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: December 31, 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 December 31, 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 December 31,
1999 (Unaudited) and September 30, 1999 (Audited). 3-4
Condensed Consolidated Statements of operations
for the three months ended of December 31, 1999
and 1998 (Unaudited). 5
Condensed Consolidated Statements of Cash Flows
for the three months ended of December 31, 1999 and
1998 (Unaudited).
6
Condensed Consolidated Statements of Changes in
Shareholders' Equity. 7
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations
9-10
PART II - OTHER INFORMATION 11
Signatures 12
Exhibit 27 13
MICEL CORP. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
MICEL CORP. AND SUBSIDIARIES
- ---------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S dollars in thousands
December 31 September 30
1999
1999
(UNAUDITED) (AUDITED)
------------------- ----------
- ---------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 974 $ 360
Trade receivables 530 467
Other accounts receivable 750 606
Inventories 662 833
--------------- ---------------
Total current assets 2,916 2,266
--------------- -------
- --------
INVESTMENT IN AFFILIATED COMPANY 146 119
-------------- --------------
DEPOSITS WITH INSURANCE COMPANIES
AND PENSION FUNDS 416 326
-------------- --------------
MINORITY INTEREST 377 4
-------------- --------------
PROPERTY PLANT AND EQUIPMENT, NET 953 815
--------------- -----------
- ----
Total assets $ 4,808 $ 3,530
======== ========
LIABILITIES AND SHAREHOLDERS EQUITY
- ------------------------------------------------------------
CURRENT LIABILITIES:
Short-term bank credit 214
28
Shareholders loan
1,157 -
Current maturities of long term debt 7
7
Accounts payable and accrued liabilities 1,022
1,099
Advances from customers 182
199
--------------- ---------------
Total current liabilities 2,582
1,333
--------------- ---------------
ACCRUED SEVERANCE PAY 511 415
PREFERRED SHARES OF SUBSIDIARY 1,305
1,292
--------------- ---------------
Total liabilities 1,816
3,040
--------------- ---------------
SHAREHOLDERS' EQUITY:
Common Stock 59 59
Additional paid-in capital 7,962 7,779
Receipt on account of shares 775
775
Accumulated deficit (8,052)
(7,894)
Deferred compensation from issuance of stock
option to employees (334) (229)
--------------- ---------------
Total shareholders' equity 410 490
--------------- ---------------
Total liabilities and shareholders' equity $ 4,808
$ 3,530
========= =========
MICEL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
U.S dollars in thousands
3 Months Ended December
-----------------------------------
1999 1998
(Unaudited) (Unaudited)
- -------------- --------------
Sales 1,038
349
Cost of sales 537 173
------
- ------- -------------
Gross profit 501
176
-----
- -------- ------------
Research and development expenses, net 519
557
Selling & Marketing expenses 204 56
General and administrative expenses 359 186
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Total operating expenses 1,082
799 ----------
- --- --------------
Operating loss 581 623
Financial income (expenses) and other ( 62)
37
Capital gain
3 -
------------- -------------
Loss before income (losses) from affiliate
company and minority interest 640
586
Income (loss) from affiliated company 97
( 30)
Minority interest in losses of subsidiary 385
331
-------------- -------------
Net loss $ 158 $ 285
========
=======
Basic and diluted loss per share $0.03 $0.05
======== =======
Shares used in computing
loss per share 5,900,380 5,897,298
======== ========
MICEL
CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
U.S dollars in thousands
3 MONTHS ENDED DECEMBER 31
-------------------------------------
- ----------
1999 1998
(Unaudited) (Unaudited)
--------------- ---------------
Cash Flows From Operating Activities:
Net loss (158) (285)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 43 39
Gain on sale of equipment
3) -
Equity in loss (gain) of affiliated company (97)
30
Compensation from issuance of options to
consultants 38 16
Amortization of deferred compensation
issuance of stock options to employees 40 51
Minority interest in losses of subsidiary (385)
(331)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (207)
266
Decrease (increase) in inventories 171
(90)
Increase (decrease) in accounts payable and accrued
liabilities ( 77) 83
Increase (decrease) in advances from customers (17 )
9
Increase (decrease) in accrued severance pay 6
( 12)
Increase in preferred Shares of Subsidiary -
136
------------- ---------------
Net cash used in operating activities (646)
( 88)
---------------
---------------
Cash flows From investing activities:
Purchase of fixed assets (181)
( 24)
Proceeds from sale 3 -
Proceeds from note receivable
70 -
----
- ----------- ---------------
Net cash used in investing activities (108)
( 24)
--------------- ---------------
Cash flows from financing activities:
Repayment of long term debt -
( 5)
Net changes in short-term bank overdraft facilities 186
86)
Proceeds from long term loan
1,157 -
Issuance of subsidiary shares to third party -
441
Receipt on account
- 375
Receipt on account of subsidiary shares
to minority
25 -
------------ ------------
Net cash provided by financing activities 1,368
725
------------- ---------------
Increase in cash and cash equivalents 614
613
Cash and cash equivalents at the beginning
of period 360
1,428
--------------- ------
- ---------
Cash and cash equivalents at the end of period $ 974
$ 2,041
======= =========
MICEL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY FOR THE THREE MONTHS ENDED DECEMBER 31, 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, 1999 5,900,380 $59 $ 7,779 $ 775
$ (7,894) $ (229 ) $ 490
Compensation from issuance of
options to consultants - -
8 - - - 38
Deferred compensation from
issuance of stock options to
employees - - 145 - -
-
Amortization of deferred
compensation from issuance of
stock option to
- - - - - 40
40
Loss for the period - - - -
(158) (158)
------------ ---------- --------------- ------------ -----
- ---------- -------------------- -------------
Balance, December
31, 1999 5,900,380 $ 59 $ 7,962 $ 775 $
(8,052) $ (334) $410
MICEL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet at December 31, 1999, the
consolidated statements of loss for the three months ended December 31, 1999
and 1998, and the consolidated statements of cash flows for the three months
ended December 31, 1999 and 1998, have been prepared by the Company, and are
unaudited.
