SECURITIES AND EXCHANGE COMMISSION

WASHINGTON. D.C. 20549



FORM 10-KSB

Annual Report Pursuant to Section 13 or 15(d)

Of the Securities Exchange Act of 1934



For the Fiscal Year ended

September 30, 2000 Commission File No. 1-11020

MICEL CORP.



(Exact name of registrant as specified in its charter)

NEW YORK 11-2882297

(State or other jurisdiction of (I.R.S. Employer
Identification No.)

incorporation or organization)



445 Central Avenue, Cedarhurst, NY 11516

(Address of principal executive offices) (Zip Code)



Registrants telephone number,

Including area code: (516) 569-0606



Securities registered pursuant to Section 12(b) of the Act:



Title of each class Name of each exchange

None on which registered

None

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class

Common Stock, $.01 per value



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 for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.



YES [X] NO



Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation SB (229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrants knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]



Registrants revenues for fiscal year ended September 30, 2000 was
$2,947,197.



The aggregate market value of voting stock held by non-affiliates of the
registrant is $9,222,078 as of December 14, 2000.



The number of shares outstanding of the registrants Common Stock as of
December 31, 2000 is:



Class Outstanding at December 31, 2000 Common Stock, $.01 par
value 6,289,880





Part 1



Item 1.



Business

Micel Corp. through its subsidiary and affiliates, is engaged
in the development, manufacture and sale of radio frequency (RF) microwave
components and custom made integrated assemblies for commercial and military
applications. These wireless applications include radio communications,
electronic warfare (EW) and radar.

Other applications that the Company are developing are
microwave products for the commercial telecommunications field, such as radios
for rural telecommunications and point to point communications. The Company
possesses the product and technology base necessary for the production of
certain microwave components and complete subsystems. The Companys corporate
strategy is to create a series of separate operating divisions or partially
owned subsidiaries to support the manufacture, marketing/sales and distribution
of specific commercial technologies.

RadioTel, Ltd

During 1997-1998, Clal Venture Capital Fund Limited
Partnership

The Company held 51.5% of RadioTel until March 2000. On March
27, 2000 RadioTel completed a private placement of preferred shares as discussed
above, to third parties and existing shareholders and Micels ownership was
reduced below 50 percent. Consequently, while RadioTel had been fully
consolidated until March 27, 2000, it has been accounted for under the equity
method of accounting since March 27, 2000 .

Microkim, Ltd

Micel Wireless Corp

Micel Wireless designs, manufactures and sells fixed cellular
terminals for WLL applications in developing countries. Micel Wireless
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. A
majority of its sales have been made in Latin and South America.



Products

The Company began operations through its wholly owned Israeli
subsidiary, Microkim Ltd., by manufacturing microwave components such as ferrite
devices including isolators and control devices such as switches. Subsequently,
the Company developed a line of microwave circuit assemblies, subsystems and
subassemblies for advanced electronic defense and certain medical products. More
recently, the Company has introduced stand-alone products to be marketed
directly to end-users. The Company maintains its technological know-how and
infrastructure for manufacturing RF components to support its highly integrated
products.

The Company focuses its activities in two main areas

Products

Products for the military market





> 

Commercial Products

The following are the Companys products for the commercial
communications market:



PCS Antenna

Passive PCS Antenna

Microkim had developed a low cost antenna for PCS (Personal
Communication Services) application that requires easy installation of point to
point communication in hard environmental conditions. The high performance of
the antenna enables an improvement of the base station range. In fiscal 2000,
the Company sold 42 unit.

Active PCS Antenna

For PCS applications that demand a relatively long RF cable
between the Antenna and the subscriber unit, Microkim has developed an active
PCS Antenna for system performance upgrading and system price reduction. This
Antenna improves the overall performance by placing the Low Noise Amplifier
(LNA) inside the Antenna (improving significantly the Noise Figure of the
system) and also placing the Power Amplifier (PA) inside the Antenna (overcoming
the loss of the cable). By using this Antenna, the coverage range can be greatly
extended. The only link between the Antenna and the Subscriber unit is by the RF
cable that carries the RF signals, the control signal and the DC power. There
were no sales in Fiscal 2000.



Broad Band Data Communication Link Hardware. The Company
developed the hardware required to establish a broad and data communication link
using QAM (Quadrature Amplitude Modulation) type digital modulation scheme. This
type of modulation scheme required special consideration due to the high
linearity and low phase noise required by the link. Such stringent requirements
became a necessity due to the fast development of complex digital modulation
schemes during the last few years. These modulation schemes are the trend of the
future as the requirement for more data in less bandwidth increases. The Company
delivered 10 units in Fiscal 2000.



> 

Military Products

The products for the military market include

Radar Signal Simulator.

