FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Quarterly Report Under to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: June 30, 1998
Commission File Number: 1-11020
Micel Corp.
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(Exact name of Small Business Issuer as specified in its charter)
NEW YORK 11-2882297
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(State of other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
445 Central Ave., Cedarhurst New York 11516
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(Address of Principal executive offices) (Zip Code)
(516) 569-1234
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(Registrant's telephone number, including area code)
(Former name, former address, and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for past 90 days.
YES X NO
- -
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of the latest practicable date.
Common Stock, Par Value $.01 6,000,380
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(Title of each Class) (Outstanding at June 30, 1998)
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2
MICEL CORP. AND SUBSIDIARIES CONSOLIDATED REPORT
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
PAGE
Item 1. Consolidated Financial Statements: Condensed
Consolidated Balance Sheets as of June 30,
1998 (Unaudited) and September 30, 1997. 3
Condensed Consolidated Statements of Income (loss)
for the nine and three months ended June 30, 1998
and 1997 (Unaudited). 4
Condensed Consolidated Statements of Cash Flows
for the nine months ended June 30, 1998 and
1997 (Unaudited). 5
Condensed Consolidated Statements of Changes in
Shareholders' Equity. 6
Notes to Condensed Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations 9-12
PART II - OTHER INFORMATION 13
Signatures 13
Exhibit 27 14
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3
MICEL CORP. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
MICEL CORP. AND SUBSIDIARIES
- ---------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30 September 30
1998 1997
(UNAUDITED) (AUDITED)
---------------- -----------------
ASSETS
----------
CURRENT ASSETS
Cash and cash equivalents $ 814,828 $ 491,000
Accounts receivable 852,290 521,332
Inventories 846,943 894,992
--------- ----------
Total current assets 2,514,061 1,907,324
---------- ---------
Investment in
Affiliated Company 150,980 119,745
Deposits With Insurance
Companies and
Pension Funds 366,890 196,988
PLANT AND
EQUIPMENT (net) 575,650 210,398
-------- --------
Total assets 3,607,581 2,434,455
========= =========
LIABILITIES AND SHAREHOLDERS EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable and
accrued liabilities 1,093,376 933,188
Bank Overdraft Facilities 94,394 7,621
Current maturities of long
term debt 16,006 18,416
Advances from customers 110,411 323,838
------- --------
Total current liabilities 1,314,187 1,283,063
-------- --------
ACCRUED SEVERANCE PAY 429,431 251,062
LONG TERM DEBT:
net of current maturities 11,478 23,312
Minority Interest 326,828 0
------- -------
Total liabilities 2,081,924 1,557,437
-------- ----------
SHAREHOLDERS' EQUITY:
Common Stock 60,004 57,504
Additional paid-in capital 7,766,371 7,031,626
Capital Reserve 710,907
Accumulated deficit (6,550,177) (5,848,812)
Deferred Compensation (461,448) (363,300)
----------- -----------
Total shareholders' equity 1,525,657 877,018
---------- --------
Total liabilities and
shareholders' equity 3,607,581 2,434,455
========= =========
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4
MICEL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME (LOSS)
9 Months Ended June 30 3 Months Ended June 30
---------------------- ----------------------
1998 1997 1998 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
Sales 2,070,208 3,223,000 543,927 571,970
Cost Of Sales 1,348,339 2,372,093 474,870 362,117
--------- --------- ------- --------
Gross Profit 721,869 850,907 69,057 209,853
--------- --------- -------- --------
Research and Development
Expenses, net 863,712 376,997 301,633 128,844
Selling Expenses (net) 163,514 94,495 42,593 31,414
General and Administrative
Expenses 710,880 347,761 176,839 107,539
------- ------- ------- -------
