkim signed an agreement with ArrayComm Inc., a
California Corporation located in San Jose, for the development of a family of
Subscriber Unit Antennas (SUA) to be part of a Wireless Local Loop (WLL) system
developed by ArrayComm. The family of the SUA products will comprise of four
different types of passive and active antennas.

The air interface chosen for ArrayComm's WLL system is PHS (RCR-28). Japan
currently has over 3.5 million users utilizing PHS as a low mobility wireless
communication system. Choosing an accepted standard such as PHS, minimizes the
risks with market acceptance of the WLL system due to standards or regulatory
issues. The air interface PHS has either been proposed or accepted in Indonesia,
Thailand, Australia, Malaysia, Philippines, China, India and Vietnam.

The customer base for the subscriber antennas is the telecommunication operators
in developing countries. The Company believes that these operators are looking
for wireless technology as a means of replacing all or part of the "hard
wire"infrastructure typically used for subscriber connections. ArrayComm's WLL
system sales is expected to provide a distribution channel for Microkim's
subscriber unit antennas. In addition, Microkim will seek other WLL
infrastructure suppliers and operators to generate additional subscriber unit
antenna sales.

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In December 1996, ArrayComm and Microkim received the approval from the
Israel-U.S. Binational Industrial Research and Development Foundation (BIRD) for
funding of its joint project. BIRD agreed to fund up to 50% of actual approved
expenditures. BIRD will receive a royalty from the sale of products developed
under this project up to 150% of the funds received.

The development of the RSS and certain commercial microwave components have
been partly financed by the Office of the Chief Scientist of the Israeli
Ministry of Industry and Trade ("OCS"). A royalty of 2%-3% must be paid from
the sales of products developed with grant funds. The royalty repayment is
limited by the total grant amounts.

During Fiscal 1996 and 1995, the Company's gross research and development
activities aggregated $444,719 and $489,105, respectively, including grants of
$117,190 and $72,479, respectively, received from the OCS.

MANUFACTURING AND SUPPLIERS

The Company offers both standard products manufactured and assembled by the
Company as well as customized systems, subsystems, components and subassemblies
in accordance with specific customer demands. The Company is currently
emphasizing subsystems and systems products. The Company is capable of
providing a full range of services including engineering design and development,
assembly and fabrication of circuits, subsystems and subassemblies. The Company
employs advanced manufacturing techniques geared towards production to military,
RF/microwave components and aerospace standards. The Company's manufacturing
facilities in Israel include a class 100,000 clean room. The clean room area
consists of laminar flow benches where the critical bonding and dice-attaching
processes and inspections are performed. The Company's manufacturing facilities
include electrical and RF test equipment required for in-process and acceptance
testing. Special equipment at the Company's manufacturing facility also include
broadband sweepers, automatic test stations, bonding and dice attaching
equipment.

In August, 1991, Microkim was granted under the Israeli Law for
Encouragement of Capital Investment 1959, the approval to expand its production
capabilities and increase its working capital. The approval enables Microkim
Ltd. to receive a guarantee from the State of Israel of loans from Israeli banks
up to $1,240,000. These loans were used to purchase equipment. As of
September 30, 1996, a balance of approximately $141,000 of long term bank loans
has been guaranteed by the State of Israel.

The Company's product assurance and reliability programs are designed to
meet most applicable military standards. Established quality assurance programs
monitor the performance to specifications of all materials used and labor
performed in manufacturing. Monitoring begins with the inspection of incoming
materials and continues through the processing, assembly and testing of final
products. Since the products are used for military purposes, the Company's
quality control requires that it inspects its products before they are shipped
to customers. The Company is required to keep detailed records of the results
of such inspections.

The Company has a number of sources of supply for most of the materials and
components necessary for the production of its products and systems. The
Company is constantly looking to qualify more than one supplier for its
necessary component parts. The Company generally purchases the component parts
necessary to complete an order as soon as the order is confirmed thereby
attempting to eliminate shortages or delays in the manufacturing process without
the necessity of maintaining excess inventory.

MARKETING AND PRINCIPAL CUSTOMERS

The focus of Micel's commercial marketing effort will be to identify those
telecommunications service providers who require fixed wireless solutions in
their given territories and the cost benefits of

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wireless compared to copper wire installation. The target markets are those
emerging countries where industry is rapidly developing but the country's
infrastructure and communication systems are lagging behind. These emerging
markets include South and Central America, Eastern Europe, the Philippines,
Brazil, Argentina, China, India, Indonesia, Africa, and Peru.

Approximately 76% of the Company's sales during the fiscal year ended
September 30, 1996, were made to customers in Israel directly by the Company's
sales staff. In Fiscal 1996, Elta Electronics Industries Ltd. represented
approximately 22 % of total sales. In addition, Teledata and ASDI represented
approximately 35% and 13% of total sales, respectively, during fiscal 1996.

The Company markets its products in Israel through its sales and
management staff by calling upon customers or potential customers. In
addition, the Company is contacted directly by potential customers to
provide them with specifications and quotations on the development and
manufacture of specific components and subsystems. The Company has
determined that the preferred way to market its components outside Israel is
through agents and representatives located in the country where the customer
is located, since certain potential customers prefer to purchase their
military components from a local source. In addition, the Company's
representatives located in a country may be required to have the technical
expertise to assist the customer and repair any defective components.

Effective as of January 15, 1993, the Company entered into an agreement
with Quest Enterprise, Inc. ("Quest"), a marketing consulting company for
military and communication companies, to provide marketing, consulting and other
services as reasonably required by the Company for the purpose of securing for
the Company research and development contracts, joint development programs,
strategic partnerships, business opportunities and production and sales
contracts with North American companies and other entities on an exclusive basis
in North America. The Company is paying Quest a fee in the amount of $5,000
per month plus expenses. In addition, in the event that the services provided
by Quest to the Company result in a contract being awarded to the Company, Quest
will be entitled to a commission in the amount of one percent of the revenues
received. In the event that the services provided by Quest result in a joint
venture or other equity arrangement between Micel Corp. and the potential
partner, Quest will be entitled to a reasonable equity position in such joint
venture not to exceed 15% of the equity of the joint venture or a commission.
Quest is also entitled to 25% of any royalties received by the Company from
parties introduced to the Company by Quest.

COMPETITION

There are numerous manufacturers of microwave products in Israel, the
United States and elsewhere which compete with the Company. Many of these
competitors are much larger than the Company with substantially greater
financial resources, experience and more extensive engineering, technical and
research capabilities. In addition, many large companies with substantially
greater financial, technical and marketing resources than the Company, including
some companies that are currently customers of the Company, have the capability
to produce the products made by the Company and could decide to enter the
market in the future and compete with the Company. The Company is not a major
competitor in the worldwide microwave market, although the Company believes that
it competes effectively in the Israeli market. The Company's largest competitor
in Israel is Elisra Ltd., a subsidiary of Tadiran Ltd. The Company believes
that it is able to compete based on its quality, location, technical capability
and experience. In addition, its products have been field tested and the
Company has the ability to produce and integrate many different microwave
components into subassemblies and end-user products. The major competitor of
the Company's RSS is A.A.I. which manufactures the APM 427. The Company
believes that the RSS is superior to the APM 427, since the RSS is less
expensive, is much smaller and can be operated by only one person. Three
additional companies are now offering portable units which compete with the RSS
2000. RepublicElectronics of N.Y. is offering its MTS-300; Cal Corp. of
Ontario, Canada has introduced its Micro-Tass Product; and Anarem in the United
Kingdom offers a similar product.

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The major competitors of the Company's communication products are (i)
California Microwave Inc. which manufactures digital point-to-point radios,
medium haul radios for cellular communications and modems, and (ii) Digital
Microwave Corp. which manufactures digital microwave radios for short and medium
haul communications for multiple digital lines.

PATENTS

The Company believes its ability to compete depends primarily on the
technical competence, knowledge and experience of its management and
personnel and their abilities to develop, improve and market its products.
Nevertheless, others may be able to learn certain of the Company's trade
secrets or copy its product designs. The Company does not presently own any
patents, however, the Company intends to file patent applications for any
patentable inventions, processes or improvements that the Company may develop
in the future when it believes that meaningful patent protection can be
obtained. During Fiscal 1992, the Company filed a patent application in
Israel entitled: "Apparatus for Testing Electronic Warfare Systems," related
to the unique design of the Fite 2000. To date, this patent has not been
issued.

The Israeli Ministry of Defense ("IMOD") usually retains certain rights to
technologies and inventions resulting from the Company's performance as a
contractor under IMOD contracts and may generally disclose such information to
third parties, including other defense contractors who may be competitors of the
Company. When the IMOD funds research and development, it usually acquires
rights to data and title to inventions, and the Company may retain a
non-exclusive license for such inventions. The IMOD is, as a rule, entitled to
receive royalties on export sales, to the extent that such sales resulted from
IMOD-financed development. However, if the IMOD purchases only the end product,
the Company normally retains the principal rights to the technology.

GOVERNMENT REGULATIONS

Many of the component parts of the Company's products are imported from the
United States. Accordingly, the Company and/or its suppliers may be required to
obtain an export license, preference rating or other government authorization in
connection with components purchased in the United States. To date, the Company
has not experienced any difficulty in obtaining such authorizations or licenses.
In addition, unless the Company obtains prior authorizations from the Office of
Export Administration of the Department of Commerce of the United States, the
Company will not be allowed to export or reexport to certain restricted
countries, directly or indirectly, any of the Company's products containing
components imported from the United States. The Company does not expect that
this will be detrimental to the Company's business. In addition, the Company
will require the permission of the Ministry of Defense of Israel before the
Company could export any military microwave system. There can be no assurance
that the Company will be able to obtain such permission on a timely basis or at
all. However, the Company has received such permission for the export of the
RSS, Altimeter tester, Fite 2000 and microwave components to certain countries.

PRODUCT WARRANTY AND SERVICE

Generally, the Company provides the customer, at the time a purchase
contract is entered into, with a detailed list of Acceptance Test Procedures.
These procedures identify which tests the Company's products must undergo and
pass before the individual product would be delivered and accepted by the
customer. Certain customers require and pay for a Quality Test Procedure
("QTP") which is a specific procedure for testing the quality of certain of the
Company's products based on that customers specifications. The Company
generally provides a warranty for parts and labor for one year from delivery of
the product, although in some cases a longer warranty period may be given. The
Company currently services any

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warranty claims itself. The Company's rate of returns for repair under the
warranty is similar to that prevailing in the industry and annually averages
between 1/2% and 1% of total sales.

EMPLOYEES

At September 30, 1996, the Company had a total of 25 employees in Israel
including 11 in engineering, 6 in general management and in marketing and 8 in
production. Management believes that its relations with its employees are
satisfactory.

The Company's employees do not belong to any labor organization.
Nevertheless, certain provisions of the collective bargaining agreements between
the Histadrut (General Federation of Labor in Israel) and the Coordination
Bureau of Economic Organizations (including the Industrialist's Association) are
applicable to the Company's Israeli employees by order of the Israeli Ministry
of Labor. These provisions concern mainly the length of the work day, minimum
daily wages for professional workers, insurance for work-related accidents,
procedures for dismissing employees, determination of severance pay and other
conditions of employment. The Company generally provides its Israeli employees
with benefits and working conditions beyond the required minimums.

A general practice followed by the Company, although not legally required,
is the contribution of monies on behalf of its senior Israeli employees to a
fund known as "Managers Insurance." This fund provides a combination of a
savings plan, insurance and severance pay benefits to the employee, giving the
employee a lump sum payment upon retiring and securing his right to receive
severance pay, if legally entitled, upon termination of employment. The
employee contributes an amount equal to 5% of his wages and the employer
contributes an additional 13 1/3% of his wages.

In addition, Israeli law generally requires severance pay (generally one
month's salary for each year of employment) upon the retirement or death of an
employee or termination of employment without due cause. Furthermore, Israeli
employees and employers are required to pay predetermined sums to the National
Insurance Institute, which is similar to the United States Social Security
Administration. Payments, up to a ceiling, amount to approximately 12% of
wages, with the employee contributing approximately 60% and the employer
approximately 40%.

ITEM 2
LEGAL PROCEEDINGS

The Company is unaware of any pending legal proceedings, the outcome of
which, in the Company's view, will have a material adverse effect on the
Company's consolidated financial position or results of operations.

In April 1994, Dr. Hillel Weinstein, the former President of the Company,
commenced an action against the Company in Labor Court in Israel claiming that
the Company owes him a total of approximately $91,200 for yearly bonuses and
cost of living increases not given to him, for sick days not taken, for the
repayment of a 10% across the board salary reduction instituted in December
1992, and for amounts withheld from his paycheck. The Company responded to this
claim by denying each of the claims. This claim was withdrawn pursuant to an
agreement dated May 27,1996, (see below).

