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: Juns 30, 2000
Commisiion File Number: 1-11020
Micel Corp.
(Exact name of Small Business Issuer as specified in its charter)
NEW YORK 11-2882297
(State of other jurisdiction (I.R.S. Employer
of incorporation) Indentification No.)
445 Central Ave., Cedarhurst New York 11516
(Address of Principal executive offices) (Zip Code)
(516) 569-0606
(Registrants 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 issuers classes of
Common Stock, as of the latest practicable date.
Common Stock, Par Value $.01 6,289,880
(Title of each Class) (Outstanding at June 30, 2000)
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, 2000
(Unaudited) and September 30, 1999 (Audited). 3-4
Condensed Consolidate Statements of operations for the nine
months ended of June 30, 2000 and 1999 (Unaudited). 5
Condensed Consolidate Statements of Cash Flows for the
nine month ended of June 30, 2000 and 1999 (Unaudited). 6-7
Condensed Consolidate Statements of Changes in
Shareholders Equity. (deficiency) 8
Notes to condensed Consolidated Financial Statements 9
Item 2. Managements Discussion and Analysis of Financial
Conditions and Results of Operations. 10-11
PART II OTHER INFORMATION 12
Signatures 13
Exhibit 27 14
MICEL CORP. AND SUBSIDIARIES
PART I FINANCIAL INFORMATION
MICEL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30,
2000 (UNAUDITED) September 30, 1999 (AUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $251 $360
Trade receivables 570 467
Other accounts receivables 36 606
Inventories 794 833
---------- ----------
Total current assets 1,651 2,266
---------- ---------
INVESTMENT IN AFFILIATED COMPANIES 3,418 119
DEPOSITS WITH INSURANCE COMPANIES AND PENSION FUNDS 415 326
---------- ----------
MINORITY INTEREST - 4
---------- ----------
PROPERTY PLANT AND EQUIPMENT, NET 264 815
---------- ----------
Total assets $5,748 $3,530
LIABILITIES AND SHAREHOLDERSQ EQUITY ( DEFICIENCY)
CURRENT LIABILITIES:
Short-tern bank credit 0 28
Current maturities of long tern debt. 0 7
Accounts payable and accrued liabilities 524 1,099
Advances from customers 87 199
---------- ----------
Total current liabilities 611 1,333
---------- ----------
ACCRUED SEVERANCE PAY 473 415
PREFERRED SHARES OF SUBSIDIARY 5,649 1,292
---------- ----------
Total liabilities 6,733 3,040
---------- ----------
SHAREHOLDERS EQUITY (DEFICIENCY):
Common stock 63 59
Additional paid-in capotal 7,832 7,779
Receipt on account of shares - 775
Accumulated deficit (8,880) (7,894)
Deferred compensation of subsidiary - (229)
---------- ----------
Total shareholders equity (deficiency) (985) 490
---------- ----------
Total liabilities and shareholders equity (deficiency) $5,748 $3,530
====== ======
MICEL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
U.S dollars in thousands
nine month ended June 30 three month ended June 30
2000 (Unaudited) 1999
(Unaudited) 2000 (Unaudited) 1999 (Unaudited)
---------- ---------- ----------- ----------
Sales 2,288 1,322 552 384
Cost of sales 1,407 660 296 132
---------- ---------- ---------- ----------
Gross profit 881 662 256 132
---------- ---------- ---------- ----------
Research and development expenses, net. 963 1,236 59 417
Sales & Marketing expenses 451 187 49 67
General and administrative expenses 723 670 81 232
---------- ---------- ---------- ----------
Total operating expenses 2,137 2,093 189 716
- ---------- ---------- ---------- ----------
Operating (loss) income (1,256) (1,431) 67 (464)
Financial income (expenses) and other (298) 67 (5) 30
---------- ---------- ---------- ----------
Income (loss) before income (loss) from affiliate company and minority
interest (1,554) (1,364) 62 (434)
Income (loss) from affiliate company (208) 43 (349) (48)
Minority interest in losses of subsidiary 776 708 1 200
---------- ---------- ---------- ----------
Net loss $ (986) $ (613) (286) $ (282)
====== ====== ====== ======
Basic and diluted net loss per share $0.16 $0.10 $0.04 $0.05
====== ====== ====== ======
Weighted average number of shares used in computing basic and diluted net
loss per share
6,115,658
5,900,380
6,287,880
5,900,380
====== ====== ====== ======
MICEL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
U.S dollars in thousands
nine month ended in June 30
--------------------------------------
2000 (Unaudited) 1999 (Unaudited)
-------------------- --------------------
Cash Flows From Operating Activities:
Net loss (986) (613)
