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, 1999
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) 569-0606
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(Registrant's telephone number, including area code)
(Former name, former address, and former fiscal
Year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act
of
1934 during the preceding 12 months (or such shorter period that the
registrant
was required to file such reports) and (2) has been subject to such filing
requirements for past 90 days.
YES X NO
- - -
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of the latest practicable date.
Common Stock, Par Value $.01 5,900,380
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(Title of each Class) (Outstanding at June 30, 1999)
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,
1999 (Unaudited) and September 30, 1998 (Audited). 3
Condensed Consolidated Statements of operations
for the nine and three months ended of June 30, 1999
and 1998 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows
for the nine months ended of June 30, 1999 and
1998 (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
Exhibit 27 14
Signatures 15
MICEL CORP. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
MICEL CORP. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS
June 30 September 30
1999 1998
(UNAUDITED) (AUDITED)
------------------- -------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $908,394 $1,428,604
Trade receivables 461,853 727,332
Other accounts receivable 494,451 183,821
Inventories 879,010 665,071
--------------- ---------------
Total current assets 2,743,708 3,004,828
--------------- ---------------
INVESTMENT IN AFFILIATED COMPANY 207,118 145,704
DEPOSITS WITH INSURANCE COMPANIES
AND PENSION FUNDS 330,323 350,855
PROPERTY PLANT AND EQUIPMENT, NET 772,054 684,120
--------------- ---------------
Total assets $4,053,203 $4,185,507
========= =========
LIABILITIES AND SHAREHOLDERS` EQUITY
- ------------------------------------------------------------
CURRENT LIABILITIES:
Short-term bank credit 43,826 229,719
Current maturities of long-term debt 11,061 15,500
Accounts payable and accrued liabilities 919,926 830,966
Advances from customers 201,264 43,900
--------------- ---------------
Total current liabilities 1,176,077 1,120,085
--------------- ---------------
ACCRUED SEVERANCE PAY 410,536 429,431
LONG-TERM DEBT NET OF CURRENT
MATURITIES - 7,504
SHAREHOLDERS` LOAN 385,000 -
PREFERRED SHARES OF SUBSIDIARY 1,292,232 1,159,222
MINORITY INTEREST 417,748 688,231
--------------- ---------------
Total liabilities 3,681,593 3,404,473
--------------- ---------------
SHAREHOLDERS' EQUITY:
Common Stock 59,004 59,004
Additional paid-in capital 7,834,177 7,723,842
Receipt on account of shares 400,000 400,000
Accumulated deficit (7,573,782) (6,966,466)
Deferred compensation from issuance of stock
option to employees (347,789) (435,346)
--------------- ---------------
Total shareholders' equity 371,610 781,034
--------------- ---------------
Total liabilities and shareholders' equity $ 4,053,203 $ 4,185,507
========= =========
MICEL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
9 Months Ended June 30 3 Months Ended June 30
----------------------------------- ----------------------------------
- -
1999 1998 1999 1998
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
-------------- -------------- -------------- --------------
Sales 1,321,676 2,070,208 383,608 543,927
Cost of sales 659,995 1,348,339 131,846 474,870
------------- ------------- ------------- ------------
Gross profit 661,681 721,869 251,762 69,057
-------------- ------------- ------------- -----------
Research and development expenses, net 1,229,681 863,712 417,495 301,633
Selling & Marketing expenses 186,974 163,514 66,819 42,593
General and administrative expenses 670,692 710,880 232,389 176,839
------------- ------------- ------------ ----------
Total operating expenses 2,087,347 1,738,106 716,703 521,065
------------- ------------- ------------ ----------
Operating loss (1,425,666) (1,016,237) (464,941) (452,008)
Financial income (expenses) and other 66,771 (30,546) 30,094 (3,512)
------------- ------------- ------------ -------------
Loss before income (losses) from affiliate
company and minority interest (1,358,895) (1,046,783) (434,847) (455,520)
Income (loss) from affiliated company 43,406 (3,765) (47,611) (5,706)
Minority interest in losses of subsidiary 708,173 349,183 199,923
160,601
-------------- ------------- ------------ -----------
Net loss $(607,316) $(701,365) $(282,535) $(300,625)
======== ======== ======== ========
Basic and diluted loss per share ($0.10) ($0.12) ($0.05) ($0.05)
======== ======== ======== ========
Shares used in computing
loss per share 5,900,380 5,945,801 5,900,380 6,000,380
======== ======== ======== ========
MICEL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
9 MONTHS ENDED JUNE 30