In March 1994, Microkim commenced a civil action in Israel against Dr.
Hillel Weinstein, and his wife claiming among other things, that Dr. Weinstein
purchased from Microkim a company car at a price below the fair market value at
the date of purchase, did not make all the payments on the car, sold his family
car to Microkim at a higher than fair market value, drew unauthorized checks to
himself aggregating approximately $29,333, made unauthorized payments from
Microkim for personal expenses and without

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proper invoices, used Microkim's credit cards to pay personal expenses and
aiding and abetting Arie Huber, the former chief financial officer, to embezzle
Microkim funds for his own use. The total amount of the claim is approximately
$243,000. Dr. Weinstein has denied these charges. This matter was settled
pursuant to an agreement dated May 27, 1996, (see below).

On May 27, 1996, an overall settlement agreement was reached between Dr.
Weinstein, Microkim and the Company whereby all existing litigation, complaints,
and disputes between the parties would be withdrawn with prejudice. Dr.
Weinstein paid $80,000 to Microkim and surrendered to the Company 617,500 shares
(pre reverse split) of the Company, but did not admit any wrongdoing.

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 has denied the charges and has
counterclaimed against the Company and certain officers for indemnification in
the event that the Company is successful. In addition, he has counterclaimed
against the Company for approximately $33,000 claiming that he is entitled to be
indemnified by the Company for legal fees. Dr. Weinstein is no longer a
defendant or counter claimant in this action as a result of the 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.

ITEM 3
PROPERTIES

The Company's executive offices consist of approximately 400 square feet
located at 445 Central Ave. Cedarhurst, New York. Microkim's executive offices
and manufacturing facilities are located in a light industrial area in the city
of Haifa, Israel. Microkim's lease which expires on March 31, 1997, covers
approximately 7210 square feet at a monthly rental of approximately $5,600
exclusive of utilities. The rent is linked to the U.S. Dollar and the U.S.
Consumer Price Index.The Company's productive capacity at this facility is
approximately 1400 assembly hours per month. Any excess demand is subcontracted
out since the Company believes this is the most efficient method. RadioTel's
executive offices are located in Yahud, Israel. The Company believes that its
properties are sufficient for its needs at the present time.

ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company held its annual meeting of shareholders on November 15, 1996.
At the meeting, Benjamin Sporn, Heather Loren, Ron Levy and Barry Braunstein
were each elected as directors of the Company for a term of one year or until
his/her successor is duly elected and qualified. The Shareholders approved a
ten-for-one reverse stock split. 38,940,809 votes were cast for the split and
200 votes were cast against the split. In addition, the Shareholders approved
an amendment to the Company's 1990 Stock Option Plan increasing the number of
shares of Common Stock which may be issued under the Plan from 2,500,000 (pre
split) to 8,000,000 shares (pre split). 38,757,837 votes were cast for the
amendment, 400 votes cast against and 1,182,772 votes abstained.

PART II
ITEM 5
MARKET FOR THE COMPANY'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS

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The Company's securities are currently listed for trading on the Bulletin
Board. Prior to November 25, 1996, the effective date of the ten-for-one
reverse stock split, the shares of Common Stock, $.001 par value, were trading
under the symbol MICL. On the effective date of the reverse stock split, shares
of Common Stock, $.01 par value, were traded under the symbol MICE. The
following table sets forth the range of high and low bid prices of the Company's
Common Stock for the fiscal quarters of 1995 and 1996. These quotations
represent prices between dealers in securities, do not include retail mark-ups,
mark-downs or commissions and do not necessarily represent actual transactions.
The quotes have been retroactively adjusted to reflect the ten-for-one reverse
stock split which took effect November 25, 1996.

Fiscal Year Ended Fiscal Year Ended
SEPTEMBER 30,1995 SEPTEMBER 30, 1996
----------------- ------------------
HIGH BID LOW BID HIGH BID LOW BID
-------- ------- -------- -------

COMMON STOCK (MICE)
First Quarter * * $ .70 .70
Second Quarter .70 .625 .70 .70
Third Quarter .70 .70 $2.25 $2.25
Fourth Quarter .70 .70 3.75 3.75

_______________________
* No bids were entered.

The Company has not paid a dividend on its shares of common stock and does
not anticipate paying cash dividends in the foreseeable future.

ITEM 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

IMPACT OF INFLATION, DEVALUATION AND FLUCTUATION OF CURRENCIES ON THE
RESULTS OF OPERATIONS.

All of the Company's operations in Fiscal 1996 were conducted through its
Israeli subsidiary, Microkim. Microkim maintains its financial records in
United States Dollars. Transactions and balances originally denominated in
dollars are presented at their original amounts. Transactions and balances in
currencies other than the dollar are remeasured 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
twelve month period ended September 30, 1996 ("Fiscal 1996"), the Israeli
Consumer Price Index ("ICPI") increased by 11.4%, as compared with a 7.5%
aggregated devaluation of the shekel 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. See Note 3 of the Notes of
the Consolidated Financial Statements.

In computing taxable income, the Company's Israeli subsidiary is entitled
under Israeli income tax rules to certain deductions designed to avoid taxation
of inflationary gains measured in Israeli currency. If these laws or
governmental programs were modified or terminated as they apply to the Company,
there could be an adverse effect on the results of operations of the Company.

<PAGE>

FINANCIAL CONDITION:

The Company's operations in Fiscal 1996 have been financed principally by
revenues from operations, proceeds from the sale of Common Stock in a private
placement, research and development grants and a decrease in cash and cash
equivalents.

In Fiscal 1996, the Company issued 356,000 (post split) shares of common stock
in a private placement at $.50 per share and received subscriptions for 50,000
shares (post split) at $2 per share.

The total amount of outstanding loans, credit facilities and guarantees
from banks at September 30, 1996 were approximately $741,000 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 $150,000 of long term borrowings from Israel
Industrial Development Bank Ltd. to be repaid between 1996 and 2000. This also
includes approximately $269,000 of performance guarantees pursuant to contracts
with customers. The Company does not have any unused lines of credit.

<PAGE>

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. As of September 30, 1996 the outstanding
balance of back rent is approximately $79,000.

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 (approximately $1,253,935 as of September 30, 1996).
Royalties paid during Fiscal 1996 amounted to approximately $4,530.

In the year ended September 30, 1996, net cash and cash equivalents
decreased by $121,238 as a result of purchase of equipment of $69,950, repayment
of long term liabilities of $196,161 and $157,663 used in operating activities.
This was partially offset by $271,882 of proceeds from issuance of common stock
and an increase of short term bank credits of $37,546.

As of September 30, 1996, $321,057 of short term bank credits were
denominated in New Israeli Shekels and $900 of cash and cash equivalents are
denominated in Israeli Shekels.

The Company has been experiencing difficulty in making timely payments to
its trade and other creditors. As of September 30, 1996, the Company had past
due payables in the amount of approximately $150,000. 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.

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.

The Company believes, based upon a balanced budget for Fiscal 1997, that
its remaining cash resources as of September 30, 1996, plus additional funds of
up to $1,000,000 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 $1,000,000 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 attain 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>

RESULTS OF OPERATIONS

Year ended September 30, 1996 compared to the year ended September 30,
1995.

Sales in the Fiscal year ended September 30, 1996 ("Fiscal 1996") were
$3,105,392 as compared with $2,701,243 in the year ended September 30, 1995
("Fiscal 1995"), primarily due to increases in sales of microwave radios and
Radar Signal Simulators.

Cost of sales in Fiscal 1996 was 74% of sales or $2,298,886, as compared
with 73% or $1,969,521 in the same period in 1995. In Fiscal 1996, cost of
materials was approximately 46% of sales compared to approximately 34% of sales
in Fiscal 1995, subcontractor expenses were approximately 3% of sales in Fiscal
1996 compared to approximately 8% of sales in Fiscal 1995, salaries were
approximately 16% of sales in Fiscal 1996 compared to approximately 25% in
Fiscal 1995 and other expenses and depreciation were approximately 6% of sales
in Fiscal 1996 compared to approximately 5% of sales in Fiscal 1995.

Research and Development expenses net of government subsidies decreased
from $416,626 or 15% of sales in Fiscal 1995 to $327,529 or 11% of sales in
Fiscal 1996. The decrease was caused primarily by a reduction in the scale of
the Company's research and development activities.

Selling expenses increased from $146,720 or 5% of sales in Fiscal 1995 to
$196,410 or 6% of sales in Fiscal 1996. The increase resulted primarily from an
increase in marketing expenses as part of the increased marketing activities of
the company.

General and Administrative expenses decreased from $499,276 or 18% of
sales in Fiscal 1995 to $300,261 or 9% of sales in Fiscal 1996.

In Fiscal 1996 Interest expense decreased to $97,827 or 3% of sales as
compared with $112,666 or 4% of sales in Fiscal 1995. The decrease is mainly
attributable to a decrease in interest expense in Fiscal 1996 as a result of a
decrease in long term bank credit of $196,161.

In Fiscal 1996, other income increased to $131,664 compared with $53,828 in
Fiscal 1995. The increase in other income is the result of the settlement with
the former president (see "Legal Proceedings").

Due to the above, in Fiscal 1996, the Company reported a net profit of
16,143 $ or $0.003 per common share and in Fiscal 1995, the Company incurred a
net loss of $389,738 or $0.1 per common share.

ITEM 7. FINANCIAL STATEMENTS

See Pages F-1 through F-17.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not Applicable

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS:

The officers and directors of the Company are as follows:

<PAGE>

Name Age Position

Benjamin Sporn 58 Chairman of the Board

Ron Levy 48 President and Director

Marvin Neiman 52 Secretary

Barry Braunstein 37 Director

Heather Loren 28 Director

Benjamin Sporn has been a Director of the Company since December 1990 and
Chairman of the Board since November 17, 1993. Mr. Sporn has been an attorney
in private practice since January 1990. From 1964 until December 1989, Mr.
Sporn was an attorney with AT&T and retired as General Attorney for Intellectual
Property Matters. Mr. Sporn is Chairman of Creative Technologies Corp.

Ron Levy has been President and Director of the Company since October 1, 1996.
Prior to that time he was a consultant to Micokim Ltd, the Company's wholly
owned subsidiary. From October 1992 to November 1995 he was President and Chief
Executive Officer at EUROM Flash Ware Solutions Ltd. and from September 1990 to
September 1992 he was Project Manager at SanDisk Corporation in Santa Clara, CA.
From September 1982 until September 1990 he was a manager of Tadiran
Communication Micro Electronic Center. Mr. Levy has received his B.S. degree in
Electrical Engineering and Computer Science from the University of California in
Berkeley.

Marvin Neiman has been the secretary of the Company since July 1987. For more
than the past five years he has been the senior partner in the law firm Neiman
Ginsburg & Mairanz P.C., New York, New York.

Barry Braunstein has been a director of the Company since April, 1994. From
1983 to the present, he has been the administrator of Laconia Nursing Home in
Bronx, New York. Mr. Braunstein received his B.A. Degree from Adelphi
University in 1985.

Heather Loren has been a director of the Company since August, 1995. From
September, 1994 until the present, Ms. Loren has been a consultant with the firm
of Coopers & Lybrand, LLP. From December, 1991 until August of 1992, she was in
geriatric research at Hadasa Hospital in Jerusalem. From June, 1989 until
December, 1991 she held various managerial positions at the Bridgeport
Healthcare Center and White Plains Nursing Home. She received her Masters
degree in management from Northwestern University in 1994 and a B.A. degree from
Columbia University.

Each of the Company's Directors has been elected to serve until the next annual
meeting of the Shareholders. The Company's executive officers are appointed
annually by the Company's Directors. Each of the Company's Directors and
Officers continues to serve until his successor has been duly elected and
qualified. The outside directors are entitled to receive $6,000 per year from
the Company. The directors of Microkim are Ron Levy, Joseph Moscovitz and Tzvi
Siegel. To the Company's knowledge, there were no delinquent Section 16(a)
filers for transactions in the Company's securities during fiscal year ended
September 30, 1996.

ITEM 10. EXECUTIVE COMPENSATION:

<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth all compensation received for services
rendered to the Company by certain executive officers during each of the past
three fiscal years ended September 30, 1996. No other executive officer
received compensation in excess of $100,000 during any of the last three fiscal
years.