Adjustments to reconcile net loss to net cash use in operating activities:
Depreciation 138 137
Gain on sale of equipment (3) -
Equity in loss (gain) of affiated company 209 (49)
Amortization of deferred compensation issuance of stock options. 135 154
Minority interest in losses of subsidiary (776) (708)
Compensation due to conversion of minority interest loan in subsidiary 212 -
Compensation from issuance of options to consultants 50
Change in operating assets and liabilities:
Increase in accounts receivable (113) (58)
Decrease (increase) in inventories 39 (214)
Increase in accounts payable and accrued liabilities 175 89
Increase (decrease) in advances from customers (112) 157
Increase in accrued severance pay 2 2
Increase in preferred Shares of Subsidiary - 133
---------- ----------
Net cash used in operating activities (1,080) (920)
---------- ----------
Cash flows From investing activities:
Purchase of property and equipment (334) (225)
Proceed from sale of equipment 3 -
Proceed from note receivable 70 -
---------- ----------
Net cash used in investing activities (261) (225)
Cash flows from financing activities:
Repayment of long term debt (7) (12)
Proceeds from shareholders loan in
subsidiary 1,150 -
Net changes in short-term bank
overdraft facilities 63 (186)
Issuance of subsidiary shares to
third party - 438
Proceed from shareholders loan - 385
Receipt on account of subsidiary
shares to minority 25 -
Exercise of stock options to
employees 1 -
---------- ----------
Net cash provided by financing activities 1,232 625
Decrease in cash and cash equivalents (109) (520)
Cash and cash equivalents at the beginning of period 360 1,428
---------- ----------
Cash and cash equivalents at the end of period $251 $908
====== ======
MICEL CORPORATION AND SUBSIDIARY CONSOLIATED STATEMENT OF CHANGE IN
SHERHOLDERS EQUITY (DEFICIENCY) FOR THE NINE MONTH ENDED IN JUNE 30, 2000
Common stock Additional paid in capital Receipts on accounts of shares
Accumulated deficit Deferred compensation from issuance of stock option
Total
No. of shares Value
---------- ------- ---------- ---------- ---------- ---------- -------
Balance, September 30, 1999 5,900,380 $59 $7,779 $775 $ (7,894) $ (229) $490
Issuance of common stock 387,500 4 771 (775) - - -
Exercise of stock options to employees 2,000 - 1 1
Amortization of deferred compensation from issuance of stock options - -
135 - - - 135
Adjustment to carrying amount of RadioTel investment as a result of private
placement (854) 229 (625)
Loss for the period - - - (986) (986)
---------- ------ ---------- ---------- ---------- ---------- ------
Balance, June 30, 2000 6,289,880 $63 $7,832 $ - $ (8,880) $ - $ (985)
====== === ====== ====== ====== ====== ===
MICEL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet at June 30, 2000, the consolidated
statements of loss for the nine and three months ended June 30, 2000 and
1999, and the consolidated statements of cash flows for the nine months
ended June 30, 2000 and 1999, have been prepared by the Company, and are
unaudited.
Reference should be made to the notes to the Company's September 30,1999
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 was 51.5% held by the Company until March 2000. In March 27, 2000
RadioTel completed its private placement of preferred shares to third
parties and existing shareholders and Micels ownership position fell below
50 percent. Consequently, while RadioTel had previously been fully
consolidated, it has been accounted for under the equity method of
accounting from March 27, 2000 forward.
On March 27,2000,the shareholders of RadioTel converted a loan in the amount
of $1,200,000 (including $50,000 of Micel) into 41,986 Class B Preferred
shares of NIS 0.01 par value each. As a result of the conversion of
shareholders loan, RadioTel recorded $212,000 as financial expenses. As a
part of the agreement, RadioTel has granted to these shareholders 20,992
warrants to purchase Ordinary shares at the exercise price of $28.58.
On March 27, 2000,RadioTel issued 307,299 Class C Preferred shares
of
NIS 0.01 par value each to new investors in consideration of
approximately
$10,333,000. As part of the agreement RadioTel has granted to these
investors 17,844 warrants to purchase Ordinary shares at the exercise
price
of par value, exercisable until March 27, 2001.
As a result of an issuance of preferred shares of RadioTel to third
parties
and existing Shareholders the Company recorded deferred gain of
$4,356,902.