RSS-3000 In the beginning of fiscal 1999, the Company
entered into an agreement for the development of an advanced RSS Simulator that
will cover the frequency range of 0.5 GHz to 40 GHz. The RSS-3000 is a new
generation of Radar Signal Simulator. The unit is a lightweight, portable high
performance simulator. It is based on new technology and years of experience in
the simulator field. The unit is battery/mains operated for field/lab
applications. It can simulate up to 5 complex emitters, covering the range of
0.5 GHz to 40 GHz. It can be configured for static or dynamic scenarios based on
emitters library that can be set up and stored on a laptop computer. The
Windows based program enables easy data input. After configuration the data can
be down loaded to the RSS unit and stored on a Flash memory, which can be
extracted and stored in a safe, for security purposes. This RSS addresses
specifically the needs of U.S Air Force, since they intend to replace the old
APM 42 7 simulator with a new one. The Company is making arrangements to compete
in this project. The new RSS-3000 is expected to be ready for marketing in the
beginning of year 2001.

RSS-4000 The Company entered into a Memorandum of
Understanding on August 11, 1993 with Advanced Systems Development (ASD), a
subsidiary of Comptek, located in East Elmhurst, New York, to develop and market
the next generation of TSS. The new simulator was designed to enable the user to
select specific desired frequencies under computer program control. The RSS
4000, currently being offered for sale by the Company, includes fixed frequency
sources whose frequencies are tuned at the factory level. The feature of
user-selected frequencies will expand the range of applications of the radar
simulator. The system was designed to cover all frequency bands from 0.5 to 18
GHz. Development continued in fiscal 1994 through 1996.The Company delivered one
unit in fiscal 1999.There were no sales in fiscal 2000.

RSS-4000 is designed to be software compatible with a large
simulator called AMES, manufactured by ASD. The Company believes that RSS-4000
addresses the U.S. and European military markets, especially users of state of
the art EW equipment. RSS-4000 will enable those customers to simulate multiple
emitter scenarios at the flight line and use scenarios developed in the lab on
the AMES system.

Altimeter Tester

In addition to the above-mentioned systems, the Company has
developed a product line of various frequency sources. These products serve as
the building blocks for the RF simulators and the infrastructure for the
commercial communication equipment. The main products of this line are:

Frequency Synthesizers

Digital Tuned Oscillator (DTO) The Company has
developed a new highly integrated assembly of 2-18 GHz Digital Tuned Oscillator.
The product is based on the Companys ability to integrate various RF
components such as filters, low-noise amplifiers, VCOs and switches into a
highly integrated assembly. The DTO is the main building block for the RSS-4000
and is sold as a stand-alone device. The Company has delivered 26 units in
fiscal 1999 and 28 units in fiscal 2000.

In fiscal 1999 the Company improved the DTO by decreasing the
switching time of the frequency hoping that this will improve the performance of
the EW systems. The Company has delivered 32 units during fiscal 2000.

Dielectric Resonance Oscillators (DRO)

Up/down converter The Company is in process of
developing a family of up/down converters to be used in the growing demand for
such converters in the communication area. These converters will cover the
ranges of 2-40 GHz.

The following table sets forth the approximate percentage of
sales of the Companys products in Fiscal 1999 and 2000.



|Products               | Percent of Sales
|---------------------- | ----------------
|                       | 2000            
|Frequency Sources      | 60%             
|Radar Signal Simulator | 30%             
|Super Components       | 3%              
|Other Products         | 7%              
|Total                  | 100%            

Backlog



Research and Development

The Company is engaged in a continuing program of research
and development aimed at developing certain new and improved products. Whenever
possible, the Company attempts to obtain customer funding to adapt the
Companys basic technology to specialized customer requirements.

Microkim is participating in the Israeli

The development of the RSS and certain commercial microwave
components has been partly financed by the Office of the Chief Scientist of the
Israeli Ministry of Industry and Trade (OCS). A royalty of 2% - 5% must be paid
from the sales of products developed with grant funds. The royalty repayment is
up to 100%-150% from3 the total grant amount.

Repayment of such grants is not required in the event that
there are no sales of products developed with respect to such grants. The Chief
Scientist restricts the transfer of know-how obtained through its research



During Fiscal 2000 and 1999, the Companys gross research
and development activities aggregated $1,843,673 and $2,421,668, respectively,
including grants of $838,273 and $747,958 respectively, received from the OCS.



Manufacturing and Suppliers

The Company offers both standard products manufactured and
assembled by the Company as well as subsystems, components and subassemblies in
accordance with specific customer demands. The Company is currently emphasizing
subsystems and systems products. The Company is capable of providing a full
range of services including engineering design and development assembly and
fabrication of circuits, subsystems and subassemblies. The Company employs
advanced manufacturing techniques geared towards production to military,
RF/microwave components and aerospace standards. The Companys manufacturing
facilities in Israel include a class 100,000 clean room. The clean room area
consists of laminar flow benches where the critical bonding and dice-attaching
processes and inspections are performed. The Companys manufacturing
facilities include electrical and RF test equipment required for in process and
acceptance testing. Special equipment at the Companys manufacturing facility
also includes broadband sweepers, automatic test stations, bonding and dice
attaching equipment.