SUMMARY COMPENSATION TABLE

ANNUAL LONG-TERM
COMPENSATION COMPENSATION
NAME AND PRINCIPAL OTHER ANNUAL AWARDS
POSITION YEAR SALARY ($) COMPENSATION OPTIONS #
JOSEPH MOSCOVITZ, $84,590 18,750 (1)
PRESIDENT, CHIEF
EXECUTIVE OFFICER 1996 -0-
1995 $76,976 18,323 (1) 15,000

1994 (2) $36,153 $ 8,424 (1) -0-

____________________________
(1) TOTAL VALUE OF NON-CASH COMPENSATION.

(2) REPRESENTS COMPENSATION FOR A PARTIAL YEAR. IN 1994 HE WAS COMPENSATED AT
THE RATE OF $82,204 PER ANNUM.

OPTION GRANTS IN 1996

Percent of Total
Options Granted
Name (a) Options To Employees in Exercise Expiration
Granted (b) Fiscal Year 1995(c) Price (d) Date (e)
RON LEVY 100,000 (1) 80% $2.00 AUGUST 28, 2001
BENJAMIN SPORN 25,000 (1) 20% $2.00 AUGUST 28, 2001

____________________________
(1) EXERCISABLE TO THE EXTENT OF 25% PER YEAR COMMENCING AUGUST 28, 1997 .

AGGREGATED OPTION EXERCISES IN 1996 AND FOR YEAR-END VALUES

<PAGE>

Value of
Unexercised
Number of in-the-Money
Unexercised Options Options at Fiscal
at Fiscal Year-End Year-End ($)

Name Shares Acquired Value Exercisable/ Exercisable/
on Exercise (#) Realized ($) Unexercisable (d) Unexercisable (e)
(b) (c)

<S> <C> <C> <C> <C>
RON LEVY -0- -0- 0/100,000 -0-/-0-
BENJAMIN SPORN -0- -0 - 3000/34,000 -0-/-0-
JOSEPH MOSCOVITZ (1) -0- -0 - 7,500/7,500 $18,000/18,000

</TABLE>

(1) PRESIDENT UNTIL SEPTEMBER 30, 1996 .

The Shareholders in 1992 approved an amendment to the Company's By-Laws to
provide that the Company may pay the Board of Directors annual and/or per
meeting Director's Fees. The Company intends to compensate outside directors
$6,000 per year.

STOCK OPTION PLAN

In November 1990, the Company's Board of Directors adopted, and its
Shareholders approved, the 1990 Stock Option Plan (the "Plan"), which was
amended by the Shareholders at the 1996 annual meeting and provides for the
grant of incentive and/or non-qualified stock options to purchase up to 800,000
(post split) shares of Common Stock to any officer, director, consultant or
employee when the Board, in its sole discretion, determines that a grant of
options to such person would be in the best interests of the Company. Incentive
stock options granted under the Plan shall be pursuant to a written agreement
for a term not exceeding ten (10) years (five (5) years for Shareholders owning
more than ten percent (10%) of the Common Stock of the Company). The exercise
price of the options shall be established by the Board at the time of grant of
the option but cannot be less than one hundred percent (100%) of the fair market
value at the time of grant of the option. If the recipient owns more than ten
percent (10%) of the Common Stock of the Company, the exercise price must be at
least one hundred and ten percent (110%) of the fair market value of the
underlying Common Stock at the time of grant. The aggregate fair market value
(determined as of the date of grant) of the shares of Common Stock with respect
to which incentive stock options are exercisable for the first time by an
employee during any calendar year may not exceed $100,000. Other terms and
conditions of options granted under the Plan, which expires November 2000, are
determined by the Board of Directors. The number of shares subject to
outstanding options will be appropriately adjusted upon the happening of any
stock split, stock dividend, recapitalization, combination, subdivision,
issuance of rights or other similar corporate change. Persons who are
residents of the State of Israel for the purpose of the Israeli Currency Control
Regulations, who own more than 5% of the total outstanding shares of the Company
would be

<PAGE>

required to get the consent of the Bank of Israel to accept offers of stock
options from the Company. To date the Company has granted options to purchase
556, 620 shares of Common Stock, $.01 par value. None of the options previously
granted under the Plan has been exercised.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of December 15, 1996, certain information
as to the stock ownership of each person known by the Company to beneficially
own 5% or more of the Company's outstanding Common Stock, by each director of
the Company who owns any shares of the Company's Common Stock and by all
officers and directors as a group: This table takes into effect the
ten-for-one reverse stock split.

Percentage of
Name of Amount and Nature of Class as of
Beneficial owner Beneficial Ownership (1) December 15, 1996
- ---------------- ------------------------ -----------------

Bonnie Septimus (2) 446,000 8.9%
72 Lord Avenue
Lawrence, New York

Barry Septimus (3) 527,086 9.7%
72 Lord Avenue
Lawrence, New York

Benjamin Sporn 48,000 (4) *

Heather Loren 232,250 (5) 4.6%

Barry Braunstein (4) 102,000 2%

Ron Levy -0- *

All officers and directors
as a group (5 persons) 382,250 7.1%

* Less than 1%

(1) Except as otherwise indicated, all shares are beneficially owned, and sole
voting and investment power is held by the persons named.

(2) This includes 6,000 shares of Common Stock owned by certain of her children
but does not include shares listed below owned by her husband, Barry Septimus,
shares of Common Stock held in trust for her children where she is not the
Trustee or shares owned by her independent children.

<PAGE>

(3) Does not include Shares owned by Mr. Septimus' children or his wife, Bonnie
Septimus, listed above. Mr. Septimus disclaims beneficial ownership of these
Shares. The amount includes 224,000 shares of Common Stock owned by Quest
Enterprises, Inc., which is 50% owned by Mr. Septimus. Also includes 93,086
Shares issuable upon exercise of options and warrants owned by Quest
Enterprises, Inc.

(4) Includes 3,000 Shares issuable upon exercise of stock options.

(5) Includes 2,000 Shares issuable upon exercise of stock options

(6) Consists of 2,000 Shares issuable upon exercise of stock options and Shares
which have been purchased by Mr. Braunstein's family in a private placement in
September 1994. Mr. Braunstein disclaims beneficial interest in these shares.

Item 12. CERTAIN RELATIONS AND RELATED TRANSACTIONS

In January 1993, the Company entered into an agreement with Quest
Enterprises, Inc. ("Quest"), of which Barry Septimus, a principal shareholder of
the Company, owns 50%, to provide marketing, consulting and other services as
reasonably required by the Company for the purpose of securing for the Company
research and development contracts, joint development programs, strategic
partnerships, business opportunities and production and sales contracts with
North American Companies and other entities on an exclusive basis in North
America. The Company is paying Quest a fee in the amount of $5,000 per month
plus expenses (reduced from $6,000 per month). In addition, in the event that
the services provided by Quest to the Company result in a contract being
awarded to the Company, Quest will be entitled to a commission in the amount of
1.5% of the revenues received. In September 1996, Quest voluntarily reduced
this percentage to 1% at the same time as the Company employed Ron Levy who is
to receive .05% of U.S. sales. In the event that the services provided by Quest
result in a joint venture or other equity arrangement between Micel Corp. and
the potential partner, Quest will be entitled as a commission to a reasonable
equity position in such joint venture not to exceed 15% of the equity of the
joint venture. Quest is also entitled to 25% of any royalties received by the
Company from parties introduced to the Company by Quest.

In August 1994, Quest agreed to assist Microkim in management and
operations. In November 1994, the Shareholders approved the issuance of a
warrant to Quest to purchase 61,436 shares of Common Stock of the Company at
$.60 per share. In May 1995, the Board of Directors granted Quest a stock
option exercisable to purchase an additional 96,620 shares of Common Stock at
$.6875 per share. The options vest at a rate of 25% per year, with the first
installment vesting on May 23, 1996. In August 1996, the Company granted Quest,
subject to obtaining shareholder approval of a proposal to raise the number of
shares issuable under the Plan, an additional option to purchase 100,000 shares
of Common Stock, $.01 par value, at $2.00 per share, exercisable in four equal
annual installments commencing on August 18, 1997. The Shareholders approved
the amendment to the stock option plan at the 1996 Shareholders meeting.

As of March 1996, independent children of Barry Septimus purchased 50,000
(post split numbers) Shares of the Company at $.50 per Share and Benjamin Sporn
purchased 36,000 (post split numbers) Shares at $.50 per Share as of June 1996.

<PAGE>

In August 1996, the Board of Directors approved, subject to obtaining
shareholder approval of the proposal to amend the Plan, options to each of the
current directors to purchase 25,000 shares of Common Stock at $2.00 per share,
exercisable in four equal annual installments, commencing on August 18, 1997.
In addition, the Company granted to Mr. Mark Loren, consultant to the Company,
and father of Ms. Heather Loren, a director of the Company, an option to
purchase 50,000 shares of Common Stock on the same terms and conditions
described above. The Shareholders approved the amendment to the stock option
plan at the 1996 Shareholder's meeting.

Item 13. Exhibits, List and Reports on Form 8-K.

(a) Exhibits.

3.1 - Certificate of Incorporation of Registrant (1)
3.2 - Certificates of Amendment to the Certificate of Incorporation of
Registrant (1)
3.3 - By-Laws (1)
4.1 - Form of Warrant Agreement (1)
4.2 - Form of Unit Purchase Option (1)
10.3 - 1990 Stock Option Plan (1)
10.4 - Agreement with Quest Enterprises, Inc. (2)
10.5 - Representative Agreement with RF Electronic Sales, Inc. (5)
10.6 - Memorandum of Understanding with Advanced Systems Development Inc.
(5)
10.7 - Organization Agreement among Microkim Ltd, Fairchild Data Inc., Teuza
- A Fairchild Technology Venture Ltd. and Misat Ltd. (3)
10.8 - Agreements dated as of October 1, 1995 between Teledata
Communications Ltd., Mikrokim Ltd. and
- AIL Systems, Inc. (6)
10.9 - Shareholders Agreement with Export Business & Services, Inc.
10.10 - Agreement with ArrayComm, Inc.

(1) Filed with Registration Statement 33-40512
(2) Filed with Form 10-Q for the quarter ended June 30, 1993
(3) Filed with Form 10-K for year ended September 30, 1992
(4) Filed with Form 10-KSB for the year ended September 30, 1993
(5) Filed with Form 10-KSB for the year ended September 30, 1994
(6) Filed with Form 10-KSB for year ended September 30, 1995
Reports on Form 8-K

None

<PAGE>

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.

Dated: January 7, 1997

MICEL CORP.

By: s/Ron Levy
---------------------------------------
Ron Levy, President

Pursuant to the Requirement of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and dates indicated.

SIGNATURE TITLE
DATE

s/Benjamin Sporn Director and Chairman
- ------------------------
Benjamin Sporn January 3, 1997

s/Ron Levy Director, President and Chief Executive
- ------------------------
Ron Levy and Financial Officer
January 7, 1997

s/Heather Loren Director
- ------------------------
Heather Loren January 3, 1997

s/Barry Braunstein Director
- ------------------------
Barry Braunstein January 7, 1997

<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------

PAGE
----

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2

CONSOLIDATED FINANCIAL STATEMENTS:

Consolidated Balance Sheet - September 30, 1996 F-3

Consolidated Statements of Operations
For the Years Ended September 30, 1996 and 1995 F-4

Consolidated Statements of Changes in Shareholders' Equity
For the Years Ended September 30, 1996 and 1995 F-5

Consolidated Statements of Cash Flows
For the Years Ended September 30, 1996 and 1995 F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7 - F-17

F-1

<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of Micel Corp:

We have audited the accompanying consolidated balance sheet of Micel Corp. (a
New York corporation) and subsidiaries as of September 30, 1996, and the related
consolidated statements of operations, changes in shareholders' equity and cash
flows for the years ended September 30, 1996 and 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Micel Corp. and subsidiaries as
of September 30, 1996, and the results of their operations and their cash flows
for the years ended September 30, 1996 and 1995, in conformity with generally
accepted accounting principles.

