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: March 31, 2000
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 6,287,880
------------------------------------------------------
(Title of each Class) (Outstanding at March 31, 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 March 31,
2000 (Unaudited) and September 30, 1999 (Audited).
3-4
Condensed Consolidated Statements of operations
for the six months ended of March 31, 2000
and 1999 (Unaudited). 5
Condensed Consolidated Statements of Cash Flows
for the six months ended of March 31, 2000 and
1999 (Unaudited).
6-7
Condensed Consolidated Statements of Changes in
Shareholders' Equity. 8
Notes to Condensed Consolidated Financial Statements 9
Item 2. Management's 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
U.S dollars in thousands
March 31 September 30
2000
1999
(UNAUDITED) (AUDITED)
------------------- ----------
---------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 456 $ 360
Trade receivables 494 467
Other accounts receivable 38 606
Inventories 740 833
--------------- ---------------
Total current assets 1,728 2,266
--------------- -------
--------
INVESTMENT IN AFFILIATED COMPANIES 3,766 119
-------------- --------------
DEPOSITS WITH INSURANCE COMPANIES
AND PENSION FUNDS 415 326
-------------- --------------
MINORITY INTEREST -
4
-------------- --------------
PROPERTY PLANT AND EQUIPMENT, NET 285 815
--------------- -----------
----
Total assets $ 6,194 $ 3,530
======== ========
LIABILITIES AND SHAREHOLDERS EQUITY
------------------------------------------------------------
CURRENT LIABILITIES:
Short-term bank credit 3
28
Current maturities of long term debt 1
7
Accounts payable and accrued liabilities 624
1,099
Advances from customers
33
199
--------------- ---------------
Total current liabilities 761
1,333
--------------- ---------------
ACCRUED SEVERANCE PAY 487 415
PREFERRED SHARES OF SUBSIDIARY 5,648
1,292
--------------- ---------------
Total liabilities 6,135
3,040
--------------- ---------------
SHAREHOLDERS' EQUITY DEFICIENCY:
Common Stock 63 59
Additional paid-in capital 7,831
7,779
Receipt on account of shares -
775
Accumulated deficit (8,596)
(7,894)
Deferred compensation of subsidiary -
(229)
--------------- ---------------
Total shareholders' equity (deficiency)
(702)
490
--------------- ---------------
Total liabilities and shareholders' equity (deficiency) $ 6,194
$ 3,530
========= =========
MICEL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
U.S dollars in thousands
6 months ended March 31 3 months ended March 31
2000 1999 2000 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
-------------- -------------- ---------------
--------------
Sales
1,736 938 698
589
Cost of sales 1,111 528
574 355
------------- ------------- --------------
--------------
Gross profit
625 410 124
234
------------- ------------ --------------
-------------
Research and development expenses, net 904
812 385 255
Selling & Marketing expenses 402
120 198 64
General and administrative expenses 642
438 286 242
------------- ------------- ------------
-- -------------
Total operating expenses 1,948
1,370 869
------------- -------------- -------------
------------
Operating loss (1,323)
(960) (745) (327)
Financial income (expenses) and other ( 294)
36 (232) (1)
------------- ------------- ------------- ---------
----
Loss before income from affiliate
company and minority interest (1617)
(924) (977) (328)
Income from affiliated company 140
91 43 121
Minority interest in losses of subsidiary 775
508 390 177
-------------- ------------- ------------- ------
--------
Net loss $ (702)
$ (325) (544) $ (30)
======== ======= ======== =========
Basic and diluted loss per share $0.12
$0.06 $0.09 $0.01
Weighted average number of ========
======= ======== =========
shares used in computing basic and diluted
loss per share 6,029,547
5,900,380 6,158,713 5,900,380
======== ======== ======== =========
MICEL
CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
U.S dollars in thousands
6 MONTHS ENDED MARCH 31
-------------------------------------
----------
2000 1999
(Unaudited) (Unaudited)
--------------- ---------------
Cash Flows From Operating Activities:
Net loss (702) (325)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 116 89
Gain on sale of equipment
(3) -
Equity in gain of affiliated company
(140)
(98)
Amortization of deferred compensation
issuance of stock options. 135
152
Minority interest in losses of subsidiary ( 775)
(508)
Compensation due to conversion of
-
Interest loan in subsidiary
212 -
Changes in operating assets and liabilities:
Increase in accounts receivable (39)
(232)
Decrease (increase) in inventories 93
(112)
Increase in accounts payable and accrued
liabilities 274 128
Increase (decrease) in advances from customers (66)
78
Increase (decrease) in accrued severance pay 16
( 9)
Increase in preferred Shares of Subsidiary -
133
----------- ---------------
Net cash used in operating activities (879)
( 704)
---------------
---------------
Cash flows From investing activities:
Purchase of fixed assets (333)
(136)
Proceeds from sale of equipment
-
Proceeds from note receivable
70 -
--------------- ---------------
Net cash used in investing activities
(260) (136)
Cash flows from financing activities:
Repayment of long term debt (7)
( 8)
Proceeds from shareholders loan in subsidiary 1,150