The production facilities and expansion programs of the
subsidiary in Israel have been granted the status of

The Companys product assurance and reliability programs
are designed to meet most applicable military standards. Established quality
assurance programs monitor the performance to specifications of all materials
used and labor performed in manufacturing. Monitoring begins with the inspection
of incoming materials and continues through the processing assembly and testing
of final products. Since certain products are used for military purposes, the
Companys quality control requires that it inspect these products before they
are shipped to customers. The Company is required to keep detailed records of
the results of such inspections.

The Company has a number of sources of supply for most of the
materials and components necessary for the production of its products and
systems. The Company is constantly looking to qualify more than one supplier for
its necessary component parts. The Company generally purchases the component
parts necessary to complete an order as soon as the order is confirmed thereby
attempting to eliminate shortages or delays in the manufacturing process without
the necessity of maintaining excess inventory.

Marketing and Principal Customers

The focus of Micels commercial marketing effort will be to
identify those telecommunications service providers who require fixed wireless
solutions in their given territories and the cost benefits of wireless compared
to copper wire installation. The target markets are those emerging countries
where industry is rapidly developing but the countrys infrastructure and
communication systems are lagging behind. These emerging markets include South
and Central America, Eastern Europe, the Philippines, China, India, Indonesia
and Africa.

Approximately 70% of the Companys sales during the fiscal
year ended September 30, 2000, were made to customers in the U.S.A directly by
the Companys sales staff. In Fiscal 2000, Comptek Amhersts Systems and
Science Applications International Corporation represented approximately 50% and
18% of total sales, respectively. In addition, ELTA Israel Aircraft Industries
Ltd. represented approximately 11% of total sales during Fiscal 2000.

The Company markets its products in Israel through its sales
and management staff by calling upon customers or potential customers. In
addition, the Company is contacted directly by potential customers to provide
them with specifications and quotations on the development and manufacture of
specific components and subsystems. The Company has determined that the
preferred way to market its components outside Israel is through agents and
representatives located in the country where the customer is located, since
certain potential customers prefer to purchase their military components from a
local source. In addition, the Companys representatives located in a country
may be required to have the technical expertise to assist the customer and
repair any defective components.

The Company entered into a consulting agreement with
Crossways Consulting Group, Inc. (Crossways) December 31, 1998, which replaced
the agreement with Quest Enterprise, Inc. (Quest). Crossways provides marketing,
consulting and other services as reasonably required by the Company for the
purpose of securing for the Company joint development programs, strategic
partnerships, business opportunities and production and sales contracts with
North American companies. The Company pays Crossways a fee in the amount of
$6,000 per month plus expenses. In addition, in the event that the services
provided by Crossways to the Company result in sales in North America, Crossways
will be entitled to 1.5% of such sales. Crossways was granted options to
purchase 220,000 shares of Common Stock at $2.00 per share until December 31,
2003, exercisable to the extent of 20% thereof each year. Mr. Tuvia Barak, a
principle in Quest, is the principal of Crossways. RadioTel also has a
consulting agreement with Crossways under which RadioTel pays Crossways a
monthly consulting fee of $6,000 per month.

Competition

There are numerous manufacturers of microwave products in
Israel, the United States and elsewhere which compete with the Company. Many of
these competitors are much larger than the Company with substantially greater
financial resources, experience and more extensive engineering, technical and
research capabilities. In addition, many large companies with substantially
greater financial, technical and marketing resources than the Company, including
some companies that are currently customers of the Company, have the capability
to produce the products made by the Company and could decide to enter the market
in the future and compete with the Company. The Company is not a major
competitor in the worldwide microwave market, although the Company believes that
it competes effectively in the Israeli market. The Companys largest
competitor in Israel is EYAL Microwave Ltd. The Company believes that it is able
to compete based on its quality, location, technical capability and experience.
In addition, its products have been field-tested and the Company has the ability
to produce and integrate many different microwave components into subassemblies
and end-user products. The major competitor of the Companys RSS is AlL and
A.A.I. which manufactures the APM 427. The Company believes that the RSS is
superior to the APM427, since the RSS is less expensive, is much smaller
and can be operated by only one person. Three additional companies are now
offering portable units that compete with the RSS 2000. Republic Electronics of
N.Y.is offering its MTS-300; Cal Corp. of Ontario, Canada has introduced
its Micro-Tass Product; and Anarem in the United Kingdom also offers a similar
product.

The major competitors of the Companies communication products
are (I) California Microwave Inc. which manufactures digital point-to-point
radios, medium haul radios for cellular communications and modems, and (II)
Digital Microwave Corp. which manufactures digital microwave radios for short
and medium haul communications for multiple digital lines.