---------------------------------------
1999 1998
(Unaudited) (Unaudited)
--------------- ---------------
Cash Flows From Operating Activities:
Net loss (607,316) (701,365)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 137,222 73,230
Equity in loss (gain) of affiliated company (49,406) 3,765
Gain on sale of equipment - (10,593)
Compensation from issuance of options to
Consultants 50,000 -
Amortization of deferred compensation
issuance of stock options to employees 147,892 139,097
Minority interest in losses of subsidiary (708,173) (349,183)
Changes in operating assets and liabilities:
Decrease in trade receivables 265,479 -
Increase in accounts receivable (322,638) (330,958)
Decrease (increase) in inventories (213,939) 48,049
Increase in accounts payable and accrued
Liabilities 88,960 160,188
Increase (decrease) in advances from customers 157,364 (213,427)
Increase in accrued severance pay 1,637 8,467
Increase in preferred Shares of Subsidiary 133,010 -
- --------------- ---------------
Net cash used in operating activities (919,908) (1,172,730)
- --------------- ---------------
Cash flows From investing activities
Purchase of fixed assets (225,156) (438,482)
Proceeds from sale - 10,593
Investment in affiliated company - (35,000)
- --------------- ---------------
Net cash used in investing activities (225,156) (462,889)
- --------------- ---------------
Cash flows from financing activities:
Repayment of long term debt (11,943) (14,244)
Net changes in short-term
bank overdraft facilities (185,893) 86,773
Proceeds from issuance of
common shares, net - 500,000
Proceeds from shareholders` loan 385,000 -
Issuance of subsidiary shares to third party 437,690 1,211,918
Receipt on account of shares of minority 175,000
------------ ------------
Net cash provided by financing activities 624,854 1,959,447
------------- ---------------
Increase (decrease) in cash
and cash equivalents (520,210) 323,828
Cash and cash equivalents at the beginning
of period 1,428,604 491,000
--------------- ---------------
Cash and cash equivalents at the end of period $908,394 $814,828
=========== ========
MICEL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY FOR THE NINE MONTHS
ENDED JUNE 30, 1999
Common stock Deferred
Compensation
Additional Receipts on from issuance
No Value paid accounts of Accumulated of stock options
of shares in capital shares deficit to employees Total
----------- ---------- --------------- ------------ --------------- ----
- ---------------- -------------
Balance,
September 30, 1998 5,900,380 $59,004 $7,723,842 $400,000 $(6,966,466)
$(435,346) $781,034
Compensation from issuance of
options to consultants - - 50,000 - - - 50,000
Deferred compensation from
issuance of stock options to
employees - - 60,335 - - (60,335) -
Amortization of deferred
compensation from issuance of
stock option to employees - - - - - 147,892 147,892
Loss for the period - - - - (607,316) (607,316)
------------ ---------- --------------- ------------ --------------- ---
- ----------------- -------------
Balance, June
30, 1999 5,900,380 $59,004 $7,834,177 $400,000 $(7,573,782) $(347,789)
$371,610
MICEL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet at June 30, 1999, the consolidated
statements of loss for
the nine and three months ended June 30, 1999 and 1998, and the consolidated
statements of cash
flows for the nine months ended June 30, 1999 and 1998, have been prepared
by the Company, and
are unaudited.
Reference should be made to the notes to the Company's September 30,1998
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.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 and
Simulators/Testers.
Microkim is 100% held by the parent.
b. RadioTel
RadioTel Ltd. was established in 1996 in Israel, to develop a managed
wireless Synchronous
Digital Hierarchy (SDH) transmission network. Through the use of novel
techniques and state of
the art technologies the Company hopes 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 (Asynchronous
Transfer Mode), IP (Internet Protocol), and SDH) with the same reliability
and uninterrupted
service of wireline services.
RadioTel is 51.5% held by the parent.
The financial statements of RadioTel are consolidated into the Company's
financial statements.
c. MICEL Wireless Corp.
MICEL Wireless Corp., a U.S. corporation located in Florida, 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 Wireless Local
Loop (WLL) applications in developing countries.
Micel Wireless is jointly held by the parent and by Export Business
&Services Inc. ('EBS").
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
GENERAL
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 denominated in U.S. dollars are presented in their
original amounts.
Non-dollar transactions and balances have been remeasured to U.S. dollars
accordance with statement
No. 52 of the Financial Accounting Standards Board ('FASB"). 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.