Total operating
expenses 1,738,106 819,253 521,065 267,797
--------- ------- -------- --------
Income (loss) From
Operations (1,016,237) 31,654 (452,008) (57,944)
Interest and Other
Income 19,590 32,663 807 22,872
Interest and Other
Expense (50,136) (39,039) (4,319) 2,506
Income (Loss) of
Subsidiaries (3,765) 23,364 (5,706) 27,068
Minority Interest in Losses
of Subsidiaries 349,183 160,601
-------- --------- -------- ---------
Net Income (Loss) (701,365) 48,642 (300,625) 5,498
====== ====== ====== ======
Loss per share ($0.12) $0.01 ($0.05) -
------- --------- --------- ---------
Shares used in computing
loss per share 5,945,801 5,526,087 6,000,380 5,585,133
--------- --------- --------- ---------
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5
MICEL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
9 MONTHS ENDED JUNE 30
-------------------------------
1998 1997
(Unaudited) (Unaudited)
Cash Flows From Operating Activities:
Net income (loss) (701,365) 48,642
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation & amortization 73,230 65,644
Amortization of deferred compensation 139,097
Gain on sale of equipment (10,593)
Minority interest in losses of subsidiaries (349,183)
Loss (gain) in affiliated company 3,765 (23,364)
Changes in operating assets and liabilities:
Accounts receivable (330,958) 674,617
Inventories 48,049 (212,624)
Accounts payable and accrued liabilities 160,188 (400,301)
Advances from customers (213,427) 43,976
Accrued severance pay 8,467 8,626
--------- --------
Net cash provided by (used in)
operating activities (1,172,730) 205,216
--------- ---------
CASH FLOWS From Investing Activities:
Purchase of equipment (438,482) (79,730)
Proceeds from sale of equipment 10,593
Investment in affiliated company (35,000) (100,000)
--------- ---------
Net cash used in investing activities (462,889) (179,730)
CASH FLOWS From Financing Activities:
Repayment of long term debt (14,244) (105,208)
Net Changes in short-term bank
overdraft facilities 86,773 (202,776)
Issuance of common stock 500,000 420,000
Issuance of subsidiary shares to minority 1,211,918 -
Receipt on account of shares of minority 175,000 -
--------- --------
Net cash provided (used in) by financing
activities 1,959,447 112,016
Increase In Cash and Cash
Equivalents 323,828 137,502
CASH AND CASH EQUIVALENTS,
Beginning of Period 491,000 81,089
-------- ---------
CASH AND CASH EQUIVALENTS, end
of period 814,828 218,591
======= =======
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6
MICEL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY FOR THE NINE MONTHS ENDED JUNE 30, 1998
Common Additional Paid Accumulated Deferred Total
Stock No. Value in Capital and Deficit Compensation
of Shares capital reserve
--------- ----- --------------- ------------ ----------- -----
Balance,
September 30,
1997 5,750,380 57,504 7,031,626 (5,848,812) (363,300) 877,018
Issuance of Common Stock
(Net of issuance expenses)
in a private
placement 250,000 2,500 497,500 - - 500,000
Capital Reserves resulting form
Issuance of subsidiary shares to a
third party - - 710,907 - - 710,907
Deferred Compensation 237,245 (237,245)
Amortization of Deferred
Compensation 139,097 139,097
(701,365) - (701,365)
------- ----- ------------- ---------- ------- ---------
Balance, June
30, 1998 6,000,380 60,004 8,477,278 (6,550,177) (461,448) 1,525,657
MICEL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet at June 30, 1998, the
consolidated statements of Income (loss) for the nine and three months
ended June 30, 1998 and 1997, and the consolidated statements of
cash flows for the nine months ended June 30, 1998 and 1997, have
been prepared by the Company, and are unaudited.
Reference should be made to the notes to the Company's September
30,1997 audited consolidated financial statements for additional details
of the company's consolidated financial condition, results of operations
and cash flows. The details in those notes have not changed except as a
result of normal transactions in the interim. All adjustments (of
normal recurring nature) which are, in the opinion of management,
necessary to a fair presentation of the results of the interim period
have been included.