Patents

The Company believes its ability to compete depends primarily
on the technical competence, knowledge and experience of its management and
personnel and their abilities to develop improve and market its products.
Nevertheless, others may be able to learn certain of the Companys trade
secrets or copy its product designs. The Company does not presently own any
patents, however, the Company intends to file patent applications for any
patentable inventions, processes or improvements that the Company may develop in
the future when it believes that meaningful patent protection can be obtained.

The Israeli Ministry of Defense (IMOD) usually retains
certain rights to technologies and inventions resulting from the Companys
performance as a contractor under IMOD contracts and may generally disclose such
information to third parties, including other defense contractors who may be
competitors of the Company. When the IMOD funds research and development, it
usually acquires rights to data and title to inventions, and the Company may
retain a non-exclusive license for such inventions. The IMOD is, as a rule,
entitled to receive royalties on export sales, to the extent that such sales
resulted from IMOD-financed development. However, if the IMOD purchases only the
end product, the Company normally retains the principal rights to the
technology.

Government Regulations

Many of the component parts of the Companys products are
imported from the United States. Accordingly, the Company and/or its suppliers
may be required to obtain an export license, preference rating or other
government authorization in connection with components purchased in the United
States. To date, the Company has not experienced any difficulty in obtaining
such authorizations or licenses. In addition, unless the Company obtains prior
authorizations from the Office of Export Administration of the Department of
Commerce of the United States, the Company will not be allowed to export or
re-export to certain restricted countries, directly or indirectly, any of the
Companys products containing components imported from the United States. The
Company does not expect that this will be detrimental to the Companys
business. In addition, the Company will require the permission of the IMOD
before the Company could export any military microwave system. There can be no
assurance that the Company will be able to obtain such permission on a timely
basis or at all. The Company, however, has received such permission for the
export of the RSS, Altimeter tester and microwave components to certain
countries.

Product Warranty and Service

The Company generally provides the customer, at the time a
purchase contract is entered into, with a detailed list of Acceptance Test
Procedures. These procedures identify which tests the Companys products must
undergo and pass before the individual product would be delivered and accepted
by the customer. Certain customers require and pay for a Quality Test Procedure
(QTP) which is a specific procedure for testing the quality of certain of the
Companys products based on that customers specification revenues from such
arrangements are recognized after the customer acceptance. The Company generally
provides a warranty for parts and labor for one year from delivery of the
product, although in some cases a longer warranty period may be given. The
Company services all warranty claim. The Companys rate of returns for repair
under the warranty on all products is similar to that prevailing in the industry
and annually averages between 0.5% and 1% of total sales.

Employees

As of September 30, 2000, Microkim had a total of 26
employees in Israel including 10 in research and development, 5in
general management, administration and marketing and 11 in production.

The Companys employees do not belong to any labor
organization. Nevertheless, certain provisions of the collective bargaining
agreements between the Histadrut (General Federation of Labor in Israel) and the
Coordination Bureau of Economic Organizations (including the Industrialists
Association) are applicable to the Companys Israeli employees by order of the
Israeli Ministry of Labor. These provisions concern mainly the length of the
work day, minimum daily wages for professional workers, insurance for
work-related accidents, procedures for dismissing employees, determination of
severance pay and other conditions of employment. The Company generally provides
its Israeli employees with benefits and working conditions beyond the required
minimums.

A general practice followed by the Company is the
contribution of moneys on behalf of its senior Israeli employees to a fund known
as Managers Insurance. This fund provides a combination of a savings plan,
insurance and severance pay benefits to the employee, giving the employee a lump
sum payment upon retiring and securing his right to receive severance pay, if
legally entitled, upon termination of employment. The employee contributes an
amount equal to 5%of his wages and the employer contributes an
additional 13 1/3% of his wages.

In addition, Israeli law generally requires severance pay
(generally one months salary for each year of employment) upon the retirement
or death of an employee or termination of employment without due cause.
Furthermore, Israeli employees and employers are required to pay predetermined
sums to the National Insurance Institute, which is similar to the United States
Social Security Administration. Payments, up to a ceiling, amount to
approximately 12% of wages, with the employee contributing approximately 60% and
the employer approximately 40%.

Item 2

Properties

The Companys executive offices consist of approximately
400 square feet located at 445Central Ave., Cedarhurst, New York.
Microkims executive offices and manufacturing facilities are located in a new
light industrial area in the city of Tirat Hacarmel, outskirts of Haifa, Israel.
The location contains approximately 600 square meters at a monthly rental of
approximately $9,000 exclusive of utilities. The rent is linked to the Consumer
Price Index. The lease is for a period of five years and Microkim has an option
to renew the lease for additional three years.

Item3

Legal Proceeding

The Company is unaware of any pending legal proceedings other
than described below, the outcome of which, in the Companys view, will have a
material adverse effect on the Companys consolidated financial position or
results of operations.