ARTHUR ANDERSEN LLP

New York, New York
December 16, 1996

F-2

<PAGE>

MICEL CORP. AND SUBSIDIARIES
----------------------------

CONSOLIDATED BALANCE SHEET
--------------------------

SEPTEMBER 30, 1996
------------------

ASSETS
- ------

CURRENT ASSETS:
Cash and cash equivalents $ 81,089
Trade accounts receivable 1,253,066
Other receivables, net of allowance for doubtful
accounts of $30,000 86,093
Inventories 708,925
-----------
Total current assets 2,129,173

DEPOSITS WITH INSURANCE COMPANIES AND PENSION FUNDS 181,369

PROPERTY AND EQUIPMENT, net 209,329
-----------
Total assets $ 2,519,871
===========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank overdraft facilities $ 321,057
Current maturities of long-term debt 106,957
Accounts payable and accrued liabilities 1,398,632
Advances from customers 177,109
-----------
Total current liabilities 2,003,755
-----------

ACCRUED SEVERANCE PAY 226,582
-----------

LONG-TERM DEBT, net of current maturities 44,508
-----------

OTHER LONG-TERM LIABILITIES 45,172
-----------

COMMITMENTS AND CONTINGENCIES (Note 9)

SHAREHOLDERS' EQUITY:
Preferred stock: $.001 par value -- redeemable or convertible;
5,000,000 shares authorized; no shares issued and outstanding
Common stock: $0.01 par value -- 25,000,000 --
shares authorized; 5,365,380
shares issued and outstanding 53,654
Additional paid-in capital 5,785,986
Accumulated deficit (5,639,786)
-----------
Total shareholders' equity 199,854
-----------
Total liabilities and shareholders' equity $ 2,519,871
===========

The accompanying notes are an integral part of this consolidated balance sheet.

F-3

<PAGE>

MICEL CORP. AND SUBSIDIARIES
----------------------------

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

FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995
-----------------------------------------------

1996 1995
---------- ----------
SALES $3,105,392 $2,701,243

COST OF SALES (2,298,886) (1,969,521)
---------- ----------
Gross profit 806,506 731,722
---------- ----------

RESEARCH AND DEVELOPMENT EXPENSES, net 327,529 416,626

SELLING EXPENSES 196,410 146,720

GENERAL AND ADMINISTRATIVE EXPENSES 300,261 499,276
---------- ----------
Total operating expenses 824,200 1,062,622
---------- ----------

Loss from operations (17,694) (330,900)

INTEREST AND OTHER INCOME 131,664 53,828

INTEREST AND OTHER EXPENSE (97,827) (112,666)
---------- ----------
Net income (loss) $ 16,143 $ (389,738)
========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 5,165,190 3,666,930
========== ==========
NET INCOME (LOSS) PER COMMON SHARE $ - $ (0.12)
========== ==========

The accompanying notes are an integral part of these consolidated statements.

F-4

<PAGE>

MICEL CORP. AND SUBSIDIARIES
----------------------------

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
----------------------------------------------------------

FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995
-----------------------------------------------

Preferred Stock Common Stock
------------------ --------------------------
# of Par # of Par
Shares Value Shares Value
-------- -------- ------------ -------------
<S> <C> <C> <C> <C>
BALANCE, September 30, 1994 830 $ - 25,827,300 $ 25,827

Conversion of preferred stock to common stock, including
dividends accrued through date of conversion (810) - 18,984,000 18,984

Cancellation of preferred stock (10) - - -

Issuance of common stock in private placement - - 5,400,000 5,400

Net (loss) - - - -

----- ------ ------------ -----------
BALANCE, September 30, 1995 10 - 50,211,300 50,211

Issuance of common stock in private placement - - 4,060,000 4,060

Redemption of preferred stock (10) - - -

Retirement of common stock - - (617,500) (617)

1 for 10 reverse stock split - - (48,288,420) -

Net income - - - -
----- ------ ------------ -----------

BALANCE, September 30, 1996 - $ - 5,365,380 $ 53,654
----- ------ ------------ -----------
----- ------ ------------ -----------
</TABLE>
<TABLE>
<CAPTION>

Additional Accumulated
Paid-in Capital Deficit Total
--------------- ----------- -----------
<S> <C> <C> <C>
BALANCE, September 30, 1994 $ 5,183,606 $(5,125,391) $ 84,042

Conversion of preferred stock to common stock, including
dividends accrued through date of conversion 120,216 (139,200) -

Cancellation of preferred stock (10,000) - (10,000)

Issuance of common stock in private placement 264,600 - 270,000

Net (loss) - (389,738) (389,738)
------------ ------------ ----------

BALANCE, September 30, 1995 5,558,422 (5,654,329) (45,696)

Issuance of common stock in private placement 267,822 - 271,882

Redemption of preferred stock (10,000) (1,600) (11,600)

Retirement of common stock (30,258) - (30,875)

1 for 10 reverse stock split - - -

Net income - 16,143 16,143
------------ ------------ ----------

BALANCE, September 30, 1996 $ 5,785,986 $(5,639,786) $ 199,854
------------ ------------ ----------
------------ ------------ ----------

</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-5

<PAGE>

MICEL CORP. AND SUBSIDIARIES
----------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995
-----------------------------------------------

1996 1995
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES: <S> <C>
Net income (loss) $ 16,143 $(389,738)
Adjustments to reconcile net income (loss) to net cash used in
operating activities-
Depreciation and amortization 82,641 91,005
Loss (gain) on sale of equipment 691 (33,225)
Gain on sale of marketable securities - (5,144)
Non-cash gain on reacquisition of stock (30,875) -
Provision for allowance for doubtful accounts - 20,000
Changes in operating assets and liabilities:
Accounts receivable (609,165) 188,253
Inventories (44,438) (20,255)
Accounts payable and accrued liabilities 358,508 (177,002)
Advances from customers 73,537 (73,595)
Accrued severance pay (4,705) (64,542)
--------- ---------
Net cash used in operating activities (157,663) (464,243)
--------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (69,650) (57,487)
Proceeds from sale of equipment 4,408 46,526
Proceeds from sale of marketable securities - 31,759
--------- ---------
Net cash provided by (used in) investing activities (65,242) 20,798
--------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (196,161) (221,568)
Net change in short-term bank overdraft facilities 37,546 (120,202)
Proceeds from issuance of common stock 271,882 270,000
Redemption of preferred stock (10,000) -
Payment of cash dividends (1,600) -
--------- ---------
Net cash provided by (used in) financing activities 101,667 (71,770)
--------- ---------

Decrease in cash and cash equivalents (121,238) (515,215)

CASH AND CASH EQUIVALENTS, beginning of year 202,327 717,542
--------- ---------
CASH AND CASH EQUIVALENTS, end of year $ 81,089 $ 202,327
========= =========

SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 76,442 $ 120,514

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:

</TABLE>

During the year ended September 30, 1995, the Company accrued dividends on
preferred stock of $139,200, which was paid by the issuance of 278,400 shares of
common stock at the rate of $.50 per share.

During the year ended September 30, 1995, the Company converted 810 shares of
Preferred Stock, with an original $810,000, into 1,620,000 shares of common
stock at the rate of $.50 per share.

F-6

<PAGE>

MICEL CORP. AND SUBSIDIARIES
----------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------

SEPTEMBER 30, 1996 AND 1995
---------------------------

1. ORGANIZATION

Micel Corp. (the "Parent") was incorporated on June 25, 1987, for the purpose of
owning, financing and managing Microkim Limited (the "Subsidiary"). The
Subsidiary is an Israeli corporation which is engaged in the development,
manufacture and sale of microwave components and tailor-made integrated
assemblies for military and commercial applications. In May 1996, the Parent
incorporated another subsidiary, Radiotel, to engage in the development and
manufacture of radio transceivers for telephone network applications (together
with Microkim Limited, the "Subsidiaries") (collectively, the "Company"). In
October 1996, the Company formed Micel Wireless Corp. ("Micel Wireless"), a
joint venture between the Company and Export Business Service ("EBS"), to
design, manufacture, market and sell wireless telephone terminals and other
related products.

2. MANAGEMENT'S PLANS AND FUTURE UNCERTAINTIES

As reflected in the accompanying consolidated financial statements, the
Company has suffered recurring losses and negative cash flows from operations.
Furthermore, effective July 20, 1993, the Company was delisted from NASDAQ
over-the-counter market trading due to insufficient capital and is now trading
on the Bulletin Board. The Company's continued existence is dependent upon its
ability to achieve and maintain profitable operations and positive cash flows.
Additionally, the Company has benefited from a cost reduction program which
reduced overhead costs and increased production efficiencies. During the first
quarter of fiscal 1997, the Company has obtained additional equity financing of
$400,000, and expects an additional $500,000 from the same parties during fiscal
1997. The Company believes that its remaining cash resources at year end and
current sales agreements, plus additional equity financing referred to above,
will be sufficient to fund the Company's operations through September 1997.
There can be no assurance that funding from the Chief Scientist of the Israeli
Ministry of Industry and Trade will continue to be received at all or at
anticipated levels, that committed equity transactions will be consummated, or
that unanticipated events requiring the expenditure of funds will not occur. In
the event that the necessary cash resources are not received prior to September
1997, or in the event that any unforeseen events require an unexpected outlay of
cash resources prior to September 1997, the Company may need to substantially
reduce its operations, including further reductions in personnel, research and
development and in other expenses.

3. SIGNIFICANT ACCOUNTING POLICIES

BASIS OF CONSOLIDATION

The consolidated financial statements include the accounts of the Parent and its
wholly-owned Subsidiaries and have been prepared in accordance with generally
accepted accounting principles in the United States. All material intercompany
transactions and balances have been eliminated for consolidation purposes.

F-7

<PAGE>

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments, purchased with a maturity
of three months or less, to be cash equivalents. At September 30, 1996, cash
equivalents are not material.

Effective October 1, 1994, the Company adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities " ("SFAS 115"). SFAS 115 addresses the accounting and reporting for
investments in debt and equity securities. Securities classified as available
for sale are reported at fair value, with unrealized gains and losses excluded
from earnings and reported in a separate component of stockholders' equity (on
an after tax basis). Gains and losses on the disposition of securities are
recognized on the specific identification method in the period in which they
occur.

INVENTORIES

Inventories are valued at the lower of cost or market. Raw materials are valued
on the weighted average basis. Work in process is calculated based on the value
of raw materials used, plus labor and overhead which are valued using the
average standard cost.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, net of grants received. Depreciation
on property and equipment is provided using the straight-line method, over the
estimated useful lives of the assets. Amortization of leasehold improvements is
provided using the straight-line method over the shorter of their estimated
useful lives or lease term. The estimated useful lives are as follows:

Machinery and equipment 5 years
Computer systems 5 years
Vehicles 7 years
Office furniture and equipment 10 years
Leasehold improvements 10 years

NET INCOME (LOSS) PER COMMON SHARE

Net income (loss) per common share has been computed using the weighted average
number of common shares outstanding for each year presented. Common stock
equivalents have not been included in the per share computation to the extent
they are anti-dilutive. Earnings used for the per share computation are
adjusted for cumulative preferred dividend requirements.

RESEARCH AND DEVELOPMENT

Research and development expenses, net of subsidies from the Chief Scientist of
the Israeli Ministry of Industry and Trade of $117,190 and $72,479 for the years
ended September 30, 1996 and 1995, respectively, are charged to income as
incurred (see Note 9).

TRANSLATION OF FOREIGN CURRENCY

The functional currency of the Subsidiary is deemed to be the U.S. dollar.
Accordingly, its accounts are remeasured in dollars and translation gains and
losses are included in the statement of operations.

F-8

<PAGE>

REVENUE RECOGNITION

Revenue is recognized according to contract terms, either upon shipment or for
"milestone" contracts, on the basis of "milestones" as determined in the
contracts, which reflect closely actual expenditures incurred over the life of
the contract.

PRODUCT WARRANTIES

The provision for product warranty is recorded on the basis of the Subsidiary's
experience and engineering estimates.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS

During March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting
for the Impairment of Long Lived Assets and for Long Lived Assets to Be Disposed
Of." This statement establishes financial accounting and reporting standards
for the impairment of long lived assets, certain identifiable intangibles, and
goodwill related to those assets to be held and used, and for long lived assets
and certain identifiable intangibles to be disposed of. This statement is
effective for financial statements for fiscal years beginning after December 15,
1995, although earlier application is encouraged. The Company does not expect
that the adoption of SFAS 121 will have a material effect on its financial
statements.

STOCK BASED COMPENSATION

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock Based Compensation" ("SFAS
123"), which will require companies either to reflect in their financial
statements or reflect as supplemental disclosure the impact on earnings and
earnings per share of the fair value of stock based compensation using certain
pricing models for the option component of stock option plans. It is the
Company's intention to continue to account in its basic financial statements
under the general philosophy of Accounting Principles Board Opinion No. 25, as
allowed under the new standard, which measures only the intrinsic option value
as compensation. Disclosure, as required by SFAS 123, will be made commencing
with the Company's financial statements for the year ending September 30, 1997
and will reflect the impact of the compensation for options issued in 1997 and
1996 (if any) in the Notes to the Consolidated Financial Statements.
Accordingly, SFAS 123 has no impact on the financial position and results of
operations for any period described herein.