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, 2000 ('Fiscal 2000') have been financed principally from
revenues from sales, research and development grants and by a convertible
loan of subsidaiary.
The Company has $58,142 performance guarantees pursuant to contracts with
customers. Its 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.
In the nine months ended June 30, 2000 net cash equivalents decreased by
$109,000 as a result of $1,150,000 minority loan that RadioTel obtained. On
March 27,2000, RadioTel converted a loan into 41,986 Class B Preferred
shares of NIS 0.1 par value each. The loan was linked to dollar and bore
annual interest at the rate of Libor+2%. Net cash further increased $25,000
loan receipt on account of subsidiary shares to third party and $1,200 from
exercise of stock option to employees, $63,000 short-term bank overdraft
facilities and reduced by $1,080,000 in operating activities $261,000 used
in investing activities and $7,000 repayment of long term dept.
RESULTS OF OPERATIONS
Nine months ended June 30, 2000 compared to the nine months ended June 30,
1999.
Sales in the nine months ended June 30, 2000 were $2,288,291 as compared
with $1,321,676 in the nine months ended June 30, 1999. The increase in
sales compared to the 1999 period resulted from the completion of products
and their delivery in the 2000 period. Sales in the nine months ended June
30, 2000 included $1,982,810 and $305,481 revenues recognized by Microkim
and RadioTel, respectively.
Cost of sales in the nine months ended June 30, 2000 was 61% of sales or
$1,407,287 as compared with 50% or $659,995 in the same period in 1999. The
increase in cost of sales is mainly caused by the devaluation of the dollar.
Most of the sales are linked to the dollar and the cost of sales is linked
to the Israeli shakel. The increase in cost of sales was also due to the
type of products that were delivered in the 2000 period which has a higher
cost of sale than those delivered in the 1999 period. The cost of sales
fluctuates for all the products.
Gross research and development expenses were $1,792,723 in the nine months
ended June 30,2000 and $1,943,828 of sales in the same period in 1999.The
decrease in the research and development expenses is caused mainly by the
decrease in the research and development activities of RadioTel. In the 2000
period the grants and participation were $829,578 compared to $708,351 in
the same period in 1999.
Sales expenses in the nine months ended June 30, 2000 were $451,110 or 20%
of sales compared to $186,974 or 14% of sales in the same period in 1999.
The increase was due to new sales and marketing activities performed by
RadioTel.
General and administrative expenses in the nine months ended June 30,2000
were $722,997 or 32% of sales compared to $670,692 or 51% in the same period
in 1999. The increase in the cost was mainly due to the increase in the
rental expenses in the new location of the Israeli subsidiaries and the
increase of legal fees in RadioTel.
Financial expenses in the nine months ended June 30, 2000 were $298,144
compared with income of $66,771 in the same period in 1999. The increase in
the expense was caused by the compensation from conversion of shareholders
loan of RadioTel and due to interest expenses associated with bank line of
credit and shareholders loan.
Company's share in the income of its 50% held affiliate, Micel Wireless, for
the first nine months of fiscal year 2000, was $108,058 compared with the
income of $43,406 in the first nine months of fiscal 1999.
In the nine months ended June 30, 2000, the company reported a loss of
$985,685. In the same period in 1999, the Company had a loss of $607,316.
This increase in a loss was primarily due to losses of RadioTel.
Investment in affiliated companies increased from $119,468 as of September
30,1999 to $3,417,975 as of June 30,2000. This increase was due to the
Company holding 51% of RadioTel until March 27, 2000. In March 27,2000
RadioTel completed its private placement of preferred shares to third
parties and existing shareholders and Micels ownership position fell below
50 percent. Consequently, while RadioTel had previously been fully
consolidated, it accounts for the subsidiary under the equity method of
accounting since March 27,2000 .
Preferred shares of subsidiary increased from $1,292,232 as of September
30,1999 to $5,649,134 as of June 30,2000. This increase is caused by
deferred gain of $4,356,902, which was recorded as a result of an issuance
of preferred shares of RadioTel to third parties and existing shareholders.
The inventories at June 30, 2000, consisted of $425,303 raw materials and
$369,043 work in process as compared to $486,515 raw materials and $346,176
work in process at September 30, 1999.
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. Royalties paid during the nine months ended June
30,2000 and 1999 totaled $29,382 and $6,830, respectively.
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, 1999.
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 20th, 2000 By: /s/ Ron Levy
-------------------------------
President and
Chief Executive and Financial Officer