In 1999, a claim by a former employee was commenced against
Microkim for patent infringement regarding a component of the microwave system.
The U.S District Court dismissed the action. The plaintiff appealed to the U.S
Federal Circuit Court which dismissed the action.



Item 4

Submission of Matters to a Vote of Security Holders

The Company held its annual meeting of shareholders on
December 12, 2000. At the meeting, Heather Loren, Ron Levy and Barry Braunstein
were each re-elected and Barry Septimus elected as directors of the Company for
a term of one year or until his/her successor is duly elected and qualified. In
addition, the shareholders approved the 2000 Employee Stock Option Plan.
4,460,928 shares were voted for the plan and 22,270 shares voted against the
Plan.









Part II



> Item 5

MARKET FOR THE COMPANYS COMMON

EQUITY AND RELATED STOCKHOLDER MATTERS

The Companys securities are listed for trading on the OTC
Bulletin Board under the trading symbol MICE. The following table sets forth the
range of high and low bid prices of the Companys Common Stock for the fiscal
quarters of 1999 and 2000. These quotations represent prices between dealers in
securities, do not include retail mark-ups, markdowns or commissions and do not
necessarily represent actual transactions.







|                    | Fiscal Year Ended
      September 30,2000
      High Bid Low Bid | Fiscal Year Ended
      September 30,1999
      High Bid Low Bid
|------------------- | ---------------------------------------------------------------- | ----------------------------------------------------------------
|COMMON STOCK (MICE) |                                                                  |                                                                 
|First Quarter       | 3.5                                                              | 0.56                                                            
|Second Quarter      | 3.5                                                              | 0.56                                                            
|Third Quarter       | 2.0                                                              | 2.0                                                             
|Fourth Quarter      | 2.0                                                              | 2.0                                                             





On December 12, 2000, the closing bid price of the Common
Stock on OTC Bulletin Board was $ 7/16.The Company has not paid a dividend on
its shares of common stock and does not anticipate paying cash dividends in the
foreseeable future.

Item 6

MANAGEMENTS DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

All of the Companys operations in Fiscal 2000 were
conducted through its Israeli subsidiary, Microkim and until March 27, 2000
through RadioTel, which was 51% owned by the Company until that date. After such
date, the equity method of accounting has been accounted. Microkim maintains its
financial records in United States Dollars. Transactions and balances originally
denominated in dollars are presented at their original amounts. Transactions and
balances in currencies other than the dollar are remeasured into dollars in
accordance with the principles set forth in Statement No. 52 of the Financial
Accounting Standards Board.

Fluctuations in the rate of exchange between the dollar and
such other currencies result in the recognition of financial income or loss. The
Company manages its Israeli operations with the object of protecting against
material net financial loss in U.S. dollar terms from the impact of Israeli
inflation and currency devaluation on its non-U.S. dollar assets and
liabilities. In the twelve month period ended September 30, 2000 (Fiscal 2000),
the Israeli Consumer Price Index (ICPI) has not changed,as
compared with a 5.99% aggregated revaluation of the shekel against the U.S.
dollar.

In computing taxable income, the Companys Israeli
subsidiary is entitled under Israeli income tax rules to certain deductions
designed to avoid taxation of inflationary gains measured in Israeli currency.
If these laws or governmental programs were modified or terminated as they apply
to the Company, there could be an adverse effect on the results of operations of
the Company.

Financial Condition:

The Companys operations in Fiscal 2000 have been financed
principally by revenues from operations, proceeds from shareholders loans in
the subsidiary and research and development grants.

The total amount of all guarantees from banks as of September
30, 2000 were approximately $ 64,000 and are secured by liens on certain of
Microkims property and equipment, share capital and insurance rights, and by
a secured interest in all of Microkims assets. This amount includes
performance guarantees pursuant to contracts with customers.

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
100%-150% of such grant (dollar linked). Royalties paid during Fiscal 2000
amounted to approximately $29,382.

In the year ended September 30, 2000, net cash and cash
equivalents increased by $106,000 as a result of $1,150,000 proceeds from
shareholders loan, $63,000 from short term bank overdraft,$25,000 from receipts
on account of subsidiaries shares and $ 1,000 issuance of common stock. This was
offset by approximately $807,000 from cash used in operating activities and
$319,000 of cash used in investing activities.

As of September 30, 2000, $38,000 of cash and cash
equivalents were denominated in new Israeli Shekels.

Due to the weakness of the defense market, the Company
intends to place emphasis on increasing its commercial line of products and
commercial market base. It is the policy of the Company to accept only those
orders which are worthwhile economically, and the Company has also tended to
accept mainly larger orders for a limited number of projects, the most important
of which tend to be with strategic partners as with the projects with Comptek
(formerly ASDI). A significant portion of the future revenues of the Company
will be dependent on the success of these projects.

Results of Operations

Year ended September 30, 2000 compared to the year ended
September 30, 1999.