4. INVENTORIES

Inventories consisted of the following as of September 30, 1996:

Raw materials $490,048
Work in process 218,877
--------
$708,925
========

Included in work in process inventories are labor and overhead of approximately
$75,000 and $28,000, respectively, at September 30, 1996.

F-9

<PAGE>

5. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of September 30, 1996:

Machinery and equipment $1,679,507
Computer systems 251,394
Vehicles 73,682
Office furniture and equipment 122,615
Leasehold improvements 55,718
----------
2,182,916
Less: Accumulated depreciation and
amortization 1,973,587
----------
$ 209,329
==========

6. LONG-TERM DEBT

Long-term debt consisted of the following at September 30, 1996:

Annual
Interest Principal
Rate Maturity Outstanding
---------- --------- -----------
<S> <C> <C> <C>
Israel Industrial Development Bank Ltd. LIBOR + 2% 1996-2000 $ 141,047
Bank Leumi Le Israel Ltd. 8.9% 1996-1998 10,418
---------
151,465
Less: Current maturities 106,957
---------
$ 44,508
=========

</TABLE>

Long-term debt is repayable primarily in semi-annual installments through 2000.

The LIBOR interest rate as of September 30, 1996 was 5.625%.

Long-term debt matures as follows:

For the year
ended September 30,

1997 $106,957
1998 18,116
1999 15,500
2000 10,892
--------
$151,465
========

The Company's long-term debt, including current maturities, as well as bank
overdrafts, are secured by liens on the Subsidiary's property and equipment,
share capital and insurance rights, and by secured interests in all of the
Subsidiary's assets.

F-10

<PAGE>

As of September 30, 1996, $141,047 of long-term debt has been guaranteed by the
State of Israel.

7. SEVERANCE PAY PLAN AND MANAGERS' INSURANCE

Under Israeli law, the Subsidiary is required to make severance payments to its
dismissed employees. The Subsidiary discharges this liability by annual
provisions, payment of premiums to insurance companies under approved plans and
by deposits to a severance pay plan.

The Company, as a practice, contributes monies on behalf of its senior Israeli
employees to a fund known as "Managers' Insurance". This Fund provides a
combination of a savings plan, insurance and severance pay benefits to the
employees. The employees contribute an amount equal to 5% of their wages and the
Company contributes an additional 13 1/3% of their wages. The Company is
relieved of any liability upon payment to the Managers' Insurance Fund.

Expenses for both severance pay and the Managers' Insurance Fund for the years
ended September 30, 1996 and 1995 totaled $127,402 and $182,775, respectively.

8. INCOME TAXES

TAXATION OF THE PARENT

The Parent is taxed under the relevant laws in the United States. At September
30, 1996, net operating loss carryforwards ("NOL's") available to reduce future
federal taxable income amount to approximately $1,548,000, which expire
from 2003 through 2010. The use of such carryforwards may be limited as a
result of ownership changes resulting from share issuances. The ultimate
realization of the tax benefits is dependent upon the Parent's earning future
federal taxable income. The Company has recorded a deferred tax asset in the
amount of approximately $526,000 related to its available NOL carryforwards. A
valuation allowance for the entire balance has been recorded due to the
uncertainty of the tax asset's future realization.

TAXATION OF THE SUBSIDIARY

The Subsidiary is subject to tax laws in Israel, which provide for:

a. Measurement of results for tax purposes in terms adjusted for
inflation (adjusted to the changes in the Israeli consumer price index; "CPI").

b. Regular tax rates applicable to income not derived from the "Approved
Enterprise" (see c. below) are 39% for tax year 1993, 38% for 1994, 37% for
1995 and 36% for both 1996 and 1997.

c. Reduced tax rates of 10% - 25% on taxable income derived from certain
of the Subsidiary's production facilities which have been granted "Approved
Enterprise" status (periods expiring in 1998 and 2005).

At September 30, 1996, the Subsidiary has carryforward tax losses approximating
$6.1 million. Under Israeli tax law, this amount is linked to the CPI and may
be carried forward indefinitely. In the event that the Subsidiary realizes a
benefit in the future for such linkage, income tax expense will be reduced at
that time. As the realization of the tax benefit of the loss carryforward is
predicated upon the subsidiary achieving profitability, a valuation allowance
has been provided for the full amount of the deferred tax benefit. The
effective future tax rate cannot be estimated as the allocation of net income in
the future between the statutory rate (36-37%) and the "Approved Enterprise"
rate (10-25%) is not predictable.

F-11

<PAGE>

Through September 30, 1996, the Subsidiary underwent income tax audits relating
to tax years 1991 through 1993 and paid approximately $60,000 in taxes and fees.
The Subsidiary has accrued $20,000 relating to the anticipated outcome of future
audits.

9. COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENT

The Subsidiary has entered into an operating lease agreement for the space it
occupies, which expires in March 1997. The Company intends to extend the lease
term. The rental payments through the lease expiration in 1997 (which are
linked to the CPI), approximate $5,818 per month. From November 1994 through
September 1995, the Company reduced the amount of leased facilities from
approximately 14,000 square feet to approximately 7,100 square feet with the
agreement of the lessor. Rent expense for the years ended September 30, 1996
and 1995 was $72,619 and $70,545, respectively.

The Company reached an agreement with its lessor to repay approximately $111,000
in back rent in monthly payments through April 1, 1999. As of September 30,
1996, the amount remaining to be paid in back rent is $75,292, of which $30,120
is included in accounts payable and accrued liabilities with the remainder
included in other long-term liabilities.

ROYALTY COMMITMENT

The Subsidiary is committed to pay royalties to the Government of Israel in
respect to products under development for which the Government participated by
way of grant. The royalty is computed at the rate of 2% to 5% of proceeds from
sales of such products, up to the aggregate amount of such grants ($1,253,935 as
of September 30, 1996). The commitment is in force for a period of seven years
from commencement of sale of each product. Royalties paid during the years
ended September 30, 1996 and 1995 totaled $4,530 and $6,429, respectively.

As security for compliance with the terms of an investment grant received from
the State of Israel, the Subsidiary registered floating security interests on
all of its assets.

BANK GUARANTEES

In connection with certain contracts entered into with customers, the Subsidiary
is required to obtain performance guarantees from several banking institutions.
The total performance guarantees outstanding at September 30, 1996 were
approximately $269,000.

REPRESENTATIVE AGREEMENT

The Company entered into a representative agreement with a company (the
"Supplier") in 1993, pursuant to which the Supplier was appointed the exclusive
representative for certain product components (RF and microwave) in the United
States, Canada and Mexico. In May 1995, the parties amended the agreement to
continue relations on a non exclusive basis. The Company will pay the Supplier
a commission of 10% on all sales that the Supplier makes. This agreement does
not have a specified termination date but may be canceled by either party with
90 days prior written notice. To date, the Company has not yet received any
purchase orders pursuant to this agreement.

LEGAL PROCEEDINGS

In April 1994, the former president of the Company commenced an action against
the Company in Labor Court in Israel claiming that the Company owes him a total
of $91,200 for yearly bonuses and cost of living increases not given to him, for
sick days not taken, for the repayment of a 10% across the board salary
reduction instituted in December 1992, and for amounts withheld from his

F-12

<PAGE>

paycheck. The Company responded to this claim by denying each of the claims.
This claim was withdrawn pursuant to an agreement dated May 27, 1996.

In March 1994, the Subsidiary commenced a civil action in Israel against the
former president of the Company and his wife claiming, among other things, that
he had purchased from the Subsidiary a company car at a price below the fair
market value at the date of purchase, did not make all the payments on the car,
sold his family car to the Subsidiary at a higher than fair market value, drew
unauthorized checks to himself aggregating approximately $30,000, made
unauthorized payments from the Subsidiary for personal expenses and without
proper invoices, used the Subsidiary's credit cards to pay personal expenses and
aided and abetted the Subsidiary's former chief financial officer to embezzle
Subsidiary funds for his own use. The total amount of the claim is
approximately $243,000.

On May 27, 1996, an overall settlement agreement was reached between the former
president and the Company and the Subsidiary whereby all existing litigation,
complaints and disputes between the parties would be withdrawn with prejudice.
The former president paid $80,000 to the Subsidiary and surrendered to the
Company 617,500 shares of the Company's common stock (prior to the consideration
of the reverse stock split) which has been included in interest and other income
in the statement of operations.

In July 1994, the Company commenced a civil action in Israel in the approximate
amount of $3,000,000 against the previous owner of the Subsidiary and the former
president for false representations made by the previous owner of the Subsidiary
in connection with the purchase of the Subsidiary from the previous owner of the
Subsidiary and for subsequent damages resulting from such misrepresentations.
The former president has denied the charges and has counterclaimed against the
Company and certain officers for indemnification in the event that the Company
is successful. In addition, he has counterclaimed against the Company for
approximately $33,000 claiming that he is entitled to be indemnified by the
Company for legal fees. The former president is no longer a defendant or
counter claimant in this action as a result of the aforementioned agreement
reached on May 27, 1996. The previous owner of the Subsidiary filed a motion
for cancellation of the Company's request for "out of boundaries" jurisdiction.
The previous owner of the Subsidiary denies the judicial competence of the
Israeli court to deliberate the suit. The previous owner of the Subsidiary also
claims prescription and the other preliminary claims. The motion is scheduled
for hearing on March 30, 1997.

The Company believes that the outcome of these proceedings is not likely to have
a material adverse effect on the Company's consolidated financial position or
results of operations.

10. SHAREHOLDERS' EQUITY

COMMON STOCK

In November 1996, the shareholders approved a one for ten reverse stock split,
which reduced the common shares issued and outstanding from 53,653,800 to
5,365,380 and at the same time approved an amendment to the Company's
Certificate of Incorporation decreasing the number of authorized shares of
common stock from 85,000,000 to 25,000,000 shares. All share and per share
references have been restated to reflect the stock split as if it had occurred
at the beginning of all periods presented.

In May 1996, the Company settled litigation with the Company's former president
and consequently reacquired 617,500 shares of its common stock (prior to the
consideration of the reverse stock split). The Company has retired these
shares.

F-13

<PAGE>

PREFERRED STOCK

a. The Company is authorized to issue 5,000,000 shares of preferred stock of
$0.001 par value.

b. On September 30, 1993, the Company issued 430 shares of 1993 Preferred
Stock (the "1993 Preferred Shares") subject to certain terms and preferences.
Total proceeds received by the Company aggregated $420,000.

In connection with the redemption of the 1990 Preferred Shares referred to
below, in April 1995 the Company also redeemed the original cost of 410 shares
of 1993 Preferred Shares of $410,000, plus accrued but unpaid interest of
$49,200 through that date. The total value was converted into 918,400 shares of
common stock at a rate of $.50 per share.

In addition to the conversion referred to above, in April 1995, the Company
canceled 10 shares of 1993 Preferred Shares for which payment had not been made.

In August 1996, the Company redeemed the 10 remaining 1993 Preferred Shares for
their original cost of $10,000, plus accrued but unpaid interest of $1,600
through that date.

c. On September 30, 1990, in connection with the partial repayment of certain
noteholders, the Company issued 400 shares of 1990 Preferred Stock (the "1990
Preferred Shares") for $1,000 per share, with terms and preferences similar to
the 1993 Preferred Shares discussed above.

In accordance with the terms of the 1990 Preferred Shares, in April 1995,
the Company redeemed the $400,000 initial cost of the 1990 Preferred Shares,
plus accrued but unpaid interest of $90,000 through that date. The total value
was converted into 980,000 shares of common stock at a rate of $.50 per share.

PRIVATE PLACEMENTS

During fiscal 1996, the Company issued 356,000 shares of common stock at $0.50
per share in a private placement. The Company also received $100,000 for 50,000
shares of common stock at $2.00 per share. The net proceeds of $271,882 were
used to retire short term debt.

In June 1995, the Company completed a private placement, issuing 540,000 shares
of common stock at $0.50 per share. The net proceeds of $270,000 were used to
retire short term debt.

UNDERWRITER'S UNIT PURCHASE OPTION

In connection with the Company's initial public offering in November 1991, the
underwriter has an option to purchase 8,000 units at a price of $60.00 per unit
exercisable for a period of four years, commencing November 12, 1992. The 8,000
shares of common stock and 8,000 warrants underlying these units were registered
by the Company in June 1994. As of September 30, 1996, the unit purchase option
has not been exercised. The option expired unexercised in November 1996.