2. Common Stock
During the first and second quarter of 1998, the company raised
$500,000 in a private placement of Common Stock at $2.00 per
share.
3. Micel's Subsidiaries:
a. Microkim
Founded in 1972, by M/A Comm, Microkim is dedicated to
providing advanced products for a broad range of military and
commercial applications. The company is a leading supplier of
portable field testers and simulators, RF and microwave systems,
sub-systems and components for application in Communication,
Electronic warfare, Radar, Test Equipment, Simulators/Testers.
b. RadioTel
RadioTel Ltd., located in Israel, was established to develop managed
wireless SDH transmission network.
Through the use of novel techniques and state of the art technologies
the Company's mission is to extend wideband wireline/fiber services
into the wireless domain. These wireless networks are used to extend
the existing and future infrastructure while at the same time
supplying full transparency of all protocols (i.e. ATM, IP, SDH) with
the same reliability and uninterrupted service of wireline services.
On March 31, 1998, RadioTel supplied an ISDN (Integrated Service Digital
Network) Multi-Link, for technology evaluation, to MadenTech Consulting
Engineering Inc.
The financial statements of RadioTel are consolidated into the
Company's financial statements.
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8
Since September 30, 1997, Clal Venture Capital Fund Limited Partnership (Clal),
H.B. Radio Investment Limited Partnership (HB), and ComSor Investment Fund
LDS (ComSor) agreed to purchase 95,000, 95,000 and 125,000 shares
respectively, at a purchase price of $10 per share- total investment
of $ 3,150,000. To date $ 2,275,000 were received.
In the event that all the shares are purchased and paid for, Clal, HB and
ComSor will own 11.69%, 11.69% and, 15.38% respectively, and the company will
own 41.23%, of RadioTel Ltd.
c. MICEL Wireless Corp.
MICEL Wireless Corp., a Florida corporation and
a joint venture between the Company and Export Business & Services,
Inc.("EBS"), is an international telecommunications company engaged
in the sourcing, marketing and sales of wireless telephone terminals and
other related products. MICEL Wireless currently represents certain
manufacturing companies and telecom agencies as a purchasing
agent and sales representative.
MICEL Wireless Corp. designs, manufactures, and sells fixed
cellular terminals for WLL applications in developing countries. The
Company capitalizes on the technical capabilities of RadioTel, the
existing knowledge of the cellular and wireless local loop markets and a
network of distribution channels. Micel Wireless' initial focus has
been in Latin America, where Micel Wireless expects to take
immediate advantage of existing WLL opportunities.
The Company owns 50% of MICEL Wireless (refer to the
Company's Form 10-KSB for the period ended September 30, 1997 for
additional details).
Micel Wireless commenced activities in the first quarter of Fiscal
1997. The Company applies the equity method of accounting for its
investments in Micel Wireless.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
General
Impact of inflation, devaluation and fluctuation of currencies on the
results operations.
The Company's operations are conducted through its Israeli subsidiaries,
Microkim and RadioTel. A substantial portion of sales and purchases of
materials are in, or linked to the United States dollar. Most of other expenses
are linked to the Israeli Shekel. Transactions and balances originally
denominated in dollars are presented at their original amounts.
Transactions and balances in currencies other than the dollar are translated
into dollars in accordance with the principles set forth in statement No.
52 of the Financial Accounting Standards Board. All transactions gains and
losses from remeasurement of monetary balance sheet items denominated in
non-dollar currencies are reflected in the statements of operations as
financial income or expenses, as appropriate.
<PAGE>
10
FINANCIAL CONDITION:
In the nine months of Fiscal 1998 the company raised $500,000 through the
issuance of 250,000 shares of common stock in a private placement at $2.00 per
share.
The company's operations in the nine months of the fiscal year
ending on September 30, 1998 ('Fiscal 1998') have been financed principally
from revenues from sales, research and development grants, by a private
placement of shares of common stock and by a private placement in RadioTel.