Sales in the Fiscal year ended September 30, 2000 (Fiscal
2000), were approximately $2,642,000 as compared with approximately $2,202,000
in the year ended September 30, 1999 (Fiscal 1999). The increase in sales
compared to Fiscal 1999, resulted from the completion of certain products and
their delivery in the 2000 period. Sales in Fiscal 2000 included approximately
$2,697,000 revenues recognized by MicroKim less approximately $55,000 sales to
RadioTel. compared to Fiscal 1999 that included approximately $ 2,202,000
revenues recognized by MicroKim.

Cost of sales in Fiscal 2000 was 67% of sales or
approximately $1,774,000 as compared with 69%or approximately $1,525,000
in the same period in 1999.The decrease as a percentage of sales resulted from
the sales of a different mix of products in Fiscal 2000. In Fiscal 2000, cost of
materials was approximately 30% of sales compared to approximately 36% of sales
in Fiscal 1999, subcontractor expenses were approximately 1% of sales in Fiscal
2000 compared to approximately 1% of sales in Fiscal 1999, salaries were
approximately 20% of sales in Fiscal 2000 compared to approximately 22% in
Fiscal 1999 and other expenses, and depreciation expenses were approximately 9%
of sales in Fiscal 2000 compared to approximately 9% of sales in Fiscal 1999.

Research and Development expenses net of government subsidies
were approximately $785,000 or 30% of sales in Fiscal 2000 compared with
approximately $1,674,000 or 76% of sales in Fiscal 1999.The decrease resulted
from participation of one of Radio Tels customers in the research and
development expenses for the period ending March 27, 2000 in the amount of
approximately $ 305,000.

Selling and Marketing expenses increased to approximately
$493,000 or 17% of sales in Fiscal 2000 compared to approximately $250,000 or
11% of sales in Fiscal 1999. The increase resulted primarily from an increase in
marketing activities.

General and Administrative expenses were approximately
$777,000 or 26% of sales in Fiscal 2000 compared to approximately $902,000 or
41% of sales in Fiscal 1999. The reduction in General and Administrative
expenses was caused mainly by the improved efficiency of the companies and the
change of accounting of RadioTel to the equity method after March 27, 2000.

The Companys results of operations include its equity in
the earnings of its affiliate, Micel Wireless Corp. amounting to $168,000.

On March 31, 2000 as a result of Radio Tels decnsolidated,
a cumulative effect income pick-up had been recognized in the amount of
$4,626,000.

Due to the above, in Fiscal 2000, the Company reported a net
income of approximately $3,309,000 or $0.53 per common share and in Fiscal 1999,
the Company reported a net loss of $2,058,000 or $0.33 per share.

ITEM 7. Financial Statements

See Pages F-l through F-25.

> ITEM 8. Changes in and disagreements with Accountants
>     on Accounting and Financial Disclosure

Not Applicable

ITEM 9. Directors and Executive Officers:

The officers and directors of the Company are as follows:

Name Age Position

Ron Levy 52 President and Director

Avraham Yanai 60 Vice President

David Selengut 45 Secretary

Barry Braunstein 41 Director

Heather Sabatier 32 Director

Barry Septimus 51 Director

Ron Levy has been President and Director of the Company since
October 1, 1996. He has also been the President of RadioTel since October 1,
1996. Prior to that time he was a consultant to Microkim Ltd., the Companys
wholly owned subsidiary. From October 1992 to November 1995,he was
President and Chief Executive Officer at EUROM Flash Ware Solutions Ltd. and
from September 1990 to September 1992 he was Project Manager at SanDisk
Corporation in Santa Clara, CA. From September 1982 until September 1990, he was
a manager of Tadiran Communication Micro Electronic Center. Mr. Levy received
his B.S. degree in Electrical Engineering and Computer Science from the
University of California in Berkeley.

Avraham Yanai has been Vice President of the Company since
December 1999. He has also been the General manager of Microkim since April
1999. From January 1996 to March 1999 he was a consultant on issues relating to
Quality Assurance and projects management. From 1994 to December 1995 he was the
Quality Assurance manager of Microkim.

David Selengut has been the secretary of the Company since
November 1997. Mr. Selengut has been a member of the law firm Ellenoff Grossman
Schole & Cyruli, LLP since May 1998, a partner in the Law Firm of Bernstein
& Wasserman, LLP from July 1997 to May 1998 and was a Partner at the Law
Firm of Singer, Bienenstock, Zamansky, Ogele & Selengut, LLP from May 1995
until April 1997. Those firms have acted as counsel to the Company with respect
to certain matters. From May 1988 until April 1995, he was an associate at the
Law Firm of Neiman Ginsburg & Mairanz P.C., New York, New York.

Barry Braunstein has been a director of the Company since
April 1994. From 1983 to the present, he has been the administrator of Laconia
Nursing Home in Bronx, New York. Mr. Braunstein received his B.A. Degree from
Adelphi University in 1985.