FINANCIAL CONDITION:
The company's operations in the nine months of the fiscal year ending on
September 30, 1999 ('Fiscal
1999') have been financed principally from revenues from sales, research and
development grants and
by a private placement of shares in RadioTel.
The total amount of outstanding loans, credit facilities and guarantees from
banks is approximately
$256,000 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 $11,000 of long-term borrowings from Israel Industrial
Development Bank Ltd., to be
repaid between 1999 and 2000. This also includes approximately $201,000 of
performance guarantees
pursuant to contracts with customers.
In the nine months ended June 30, 1999 net cash equivalents decreased by
$520,210 as a result of
using $919,908 in operating activities, $225,156 for purchase of fixed
assets, $185,893 in bank
overdraft facilities, $11,943 repayment of long term debt, offset $385,000
from proceeds from
shareholders loan and $437,690 from issuance of subsidiary shares to third
parties.
RESULTS OF OPERATIONS
Nine months ended June 30, 1999 compared to the nine months ended June 30,
1998.
Sales in the nine months ended June 30, 1999 were $1,321,676 as compared
with $2,070,208 in the
nine months ended June 30, 1998. The decrease in sales compared to the 1998
period resulted from
the delay in delivery of certain products. We expect to deliver a portion of
these by September 30,
1999.
In addition, one of our main customers stopped new orders due to merging
with another company. We
are negotiating with this company to sell them certain products.
Cost of sales in the nine months ended June 30, 1999 was 49.94% of sales or
$659,995 as compared
with 65.13% or $1,348,339 in the same period in 1998. The changes in the
cost of sales is caused by
the type of product that was delivered on that period, the cost of sales is
not homogenous for all the
product.
Research and development expenses (net) increased to $1,229,681 or 93.04% of
sales in the nine
months ended June 30, 1999 from $863,712 or 41.72% of sales in the same
period in 1998. The
increase was caused by new research and development activities performed by
RadioTel.
Selling & marketing expenses in the nine months ended June 30, 1999 were
$186,974 or 14.15% of
sales compared to $163,514 or 7.9% of sales in the same period in 1998, due
to the fixed cost not
decreasing although sales decreased in the period and due to increasing
marketing for new customers.
General and administrative expenses decreased to $670,692 or 50.75% of sales
in the nine months
ended June 30, 1999 from $710,880 or 34.34% of sales in the same period in
1998. The decrease was
mainly due to a reduction in legal fees and increased efficiency.
Financial income in the nine months ended June 30, 1999 was $66,771 compared
with expenses of
$30,546 in the same period in 1998. The increase was mainly due to interest
from short-term
investments and the devaluation of the Israeli Shekel.
Minority share in RadioTel losses amounted to $708,173 (see also note 2b
above) as compared to
$349,183 in the same period in 1998.
Company's share in the income of its 50% held affiliate, Micel Wireless, for
the first nine months of
fiscal year 1999, was $43,406 compared with the loss of $3,765 in the first
nine months of fiscal 1998.
In the nine months ended June 30, 1999, the company reported a loss of
$607,316. In the same period
in 1998, the Company had a loss of $701,365. The loss is attributable mainly
to the operations of
RadioTel, which is primarily an R&D company.
The inventories at June 30, 1999, consisted of $532,834 raw materials and
$346,176 work in process
as compared to $482,062 raw materials and $183,009 work in process at
September 30, 1998.
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%-5% of proceeds from sales of such
products up to the
amount of such grant. In the nine months ended June 30, 1999 the company
paid $6,830 royalties.
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, 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
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?? 14th, 1999 By: /s/ Ron Levy
- ----------------------------------------
President and
Chief Executive and Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PERIOD-TYPE> 9-MO
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> June-30-1999
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<SECURITIES> 0
<RECEIVABLES> 956,304
<ALLOWANCES> 41,990
<INVENTORY> 879,010
<CURRENT-ASSETS> 2,743,708
<PP&E> 2,784,080
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<CURRENT-LIABILITIES> 1,176,077
<BONDS> 0
0
0
<COMMON> 59,004
<OTHER-SE> 312,606
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<SALES> 1,321,676
<TOTAL-REVENUES> 1,321,676
<CGS> 659,995
<TOTAL-COSTS> 659,995
<OTHER-EXPENSES> 2,087,347
<LOSS-PROVISION> 1,358,895
<INTEREST-EXPENSE> (66,771)
<INCOME-PRETAX> (607,316)
<INCOME-TAX> 0
<INCOME-CONTINUING> (607,316)
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