Reference should be made to the notes to the Company's September 30,1999
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 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 three 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 .
The total amount of outstanding loans, credit facilities and guarantees from
banks is approximately $316,000 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 $ 7,458 of short-term borrowings from Israel Industrial
Development Bank Ltd. This also includes approximately $94,000 of
performance guarantees pursuant to contracts with customers.
In the three months ended December 31, 1999 net cash equivalents increased
by $614,000 as a result of $1,157,000 shareholders loan that RadioTel
obtained. This loan is to be repaid with interest at the annual rate of
Libor+2% no later than December 2000, RadioTel issued warrants exercisable
to purchase at $0.1 RadioTels Ordinary shares par value each, net cash
further increased $25,000 loan receipt on account of subsidiary shares to
minority, $186,000 short-term bank overdraft facilities and reduced by
$646,000 in operating activities and $108,000 used in investing activities.
RESULTS OF OPERATIONS
Three months ended December 31, 1999 compared to the three months ended
December 31, 1998.
Sales in the three months ended December 31, 1999 were $1,038,151 as
compared with $348,745 in the three months ended December 30, 1998. The
increase in sales compared to the 1998 period resulted from the completion
of a product and its delivery in the 1999 period.
Cost of sales in the three months ended December 31, 1999 was 52% of sales
or $536,771 as compared with 50% or $173,207 in the same period in 1998. The
changes in the percentage of cost of sales is caused by changes in the type
of products that were delivered in the 1999 period from the 1998 period. The
cost of sales fluctuates for all the products.
Research and development expenses decreased to $519,142 or 50% of sales in
the three months ended December 31, 1999 from $557,147 or 160% of sales in
the same period in 1998. The expenses decreased due to the receipts of
grants and financial participation that RadioTel got from the Chief
Scientist .In the 1999 period the grants and participation were $219,130
compared to $0 in the same period in 1998.
Selling & marketing expenses in the three months ended December 31, 1999
were $204,073 or 20% of sales compared to $56,381 or 16% of sales in the
same period in 1998. The increase was caused by new activities performed by
RadioTel.
General and administrative expenses in the three months ended December
31,1999 were $358,861 or 35% of sales compared to $185,956 or 53% in the
same period in 1998. The increase was mainly due to the increase in the
rental expenses in the new location of the Israeli subsidiaries.
Financial expenses in the three months ended December 31, 1999 were $61,517
compared with income of $37,465 in the same period in 1998. The increase was
caused by the devaluation of the dollar and interest on loans.
Minority share in RadioTel losses amounted to $385,534 (see also note 2b
above) as compared to $330,755 in the same period in 1998.
Company's share in the income of its 50% held affiliate, Micel Wireless, for
the first three months of fiscal year 2000, was $96,536 compared with the
loss of $29,743 in the first three months of fiscal 1999.
In the three months ended December 31, 1999, the company reported a loss of
$156,397. In the same period in 1998, the Company had a loss of $285,169.
The decrease in the loss is attributable mainly to the increase in sales
from preliminary sale to a future customer.
The inventories at December 31, 1999, consisted of $463,572 raw materials
and $198,449 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..
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: February? ? 14th, 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> 3-MO
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> December-30-1999
<CASH> 974,225
<SECURITIES> 0
<RECEIVABLES> 1,280,162
<ALLOWANCES> 0
<INVENTORY> 662,021
<CURRENT-ASSETS> 2,916,408
<PP&E> 3,058,974
<DEPRECIATION> 2,106,360
<TOTAL-ASSETS> 4,808,296
<CURRENT-LIABILITIES> 2,582,234
<BONDS> 0
0
0
<COMMON> 59,004
<OTHER-SE> 350,889
<TOTAL-LIABILITY-AND-EQUITY> 4,808,296
<SALES> 1,038,151
<TOTAL-REVENUES> 1,038,151
<CGS> 536,771
<TOTAL-COSTS> 536,771
<OTHER-EXPENSES> 1,082,076
<LOSS-PROVISION> 580,696
<INTEREST-EXPENSE> 60,517
<INCOME-PRETAX> 158,397
<INCOME-TAX> 0
<INCOME-CONTINUING> 158,397
<DISCONTINUED> 0
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