Heather Sabtier (formerly Loren) has been a director of the
Company since August 1995. From February 2000 until present, she has been the
director of business development at ParentWatch. From September 1994 until
February 2000 she was a management consultant with the firm of
PricewaterhouseCoopers, LLP. From December 1991 until August of 1992, she was in
geriatric research at Haddasa Hospital in Jerusalem. From June 1989 until
December 1991 she held various managerial positions at the Bridgeport Healthcare
Center and White Plains Nursing Home. She received her Masters degree in
management from Northwestern University in 1994 and a B.A. degree from Columbia
University.

Barry Septimus has been a director of the Company since
December 2000 and the President of Quest Capital Corp., a consulting company,
since 1993. He has also been the Chief Executive Officer of Pagetalk, Inc., a
web audio publishing company, since July 1998.

Each of the Companys Directors has been elected to serve
until the next annual meeting of the Shareholders. The Companys executive
officers are appointed annually by the Companys Directors. The Secretary is a
non-executive position. Each of the Companys Directors and Officers continues
to serve until his successor has been duly elected and qualified. The outside
directors are entitled to receive $6,000 per year from the Company. The
directors of Microkim are Ron Levy and Tzvi Segal. To the Companys knowledge,
there was no delinquent Section 16(a) filers for transactions in the Companys
securities during fiscal year ended September 30, 2000.

Item 10.

Executive Compensation

The following table sets forth all compensation received for
services rendered to the Company by certain executive officers during each of
the past three fiscal years ended September 30, 2000. No other executive officer
received compensation in excess of $100,000 during any of the last three fiscal
years.



SUMMARY COMPENSATION TABLE



|Name and Principal Position                       |      | Annual Compensation |                           | Long Term Compensations
|------------------------------------------------- | ---- | ------------------- | ------------------------- | -----------------------
|                                                  | Year | Salary              | Other Annual Compensation | Awards Options #       
|Ron Levy,President, Chief Executive
      Officer | 2000 | $173,743            | $27,027 (1)               | -0-(2)                 
|Ron Levy,President, Chief Executive
      Officer | 1999 | $107,977            | $25,662 (1)               | -0-(2)                 
|Ron Levy,President, Chief Executive
      Officer | 1998 | $106,883            | $24,797 (1)               | 0(2)                   





(1) Total value of non-cash compensation.

> Mr. Levy receives his salary from RadioTel Ltd. He also
>     received options to purchase 803,120 of RadioTels common stock, a
>     subsidiary of the Company, 487,500 options exercisable for a nominal amount
>     and 315,620 exercisable for $1.1 per share. The option vests to the extent
>     of one-half at the end of two years from the date of commencement of
>     employment and the remainder at the rate of two percent per month commencing
>     on the 25th month from the date of employment.

CHART FOR OPTION GRANTS IN 2000



|Name (a) | Options Granted (b) | Percent of total Option Granted to Employees in Fiscal
      Year 2000 (c) | Exercise Price (d) | Expiration Date (e)
|-------- | ------------------- | -------------------------------------------------------------------------- | ------------------ | -------------------
|Ron Levy | 0(1)                | -0-                                                                        | -0-                |                    
|         |                     |                                                                            |                    |                    
|         |                     |                                                                            |                    |                    















AGGREGATED OPTION EXERCIES IN 2000 AND FOR YEAR-END VALUES



|Name     | Shares Acquired on Exercise (#) (b) | Value Realized ($) (c) | Number of Unexercised Options at Fiscal Year-End
      Exercisable / Unexercisable (d) | Value of Unexercised in-the-Money Options
      at Fiscal Year-End ($)
      Exercisable / Unexercisable (e)
|-------- | ----------------------------------- | ---------------------- | -------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------
|Ron Levy | -0-                                 | -0-                    | 100,000/0(1)                                                                           | -0-/-0-                                                                                                     

> Does not include the option described in note (2) to the
>     Summary Compensation Table.
>     Stock Option Plan

In December 2000, the Companys Board of Directors adopted,
and its Shareholders approved, the 2000 Stock Option Plan (the Plan), which
provides for the grant of incentive and/or non-qualified stock options to
purchase up to 900,000 shares of Common Stock to any officer, director,
consultant or employee when the Board, in its sole discretion, determines that a
grant of options to such person would be in the best interests of the Company.
Incentive stock options granted under the Plan shall be pursuant to a written
agreement for a term not exceeding ten (10) years (five (5)years for
Shareholders owning more than ten percent (10%) of the Common Stock of the
Company). The exercise price of the options shall be established by the Board at
the time of grant of the option but cannot be less than one hundred percent
(100%) of the fair market value at the time of grant of the option. If the
recipient owns more than ten percent (10%) of the Common Stock of the Company,
the exercise price must be at least one hundred and ten percent (110%) of the
fair market value of the underlying Common Stock at the time of grant. The
aggregate fair market value (determined as of the date of grant) of the shares
of Common Stock with respect to which incentive stock options are exercisable
for the first time by an employee during any calendar year may not exceed
$100,000. The Board of Directors determines other terms and conditions of
options granted under the Plan, which expires December 2010. The number of
shares subject to outstanding options will be appropriately adjusted upon the
happening of any stock split, stock dividend, recapitalization, combination,
subdivision, issuance of rights or other similar corporate change. Two thousand
of the options previously granted under the 1990 Stock Option Plan has been
exercised in fiscal 1999.