Net changes in short-term bank overdraft facilities 67
(42)
Issuance of subsidiary shares to third party -
437
Receipt on account
- 385
Receipt on account of subsidiary shares
to minority
25 -
------------ ------------
Net cash provided by financing activities 1,235
772
------------- ---------------
Increase in cash and cash equivalents 96
(68)
Cash and cash equivalents at the beginning
of period 360
1,428
------------- -
-------------
Cash and cash equivalents at the end of period $ 456
$ 1,360
======= =========
MICEL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (DEFICIENCY)FOR THE SIX MONTHS ENDED MARCH 31, 2000
Common stock
. Deferred
Additional Receipts on compensation
No Value
paid accounts of Accumulated from issuance
of shares in capital shares deficit
of stock option Total
------------ ---------- --------------- ------------
--------------- ------------------ ---------
Balance,
September 30, 1999 5,900,380 $59 $ 7,779 $ 775
$ (7,894) $ (229) $490
Issuance of common stock 297,500 4
771
- - -
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 - - - (702)
(702)
------------ ---------- --------------- ----------- --------
------- ------------- -----------
Balance, March
31, 2000 6,287,880 $ 63 $ 7,831
$ - $ (8,596) $ -
$(702)
MICEL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet at March 31, 2000, the
consolidated
statements of loss for the six and three months ended March 31, 2000 and
1999, and the consolidated statements of cash flows for the six months
ended
March 31, 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 27 March,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 six 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 total amount of outstanding loans, credit facilities and guarantees
from
banks is approximately $63,000 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 $ 1,400 of short-term borrowings from Israel Industrial
Development Bank Ltd. This also includes approximately $59,000 of
performance guarantees pursuant to contracts with customers.
In the six months ended March 31, 2000 net cash equivalents increased by $
96,000 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, $67,000
short-term bank overdraft facilities and reduced by $879,000 in operating
activities and $260,000 used in investing activities.
RESULTS OF OPERATIONS
Six months ended March 31, 2000 compared to the six months ended March 31,
1999.
Sales in the six months ended March 31, 2000 were $1,736,431 as compared
with $938,068 in the six months ended March 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 six months included
$1,430,950 and $305,481 revenues recognized by Microkim and RadioTel,
respectively.
Cost of sales in the six months ended March 31, 2000 was 64% of sales or
$1,110,980 as compared with 56% or $528,149 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 $1,702,515 in the six months
ended March 31,2000 and $1,237,515 of sales in the same period in 1999.The
increase in the research and development expenses is caused mainly by the
increase in the research and development activities of RadioTel. In the
2000
period the grants and participation were $798,557 compared to $425,329 in
the same period in 1999.
Selling & marketing expenses in the six months ended March 31, 2000 were
$402,421 or 23% of sales compared to $120,155 or 13% 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 six months ended March 31,2000
were $645,364 or 37% of sales compared to $438,303 or 47% 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 six months ended March 31, 2000 were $293,913
compared with income of $36,477 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 six months of fiscal year 2000, was $140,122 compared with the
income of $91,017 in the first six months of fiscal 1999.
In the six months ended March 31, 2000, the company reported a loss of
$702,000. In the same period in 1999, the Company had a loss of $324,781.
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 $3,776,228 as of March 31,2000. This increase was due to
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.
Preferred shares of subsidiary increased from $1,292,232 as of September
30,1999 to $5,649,134 as of March 31,2000. 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 March 31, 2000, consisted of $485,201 raw materials and
$254,950 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 six months ended March
31,2000 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: May 22th, 2000 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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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MO
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> March-31-2000
<CASH> 456,130
<SECURITIES> 0
<RECEIVABLES> 531,703
<ALLOWANCES> 0
<INVENTORY> 740,151
<CURRENT-ASSETS> 1,727,983
<PP&E> 2,203,689
<DEPRECIATION> 1,919,053
<TOTAL-ASSETS> 6,193,846
<CURRENT-LIABILITIES> 760,615
<BONDS> 0
0
0
<COMMON> 62,879
<OTHER-SE>
765,988
<TOTAL-LIABILITY-AND-EQUITY> 6,193,846
<SALES> 1,736,431
<TOTAL-REVENUES> 1,736,431
<CGS>
1,110,980
<TOTAL-COSTS> 1,110,980
<OTHER-EXPENSES> 1,948,897
<LOSS-PROVISION> 1,323,446
<INTEREST-EXPENSE> 293,913
<INCOME-PRETAX> 701,882
<INCOME-TAX> 0
<INCOME-CONTINUING> 701,882
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 701,882
<EPS-BASIC> (0.12)
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