INITIAL PUBLIC OFFERING WARRANTS

In November 1991, the Company completed an initial public offering of 80,000
units of common stock and warrants (for a price of $50.00 per unit), and
received net proceeds from the offering of $3,206,792. The units, which are
separable, are composed of one share of common stock, and a warrant to purchase
one share of common stock at a price of $70.00 per share. In June 1994, the
Company registered 1,360,000 shares of common stock and lowered the exercise
price of the warrants for a three month period, allowing each warrant to be
exercisable to purchase 17 shares of common stock at $.60 per share. During the
year ended September 30, 1994, 1,252,730 shares were issued as a result of the
warrants exercised and the net proceeds received by the Company totaled
approximately $710,000.

F-14

<PAGE>

As of September 30, 1996, 6,310 initial public offering warrants remain
outstanding pursuant to their original terms. Such remaining warrants expired on
November 12, 1996.

OTHER WARRANTS

a. In November 1994, the shareholders approved the issuance of a warrant to
Quest (a related party, see Note 12) to purchase 61,437 shares of common stock
at $.60 per share.

b. In 1987, warrants were issued to purchase 32,133 shares of common stock (at
$50 per share). The warrants expire in July, 1997.

STOCK OPTION PLAN

In November 1990, the Company's Board of Directors (the "Board") adopted, and
its shareholders approved, the 1990 Stock Option Plan (the "Plan"), as amended
through November 1994, which provides for the grant of incentive and/or
nonqualified stock options to purchase up to 2,500,000 shares of common stock to
any officer, director, consultant or employee at the Board's discretion.
Generally, these options become exercisable over specified vesting periods but
may not be exercised after ten years from the date of grant. The exercise price
of the qualified options cannot be less than the fair market value of the
Company's common stock at the time of grant. In November 1996, the shareholders
approved an amendment to the Plan which increased the number of shares issuable
under the Plan to 8,000,000.

The following summarizes activity under the plan for the years ending September
30, 1996 and 1995:

YEAR ENDED SEPTEMBER 30,
------------------------

1996 1995
---- ----
# of Shares Price # of Shares Price
----------- ----- ----------- -----

Options outstanding, 198,620 $0.60-$0.6875 10,000 $0.60
beginning of period

Options granted 373,000 $0.60-$2.00 188,620 $0.60-$0.6875
Options exercised - - - -
Options canceled/forfeited - - - -
------- ------------ ------- -------------
Options outstanding,
end of period 571,620 $0.60-$2.00 198,620 $0.60-$0.6875
------- ------------ ------- -------------
------- ------------ ------- -------------
Options exercisable,
end of period 57,155 $0.60-$0.6875 10,000 $0.60
------- ------------ ------- -------------
------- ------------ ------- -------------

At September 30, 1996, there were 7,428,380 shares available for future grant
under the Plan, restated for the increase in shares issuable under the Plan
approved by the shareholders of the Company in November 1996 and by the Board of
Directors in August 1996.

Included in the options granted in fiscal 1996 are 25,000 options granted to the
Chairman of the Board and 100,000 options granted to Quest (a related party, see
Note 12) at an exercise price of $2.00 per share. In addition, 15,000 options
were granted to a member of legal counsel for the Subsidiary, 10,000 of which
were exercisable at $.60 per share with the remainder exercisable at $2.00 per
share.

Included in the options granted during the year ended September 30, 1995 are
96,620 options granted to Quest (a related party, see Note 12) at an exercise
price of $.6875 per share. The remaining options were granted to various
officers, directors and employees of the Company.

F-15

<PAGE>

DIVIDEND RESTRICTION

Under current Israeli law, companies may only declare dividends out of retained
earnings. As of September 30, 1996, the Subsidiary had an accumulated deficit
of approximately $4,165,006. See Note 12 for further discussion of equity
transactions with related party.

11. SALES BY GEOGRAPHIC AREA/SIGNIFICANT CUSTOMERS

Sales were made to the following geographic areas for the years ended September
30, 1996 and 1995:

1996 1995
---------- ----------
Israel $2,357,040 $2,053,345
Other countries 748,352 647,898
---------- ----------
$3,105,392 $2,701,243
========== ==========

For the year ended September 30, 1996, a subsidiary of an Israeli government
agency, Elta Electronics Industries Ltd., ("Elta") accounted for 22% of total
sales, Teledata accounted for 35%, The Israeli Office of Defense accounted for
14% and ASDI accounted for 13%. In fiscal 1995, Elta accounted for 31% of total
sales, Teledata accounted for 23% while ASDI accounted for 16%.

12. RELATED PARTY TRANSACTIONS

a. In March 1996, in connection with a private placement, the Company issued
50,000 shares of common stock to the children of a principal stockholder
and in June 1996, issued 36,000 shares of common stock to a member of the
Board of Directors of the Company at $.50 a share.

b. In June 1995, in connection with the private placement, the Company issued
50,000 shares of common stock to a director of the Company and 340,000
shares of common stock to a principal stockholder at $.50 per share.

c. In April 1995, in connection with the redemption of the 1993 and 1990
Preferred Shares, the Company issued 30,625 shares of common stock to a
director of the Company and 224,000 shares of common stock to Quest, which
is 50% owned by the Company's former chairman, at $.50 per share.

d. During the year ended September 30, 1994, in connection with the private
placement and pursuant to a subscription agreement which was paid in full,
the Company issued 100,000 shares of common stock to a principal
stockholder and 200,000 shares of common stock to the husband of that
stockholder at $0.50 per share in satisfaction of loans payable to them.
In addition, 100,000 shares of common stock were issued to a director of
the Company.

e. The former chairman of the Board was a registered representative of the
underwriter for the November 1991 public offering.

f. During January 1993, the Company contracted the services of Quest
Enterprises Inc. ("Quest"), a marketing specialist for a period of three
years. The term of the agreement has been extended through December 31,
1998. Quest is 50% owned by the Company's former chairman. In August
1994, the agreement between the Company and Quest was amended to provide
that Quest will assist the Company with the operation and management of the
Subsidiary. The Company pays Quest a consulting fee of $6,000 per month
plus expenses which was increased from $5,000 per month beginning January
1996. In September 1996, the Company amended the agreement to reduce the
monthly fee to $5,000, effective October 1996.

F-16

<PAGE>

Consulting fees paid for the year ended September 30, 1996 and 1995
amounted to $83,742 and $76,582, respectively.

In addition, in the event that the services provided by Quest to the
Company result in a contract being awarded to the Company, Quest will be
entitled to a commission in the amount of 4% of the revenues received. In
April 1995, the Company amended the agreement to decrease the commission to
1.5% effective January 1, 1996 and in September 1996, the Company again
amended the agreement to reduce the commission for contracts booked to 1%
beginning October 1996. In the event that the services provided by Quest
result in a joint venture or other equity arrangement between the Company
and the potential partner, Quest will be entitled to a reasonable equity
position in such joint venture not to exceed 15% of the equity of the joint
venture or a commission. Quest is also entitled to 25% of any royalties
received by the Company from parties introduced to the Company by Quest.

g. For the year ended September 30, 1995, legal fees paid to the secretary of
the Company amounted to $41,748.

F-17

<PAGE>

Exhibit 10.9

SHAREHOLDERS AGREEMENT
----------------------

AGREEMENT made the _____ day of August, 1996, by and among Export Business
& Services, Inc. ("EBS") having an office at 15450 S.W. Boones Ferry Rd., Lake
Oswego, Oregon, 97035, and Micel Corp. ("Micel") having an office at 445
Central Avenue, Lawrence, New York 11559 (said corporations being referred to as
"Shareholder") and Milink Corporation, a Florida corporation, having offices in
Miami, Florida (hereinafter called the "Corporation").

W I T N E S S E T H:
- - - - - - - - - -

WHEREAS, the Shareholders are the owners of all of issued and outstanding
shares of the capital stock of the Corporation, and

WHEREAS, the Corporation intends to manufacture, and market wireless
telephone terminals and other related products which may be mutually agreed upon
by the Shareholders; and

WHEREAS, the parties wish to make certain agreements relating to and
affecting the Corporation and their respective rights, interests and obligations
in and to the Corporation and the capital stock of the Corporation;

NOW, THEREFORE, in consideration of the promises and the covenants herein
contained, it is mutually agreed as follows:

1. RESTRICTIONS ON TRANSFER OF SHARES.

Each of the Shareholders agrees that it will not transfer, sell,
assign, pledge, lien or otherwise in any manner dispose of or encumber or permit
to be disposed of or encumbered any of the Shares of the capital stock of the
Corporation owned by such Shareholders except as provided for in this agreement.

-1-

<PAGE>

2. OPTION TO PURCHASE STOCK.

(a) In the event any of the Shareholders wishes to sell or dispose of
any or all of its shares in the Corporation, then the shares of stock owned by
such Shareholder shall be deemed offered to the Corporation and the remaining
Shareholder or Shareholders on the date of receipt of written Notice of such
intention as provided in Paragraph 9 of this agreement.

(b) The Corporation shall within thirty (30) days after an offer is
made pursuant to the provisions of subdivision (a) of this Paragraph advise the
offering Shareholder and the remaining Shareholders of its acceptance of all or
any part of the offer.

(c) To the extent the Corporation does not accept such offer, the
remaining Shareholders shall have a period of fifteen (15) days following the
expiration of the initial period thirty (30) day period to accept such offer pro
rata according to their share holdings. A Shareholder electing to purchase all
of the shares offered to him may include in his acceptance an agreement to
purchase such additional shares (with or without limitation) not agreed to be
purchased by the other Shareholders to whom such offer is made, and the
Shareholders so electing shall purchase the shares not to agreed to be purchased
by the other Shareholders, pro rata to the extent possible to their respective
share holdings.

(d) To the extent that a Shareholder or Shareholder cannot dispose of
its shares as provided in this Paragraph, such Shareholder or Shareholders shall
retain its remaining shares until such time as they may be disposed of pursuant
to this Paragraph.

3. TERMINATION OF EMPLOYMENT

(a) In the event of the termination of employment with the Corporation of
any Shareholder (with respect to any Shareholder who is not a natural person,
"termination of

-2-

<PAGE>

employment" for purposes of this Agreement shall mean the termination of
employment of any person or persons designated by the Shareholder to be employed
as part of Shareholder's responsibilities to the corporation as set forth in
this agreement), for whatever reason other than death or disability of such
Shareholder after the Corporation shall have repaid in full the loan to Micel
and obtained profitability, then the shares of stock owned by such Shareholder
shall be deemed offered to the Corporation and the remaining Shareholders on the
date of termination of employment at the book value of such shares.

(b) In the event of death or disability of both David P. Boon and Pedro A.
Barros after the loan from Micel to the Corporation shall have been repaid in
full and after the Corporation shall be profitable, then EBS shall have the
option for a period of six months from date of death of the latter to die of Mr.
Boon or Mr Barros to offer the shares for sale upon receipt of a bona fide third
party written offer. Micel shall have the right of first refusal to purchase
the shares owned by EBS upon the same terms and at the same price set forth in
the bonafide third party offer. Such acceptance shall be made by a written
acceptance within 30 days of receipt by Micel of a copy of the third party
offer. In the event that no such offer shall be received by Micel within such
six month period set forth above then the shares owned by EBS shall be offered
to Micel in accordance with the terms of subsection (a) of this Paragraph 3.
(c) The Corporation shall within thirty (30) days after an offer is made
pursuant to the provisions of subdivision (a) of this Paragraph 3 advise the
offering Shareholder and the remaining Shareholders of its acceptance of all or
any part of the offer. To the extent the Corporation does not accept such
offer, the remaining Shareholders shall have a period of fifteen (15) days
following the expiration of the initial period thirty (30) day period to accept
such offer pro rata according to their share holdings. A Shareholder electing
to purchase all of the shares offered to him may include in his acceptance an
agreement to purchase such additional shares (with or without limitation) not
agreed to be purchased by the other Shareholders to whom such offer is made, and
the Shareholders so electing shall purchase the shares not to agreed to be
purchased by the other Shareholders, pro rata to the extent possible to their
respective share holdings. In the event that the offer is not accepted, the
Corporation shall be dissolved.

-3-

<PAGE>

4. EMPLOYMENT AND SALARIES.

(a) During the term of this Agreement each Shareholder (with respect
to any Shareholder who is not a natural person, "employment" for purposes of
this Agreement shall mean the employment of any person or persons designated by
the Shareholder to be employed as part of the Shareholder's responsibilities to
the Corporation as set forth in this Agreement), shall be employed as an officer
of the Corporation as set forth below. Each such Shareholder may appoint a
person to substitute for the officer or director that was previously appointed
by such Shareholder.