The total amount of outstanding loans, credit facilities and guarantees
from banks is approximately $206,000 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 $27,484 of long term borrowings from Israel Industrial
Development Bank Ltd., to be repaid between 1998 and 2000. This also includes
approximately $84,000 of performance guarantees pursuant to contracts with
customers.
In the nine months ended June 30, 1998 net cash equivalents increased by
$323,828 as a result of $1,886,918 proceeds from issuance of common
stock (including issuance of common stock of consolidated company to
third parties, and receipt on account of shares of minority), $86,773 from bank
overdraft facilities and proceeds from sale of
equipment of $10,593, offset by the repayment of long term liabilities of
$14,244, purchases of fixed assets of $438,482, a loan to an affiliated
company of $35,000 and used in operating activities of $1,172,730.
The company is committed to fund RadioTel in the amount of $708,575
through October 30, 1998. In the event that additional funding is not
provided to RadioTel, Micel's ownership in RadioTel may be diluted.
11
RESULTS OF OPERATIONS
Nine months ended June 30, 1998 compared to the Nine months ended
March 31, 1997.
Sales in the nine months ended June 30, 1998 were $2,070,208 as
compared with $3,223,000 in the nine months ended March 31, 1997. The decrease
in sales compared to the 1997 period resulted from the completion of a
certain project in the first quarter of fiscal 1997 representing sales of
$1,189,000. Cost of sales in the nine months ended June 30, 1998 was
65.13% of sales or $1,348,339 as compared with 73.6% or $2,372,093 in
the same period in 1997.
Research and development expenses (net) increased to $863,712 or 42%
of sales in the nine months ended June 30, 1998 from $376,997 or 12% of sales
in the same period in 1997. The increase was caused by new research and
development activities performed by RadioTel.
Selling expenses in the nine months ended June 30, 1998 were $163,514 or
7.90% of sales compared to $94,495 or 2.90% of sales in the same period in
1997. The increase was mainly due to the increase in operations of RadioTel.
General and administrative expenses increased to $710,880 or 34% of
sales in the nine months ended June 30, 1998 from $347,761 or 11.0% of sales
in the same period in 1997. The increase was mainly due to the increase in
operations of RadioTel.
Financial expenses in the nine months ended June 30, 1998 were $50,136 or
2.4% of sales compared with $39,039 or 1.2% of sales in the same period in
1997.
Minority share in RadioTel losses amounted to $349,183 (see also note 3b above).
Company's share in the loss of its 50% held affiliate, Micel Wireless, for
the nine months of fiscal year 1998, were $3,765 compared with a
profit of $23,364 in the nine months of 1997.
In the nine months ended June 30, 1998, the company reported a loss of
$701,365. In the same period in 1997, the Company had profit of
$48,642. The loss is attributable mainly to the operations of RadioTel.
The inventories at June 30, 1998, consisted of $469,306 raw materials
and $377,637 work in process as compared to $450,518 raw materials and
$444,474 work in process at September 30, 1997.
The company is committed to pay royalties to the office of the Chief
Scientist of the State of Israel ("OCS") in respect to products under
development for which the OCS participated by way of grant. The royalty is
computed at the rate of 2%-3% of proceeds from sales of such products up to the
amount of such grant.
Royalties were paid during the first nine months of fiscal 1998, in the
amount of $15,709.
<PAGE>
12
MICEL CORP. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceeding
Reference is made to Form 10-KSB for the year ended
September 30, 1997, and to Form 10-QSB for the period ended
March 31, 1998.
Item 2. Changes in Securities
None.
Item 3. Default on Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27
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13
MICEL CORP. AND SUBSIDIARIES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on behalf by the undersigned
hereunto duly authorized.
MICEL CORP.
Registrant
Date: August 12th, 1998 By: /s/ Ron Levy
-------------------------------
President and
Chief Executive and Financial Officer
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