(i) The Chairman and Secretary of the Corporation will be
Barry Septimus, or otherwise, as designated by Micel.

(ii) The president of the Corporation will be David P. Boon, or
otherwise, as designated by EBS.

(iii) The Vice President shall be Pedro A. Barros, or
otherwise, as designated by EBS.

(b) EBS, through David P. Boon and Pedro A. Barros shall be
responsible for sales, marketing, management and administration of the
Corporation. Micel, through Tuvia Barrak will be responsible for marketing and
sales for the Corporation.

(c) Each of the employees and shareholders shall devote appropriate
time and attention to the business and affairs of the Corporation as may be
required to ensure the success of the Corporation and shall not be engaged in
any other business directly competitive with that of the Corporation, whether
directly or indirectly, but nothing herein contained shall prevent the
Shareholders from investing their funds in such entitles as they may deem
advisable, provided that such investment does not require the rendition of
personal services.

-4-

<PAGE>

(i) David P. Boon and Pedro A. Barros will serve upon the
Advisory Board of Micel, if asked at compensation to be agreed upon.

(d) Each Shareholder shall have the right to elect two persons to
serve on the Board of Directors of the Corporation.

(e) The Board of Directors of the Corporation will elect the officers
of the Corporation in accordance with the persons designated by the
Shareholders.

(f) The Corporation, during its startup, will pay no salaries to
employees. The Corporation will pay to employees commissions equal to 1.5% of
sales.

(g) Commissions on sales payable to employees may be paid either
directly to the individual employees or to the Shareholders.

(h) Employees of the Corporation will be provided with a monthly
expense allowance of $500 which may be applied to cover all expense items of
$100 or less incurred by such employees within the scope of their employment.
All single expense items for amounts greater than $100, incurred by employees
within the scope of their employment, will be paid to such employee upon
submission of receipts for such expenses to the Corporation for reimbursement.

5. PROFITS AND EXPENSES OF THE CORPORATION

(a) Micel will provide to the Corporation a working capital loan to
the Corporation 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 Shareholders.

-5-

<PAGE>

(b) At a time and terms to be mutually agreed upon among the
Shareholders and the Corporation, the working capital loan may be converted into
nonvoting preferred stock of the Corporation.

(c) The working capital loan shall be used during the startup of the
Corporation to purchase inventory, pay expenses, cover operating startup and
overhead costs. Substantial remuneration to the participants should be based
upon and paid from the sales revenues of the Corporation.

(d) Checks for the Corporation or any wires up to $5,000 may be
executed by an Officer designated by either Shareholder. Checks for the
Corporation for amounts over $5,000 shall require two signatures and must be
signed by an Officer designated by each Shareholder.

(e) Net profits of the Corporation shall be divided equally among the
Shareholders.

6. TRANSFER OF EBS BUSINESS TO CORPORATION

(a) All business currently transacted by EBS except in the area of
non-wireless communications will be transferred to the Corporation. All sales
by EBS in the area of wireless communications shall be done through the
Corporation.

-6-

<PAGE>

7. LEGEND ON STOCK CERTIFICATES

All certificates for shares of stock of the Corporation subject hereto
shall be endorsed as follows:

"The shares of stock represented by this certificate are subject to,
controlled by, and are transferable only on compliance with an
agreement dated as of the ______ day of _____, 1996, among Export &
Business Services, Inc., Micel Corp. and Milink, Inc., a copy which is
on file in the office of the Corporation."

After the endorsement, the certificates shall be returned to the respective
Shareholders who shall, subject to the terms of this Agreement, be entitled to
exercise all rights of ownership of said shares of stock.

8. NOTICES

All offers, acceptances, notices or other communications required to
be given hereunder shall be given in writing and shall be deemed given when
delivered in person or mailed by registered or certified mail, return receipt
requested, to the parties hereto at the respective addresses hereinabove set
forth or to such addressed as any of the parties hereto may designate in writing
by notice given hereunder as his or its address for the receipt of such
communications.

9. FURTHER ACTIONS.

The parties hereto for themselves, their legal representatives,
successors and assigns, agrees to do all things and execute all instruments
necessary to effectuate the terms of this Agreement.

-7-

<PAGE>

10. ARBITRATION.

Any controversy or claim arising under, out of, or in connection with
this Agreement or any breach or claimed breach thereof, shall be settled by
arbitration in The City of New York, New York, before a panel of three
arbitrators, in accordance with the rules then obtaining of the American
Arbitration Association, and judgment upon any award rendered may be entered in
any court having jurisdiction thereof.

11. FORMER AGREEMENTS

This Agreement supersedes, as of the date hereof, each and every
shareholders agreement and stock purchase agreement entered into between the
Corporation and the individual parties hereto.

12. SUBSCRIPTION TO PURCHASE STOCK.

(a) EBS and Micel each agree to purchase at the date hereof, and the
Corporation agrees to sell and issue to EBS and Micel at the date hereof one
share each of Common Stock of the Corporation at a purchase price of $500 per
share.

(b) Each share of Common Stock of the Corporation shall represent
ownership of 50% of the Corporation and each share of Common Stock of the
Corporation shall carry with it a single vote.

(c) The Corporation agrees to use the proceeds from the sale of the
Common Stock to purchase inventory, pay expenses, and to cover operating startup
and overhead costs.

-8-

<PAGE>

IN WITNESS WHEREOF, The parties hereto have hereunto executed this
Agreement the day and year first above written.

EXPORT BUSINESS & SERVICES, INC.
-------------------------------------
ATTEST:
/s/ Pedro A. Barros By: /s/ David Boon
- ------------------- -------------------------
Pedro A. Barros, Sec David Boon, President

MICEL CORPORATION
-------------------------------------
ATTEST:
By: /s/ Benjamin Sporn
------------------------------
Benjamin Sporn, Chairman

MILINK CORPORATION
-------------------------------------

By: /s/ David Boon
------------------------------
David Boon, President

-9-

<PAGE>

Exhibit 10.10

DEVELOPMENT AGREEMENT

This Agreement (hereinafter referred to as the "Agreement"), made and entered
into as of the day of _______________________, by and between

ArrayComm, Inc., a California corporation having its principal offices at 3141
Zanker Road, San Jose, CA. 95134, USA (hereinafter referred to as "ArrayComm");

and

MicroKim Ltd., Scientific Industries Center, PO Box 1797, Haifa, 31016, Israel,
a subsidiary of Micel, Inc., a New York Corporation, 445 Central Avenue,
Cedarhurst, New York, 11516 (hereinafter referred to as "MicroKim"),

WHEREAS

a) MicroKim has unique experience in the areas of RF and microwave technology,
antennas and digital radios,

b) ArrayComm has unique experience in electronic systems engineering and
proprietary and patented technology in the areas of digital and spatial
signal processing,

c) MicroKim and ArrayComm intend that if their collaboration under this
Development Agreement is successful, they will enter into a series of
cooperative developments for other products, thus creating a long-term
strategic alliance,

d) each Party hereto, as a result of such experience, possesses recorded
technical data and unrecorded technical know-how that is unique to the
Party and is essential to the conduct of its business operations under
competitive conditions,

e) each Party's recorded technical data and unrecorded technical know-how is
proprietary to and closely held by that Party and is represented to be
unavailable to the other Party from any other source,

f) ArrayComm intends to develop a Wireless Local Loop system, including
various Subscriber Units ( the "System"),

g) ArrayComm wants MicroKim to develop antennae for use in connection with
such subscriber units ("Subscriber Unit Antennae" or "SUAs"), on the
Schedule set forth herein, and meeting the Specifications set forth herein,
and to field test the SUAs in accordance with this Agreement,

h) the Parties desire to set forth herein their relationship and agreements
with respect to this System,

<PAGE>

i) the Parties believe that from time to time other opportunities may warrant
future collaboration subject to the mutual agreement of the Parties. For
example, the Parties may, conditions warranting, enter into additional
development agreements for other parts of the System, such as
productization by MicroKim of radio sub-systems of the Subscriber Unit of
the System, and provision of initial field trial units. In any such case,
MicroKim would be compensated through royalty or other payments
commensurate with the efforts undertaken and the benefits derived
therefrom,

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein
set forth, the adequacy of which is hereby acknowledged, the Parties, intending
to be legally bound, agree a follows:

ARTICLE I. DEVELOPMENT

1.1 MicroKim agrees to develop the SUAs specified in EXHIBIT A, in accordance
with the Specifications and Schedule set forth therein.

1.2 In the performance of this Agreement, each Party is an independent
contractor. Neither Party shall have any authority as an agent, representative
or otherwise to bind or commit the other Party in any manner, unless authorized
to do so in written form by that Party.

1.3 Nothing herein contained shall be deemed or construed as restricting the
ability of either Party to sell its products or services to any customer or
prospective customer, or to purchase products or services from any third party.

1.4 This Agreement has been entered into solely for the benefit of the
Parties hereto and is not intended to create any interest in a third party.

ARTICLE II. RESPONSIBILITIES

2.1 ArrayComm shall be responsible for the following duties and obligations:

2.1.1 Determine the architecture of the overall System, including the
Subscriber Units, as well as the architecture and design specifications for
the equipment and systems of the System; and

2.1.2 If the SUAs developed hereunder meet the Specifications and are
developed on Schedule, and are competitive with other products available
for purchase by ArrayComm (e.g., price, availability, quality, reliability,
ease of installation, mean time between failures, and any other factors
affecting ArrayComm's purchase decisions), ArrayComm will purchase SUAs
from MicroKim, for resale in connection with the System, as deemed
appropriate by ArrayComm at its sole discretion; and/or ArrayComm will
manufacture or have manufactured the SUAs, and derivative works thereof,
pursuant to a Manufacturing Agreement under which MicroKim would receive
agreed royalties.

<PAGE>

2.2 MicroKim shall be responsible for the following duties and obligations:

2.2.1 MicroKim will design and productize (design SUAs that can be
manufactured in quantity with high yields and low cost) the SUAs as defined
in the technical Specifications and Schedule. The initial Specifications
and Schedule are set forth in EXHIBIT A. The Specifications and Schedule
will be jointly finalized by ArrayComm and MicroKim within one (1) month of
signature of the Agreement. Further amendments to the specifications will
be subject to joint review and mutual agreement between the Parties.

2.2.2 MicroKim will bear all costs for design, engineering and
productization of the SUA; as well as all expenses incurred by MicroKim in
connection with the performance of its obligations under this Agreement.

2.2.3 MicroKim will provide prototype SUAs to ArrayComm as set forth in
EXHIBIT B, and alpha and beta test SUAs with ArrayComm, in accordance with
acceptance testing procedures reasonably required by ArrayComm. ArrayComm
will pay the target unit prices set forth in EXHIBIT A for each unit that
passes such acceptance tests.

2.2.4 If ArrayComm chooses to purchase SUAs, MicroKim agrees to sell
SUAs to ArrayComm, on most favored customer prices and terms, including
delivery schedules, under a Purchase Agreement to be negotiated by the
parties expeditiously and in good faith.

2.2.5 MicroKim will provide ArrayComm a weekly written report
describing the status of the development, comparing MicroKim's progress to
the Schedule, describing any problem areas and issues and the steps
underway to resolve them, recommending any actions by ArrayComm that
MicroKim considers necessary or desirable to a smooth and timely
development and implementation process, and reporting all other information
necessary or desirable for ArrayComm to understand the status of the
project to develop. productize and test the SUAs.

2.2.6 MicroKim represents and warrants that all persons and
entities engaged to perform design or development work under this Agreement
will have signed a written agreement, in a form acceptable to ArrayComm,
acknowledging their obligation to protect ArrayComm Confidential
Information and assigning to MicroKim all such person's or entity's right,
title and interest in and to any Inventions and Intellectual Property
developed by such person or entity (or by their or its employees or
subcontractors) in whole or in part, in connection with MicroKim's
obligations under this Agreement. MicroKim will supply to ArrayComm,
within 15 days of the signing of this Agreement, a copy of all such
contracts with persons or subcontractors it intends to assign or engage to
perform work hereunder; and if additional or new employees are assigned to
work under this Agreement, or new subcontractors engaged, MicroKim will
provide to ArrayComm, within 15 days of such assignment or engagement, a
copy of the relevant contract with such person(s) or entity(ies).

<PAGE>

ARTICLE III. MANUFACTURING

3.1 MicroKim agrees, at ArrayComm's request, to license ArrayComm and/or its
manufacturing subcontractors to manufacture, use and sell SUAs, and to create,
manufacture, use and sell cost-reduced versions of the SUAs and other derivative
works thereof, under a Manufacturing Agreement to be negotiated by the parties
expeditiously and in good faith. The Manufacturing Agreement will provide for
payment of royalties to MicroKim as set forth in EXHIBIT C and the delivery of
all of the items listed on EXHIBIT D.

3.2 If MicroKim fails to satisfy any milestone within sixty days of the
completion date for such milestone specified in the Schedule, or if any SUA
developed hereunder does not meet the Specifications therefor or is rejected by
ArrayComm with reasonable cause after acceptance testing, MicroKim will promptly
provide to ArrayComm the deliverables specified in EXHIBIT D, and ArrayComm will
have a non-exclusive, perpetual, worldwide right and license under all MicroKim
Intellectual Property:

(i) to develop and manufacture products; and to sell, license, market,
demonstrate, install, maintain, support and distribute such products,
directly and through third parties, for use in connection with
Wireless Local Loop systems and/or subscriber units sold or otherwise
marketed by ArrayComm,

(ii) to practice and have practiced any method, make and have made, use
and have used any apparatus, and to use, execute, reproduce, display,
perform, import, modify and create derivative works of MicroKim, all
in connection with such products,

(iii) to use any information, materials, software or other items, provided
or disclosed by MicroKim to ArrayComm at any time, in connection with
the exercise of ArrayComm's rights and licenses under this Agreement,

(iv) to authorize third parties to do any of the foregoing for and on
behalf of ArrayComm. This subparagraph will be construed as
authorizing ArrayComm to permit cascaded sublicensing such that, for
example, ArrayComm may sublicense an affiliate, which will have the
right to subcontract development or manufacturing to a third party,
which can in turn hire contractors to perform work in connection with
such development or manufacturing.

This license will be royalty bearing until eight years after the first date
("Notice Date") on which ArrayComm informs MicroKim that MicroKim has not met
the requirements of this Agreement (subject to the provision of EXHIBIT C with
respect to the term during which royalties will be paid). However, the royalty
schedule listed in EXHIBIT C will be multiplied by a fraction, equal to:

<PAGE>

B
-----
A+B

where:

A = ArrayComm's Direct Costs incurred in connection with the design and
productization of the SUAs

B = MicroKim's Direct Costs, incurred from the date this contract is signed
until the Notice Date, in connection with the design and
productization of the SUAs, plus $2000 (representing payment for two
days of consulting services to be provided by MicroKim to ArrayComm).

Direct Costs = actual out of pocket expenses, direct labor and materials
and payments to unrelated 3d parties

Notwithstanding any other provision of this Agreement, if MicroKim fails to
provide ArrayComm reasonable assistance during the consulting period required
under EXHIBIT D, or fails to provide any of the required Deliverables, this
license will be royalty free. MicroKim represents and warrants that it has all
necessary right and authority to provide the Deliverables and to grant the
rights and licenses and to undertake the obligations set forth herein, all
without the further consent of any other person or entity.

ARTICLE IV. BIRD FOUNDATION

4.1 Considering that the cooperative effort undertaken by MicroKim and
ArrayComm matches certain objectives of the Bird Foundation ("Bird Foundation"),
a bilateral trade and technology development agency of the United States and
Israel, ArrayComm and MicroKim will prepare a request and apply for funding
from Bird Foundation in connection with the specification, development and
testing of SUAs. The amount of funding, the schedule for disbursement of funds,
and the amount of funds to be received by each party are set forth on EXHIBIT E.

4.2 MicroKim warrants that it will undertake and bring to term its obligations
under this Agreement, regardless of the outcome of any request for funding from
the Bird Foundation.

4.3 If Bird Foundation funding is obtained, MicroKim agrees that as between
MicroKim and ArrayComm, MicroKim will be solely responsible for any payments due
to the Bird Foundation under the terms of any contract, and that ArrayComm will
have no obligation to make any such payments. MicroKim also agrees that the
amount of any payments under such contract will be determined solely on the
basis of the revenue received by MicroKim from the sale of SUAs and from
licensing third parties to manufacture SUAs; and that revenues received by
ArrayComm from the resale of SUAs purchased from MicroKim or third parties will
not be used to calculate any payment obligations under the Bird foundation
contract. MicroKim further agrees that if

<PAGE>

MicroKim breaches any provision of this Section 4.3, MicroKim will promptly
provide to ArrayComm the deliverables specified in EXHIBIT D, and ArrayComm will
have a non-exclusive, perpetual, world-wide, royalty-free right and license
under all MicroKim Intellectual Property as set forth in Section 3.2.

ARTICLE V. CONFIDENTIALITY

The achievement of the objective of this Agreement may require that the Parties
exchange confidential data, drawings, procedures, engineering studies,
schematics and logic diagrams and other information which either Party may
require use of in performing its obligations under this contract. Each Party
agrees to treat such Confidential Information subject to the limitations of the
MicroKim/ArrayComm Confidentiality and Nondisclosure Agreement ("CNDA") which is
attached hereto and made a part hereof, as EXHIBIT F. Proprietary information
shall be disclosed in accordance with EXHIBIT F. The CNDA shall remain in effect
for the duration of this Agreement.

ARTICLE VI. INTELLECTUAL PROPERTY

EXHIBIT G contains a schematic diagram of the SUA to be developed hereunder, and
of the Subscriber Unit to be developed by ArrayComm, In the course of their
discussions or work under this Agreement, the parties may jointly or separately
make or create new patentable or copyrightable Inventions. Regardless of which
Party or Parties contributes to any Invention, the following rules will apply:

6.1 MICROKIM

MicroKim will own all Intellectual Property in each of the following:
6.1.1 pre-existing MicroKim hardware and software used in the
performance of this Agreement; and
6.1.2 the SUAs developed by MicroKim hereunder, including the high gain
directional antenna, LNA/TR switch power amplifier and SUA
housing developed by MicroKim .

6.2 ARRAYCOMM

ArrayComm will own all Intellectual Property in each of the following:
6.2.1 pre-existing ArrayComm hardware and software used in the
performance of this Agreement;
6.2.2 the active antenna TR control circuitry (which will reside
outside the SUA unit), and all portions of the Subscriber Unit
(other than the SUA to the extent owned by MicroKim) and System.

The Parties will jointly maintain and periodically update a list detailing the
respective rights of the Parties to the segments of the work accomplished under
this Agreement.

<PAGE>

6.3 OTHER RIGHTS

No other rights or licenses under any patent, trademark or copyright or
otherwise are granted to either Party hereby arising out of or in connection
with any development, invention or discovery.

6.4 DEFINITIONS

"INTELLECTUAL PROPERTY" means, to the extent owned or controlled by the granting
or transferring party in any country, all (i) copyrights, (ii) mask work rights,
(iii) rights to exploit know-how, trade secret and other non-public or
confidential information, including the right to use and exploit all
Confidential Information, (iv) rights under patents, and (v) rights under any
other form of intellectual property.

"INVENTIONS" means discoveries, developments, designs, innovations,
improvements, inventions, formulas, processes, techniques, know-how and data,
software, original works of authorship, developments, concepts and trade secrets
(whether or not patentable or registrable under copyright or similar laws, and
whether or not at a commercial stage).

ARTICLE VII TERM

The initial term of the Agreement will be two years from the date of signature.
The provisions of Section 2.2.4, Article III (Manufacturing), Section 4.3,
Article V (Confidentiality), Article VI (Intellectual Property) and Article VIII
(Miscellaneous) will survive any expiration or termination of this Agreement.

ARTICLE VIII MISCELLANEOUS

8.1 PUBLICITY
Upon conclusion of the Agreement, the Parties will discuss the development and
scope of a joint publicity and market awareness campaign to maximize the
potential benefits issuing from the Agreement for both Parties.

Neither Party will issue any public announcement concerning the subject matter
of this Agreement, or of the signing of this Agreement, without the written
approval of the other Party. If such disclosure is required by law, the Party
required to make such disclosure announcement will provide the other Party with
as much notice as possible regarding the proposed disclosure in order to enable
such other Party to obtain injunctive relief to avoid disclosure.

8.2 FEES AND EXPENSES
Each Party agrees to pay the respective legal and other fees and expenses
incurred with respect to the preparation of this Agreement.

<PAGE>

8.3 EXPORT CONTROL
The Parties hereby declare that, during the performance of this Agreement and
any extension thereof, and in any action pertaining to use of the technology
disclosed by each Party to the other, they will abide by the laws and
regulations of the United States of America and Israel governing the export and
re-export of technology always provided the receiving Party has been informed
whether and to what extent such laws and regulations are applicable to the
technology transferred.

8.4 ASSIGNMENT
This Agreement shall inure to the benefit of, and shall be binding upon, the
Parties hereto and their respective successors and assigns. Neither Party may
assign or delegate this Agreement or any of its licenses, rights or duties under
this Agreement without the prior written consent of the other, except as
expressly set forth herein. Notwithstanding the foregoing, either party may
assign this Agreement to a corporation with which it may merge or consolidate,
or to a purchaser of substantially all of its assets.

8.5 NOTICES
Any notice or other communication required or permitted to be given by one Party
to the other Party by this Agreement shall be in writing and either (a) served
personally on the other Party, (b) sent by express, registered or certified
first-class mail, postage prepaid, addressed to the other Party at its address
as indicated above, or to such other address as the addressee shall have
theretofore furnished to the other Party by proper notice, (c) delivered by
commercial courier to the other Party.

8.6 ENTIRE AGREEMENT
This Agreement reflects the entire understanding of the Parties' with respect to
the subject matter of this agreement, and no term or condition hereof may be
modified except by a subsequent writing executed by both Parties. Except as set
forth herein, this Agreement is not intended to limit any rights that the
Parties may have under trade secret, copyright, patent or other laws that may
apply to the subject matter of this Agreement both during and after the term of
this Agreement.

8.7 SEVERABILITY
Whenever possible, each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law; but if any provision
of this Agreement should be prohibited or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity
and the balance of this Agreement shall be interpreted as if such provision were
so excluded and shall be enforceable in accordance with its terms unless such
selective enforcement would destroy the basic intent and integrity of this
Agreement.

<PAGE>

8.8 COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be deemed an
original instrument, but which together shall constitute only one and the same
instrument. Execution and delivery of this Agreement by exchange of facsimile
copies bearing the facsimile signature of a Party hereto shall constitute a
valid and binding execution and delivery of this Agreement by such Party. Such
facsimile copies shall constitute enforceable original documents.

8.9 NO WAIVER OF RIGHTS
All waivers hereunder must be made in writing, and failure at any time to
require the other Party's performance of any obligation under this Agreement
shall not affect the right subsequently to require performance of that
obligation. Any waiver of any breach of any provision of this Agreement shall
not be construed as a waiver of any continuing or succeeding breach of such
provision or a waiver or modification of the provision.

8.10 RESERVATION OF RIGHTS
In addition to any particular right or remedy provided for under this Agreement,
each Party reserves all other rights and remedies available under the laws and
regulations of copyright, patent, trademark, trade secret, and other applicable
laws and administrative regulations.

8.11 CERTAIN RULES OF CONSTRUCTION
The provisions of this Agreement have been examined, negotiated and revised by
counsel for each Party, and no implication shall be drawn against either Party
by virtue of the drafting of this Agreement.

8.12 ARBITRATION AND CHOICE OF LAW
Any controversy or claim arising under or related to this Agreement shall be
settled by arbitration before the American Arbitration Association and in
accordance with the then existing Rules of the American Arbitration Association
with the hearing to be held in New York, New York, USA. The decision by the
arbitrator(s) shall be binding and conclusive upon the Parties and their
successors and assigns and may be entered as judgment in any court having
jurisdiction thereof.

8.13 LIMITATION OF LIABILITY
Except for breaches of the representations and warranties set forth in Section
2.2.6 and Article III, and of the obligations set forth in Sections 2.2.4 and
3.1, (i) neither party will be liable to the other party or to any third party
for any incidental, consequential, special, punitive or exemplary damages, or
for any lost profits, regardless of the form of action, whether in contract,
tort or otherwise, and regardless of whether such party has been informed of the
possibility of such damage and (ii) each party's maximum total liability to the
other for all damages of any kind incurred or arising in connection with this
Agreement, or any right, license or obligation created or granted hereunder will
not exceed $200,000.00.

<PAGE>

This Agreement will be governed by and construed in accordance with the laws of
the United States of America and the State of California as applied to
Agreements entered into and to be performed entirely within California between
California residents.

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first written above.

ArrayComm, Inc. MicroKim, Ltd.

By: __________________ By: __________________
------------------ ------------------

Name: /S/ Name: /S/
----------------- ------------------------------ -----

Title: __________________ Title: __________________
------------------ ------------------

<PAGE>
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