Mr. Tuvia Barak, a principal in Crossways Consulting Group,
Inc. and Mr. Ron Levy, President of the Company, each received an option,
exercisable for nominal value, to purchase up to 803,120 Ordinary Shares of NIS
0.01 par value each of RadioTel Ltd., a subsidiary of the Company, the options
vest to the extent of one half at the end of two years and the remainder at the
rate of 2% per month commencing on the 25th month from date of commencement of
employment. The options will only vest if such persons are still an employee or
a consultant to RadioTel.







Item 11. Security Ownership of Certain Beneficial Owners
and Management

The following table sets forth, as of December 29, 2000,
certain information as to the stock ownership of each person known by the
Company to beneficially own 5%or more of the Companys outstanding
Common Stock, by each director of the Company who owns any shares of the
Companys Common Stock and by all officers and directors as a group:

Percentage of

Name of Amount and Nature of Class as of

Beneficial Owner Beneficial Ownership (1) December
29, 2000

Bonnie Septimus (2) 460,600 7.4%
72 Lord Avenue

Lawrence, New York

Barry Septimus (3) 515,563 8.1%
72 Lord Avenue

Lawrence, New York

Heather Sabatier (4) 192,6253.0%

Barry Braunstein (5)248,000 4.0%

Ron Levy (6) 100,000 1.6%

Tuvia Barak (7) 244,000 3.8%

All officers and directors

as a group (8) (4 persons) 1,056,188 16.3%



(1) Except as otherwise indicated, all shares are
beneficially owned, and the sole voting and investment power is held by the
persons named.



(2) This includes 6,000 Shares owned by certain of her
children but does not include Shares listed below owned by her husband, Barry
Septimus or Shares owned by her independent children or Shares held in trust for
her children where she is not the Trustee.

(3) Does not include Shares owned by Mr. Septimus children or
his wife, Bonnie Septimus, listed above. Includes 100,000 Shares issuable upon
exercise of options owned by Quest Enterprises, Inc. which is 50%owned
by Mr. Septimus.

(4) Includes 33,000 Shares issuable upon exercise of stock
options.

(5) Includes 25,000 Shares issuable upon exercise of stock
options and Shares, which have been purchased by Mr. Braunstein and his family
in private placements.

(6) Consists of shares issuable upon exercise of stock
options.

(7) Includes 132,000 shares issuable upon exercise of options
owned by a company in which Mr. Barak is a principal.

(8) Includes options and warrants described in footnotes (3)(4)(5)
and (6) above.



Item 12. Certain Relations and Related Transactions

On December, 1998 the Company entered into a consulting
agreement with Crossways Consulting Group, Inc. (Crossways) which replaced the
agreement with Quest Enterprise Inc (Quest). Crossways provides marketing,
consulting and other services as reasonably required by the Company for the
purpose of securing for the Company joint development programs, strategic
partnerships, business opportunities and production and sales contracts with
North American companies. The Company pays Crossways a fee in the amount of
$6,000 per month plus expenses. In addition, in the event that the services
provided by Crossways to the Company result in sales in North America, Crossways
will be entitled to 1.5% of such sales. Crossways was granted options to
purchase 220,000 shares of Common Stock at $2.00 per share until December 31,
2003, exercisable to the extent of 20% thereof each year. Mr. Tuvia Barak, a
principle in Quest, is the principal of Crossways. RadioTel Ltd. also has a
consulting agreement with Crossways Consulting Group. Inc. under which RadioTel
pays Crossways a monthly consulting fee of $6,000.

Mr. Tuvia Barak and Mr. Ron Levy, President of the Company,
each received an option, exercisable for nominal value, to purchase up to 6% of
the equity of RadioTel Ltd., an affiliate of the Company. The options vest to
the extent of one half at the end of twoyears and the remainder at the
rate of 2% per month commencing on the 25th month from date of commencement of
employment. The options will only vest if such persons are still an employee or
a consultant to RadioTel.

In addition, the Company has been informed that Mr. Barak and
Mr. Levy collectively own 10% of EBS, Inc., the other Shareholder of Micel
Wireless Corp.

Item 13. Exhibits, List and Reports on form 8-K.

(a) Exhibits.

3.1 - Certificate of Incorporation of Registrant (1)
3.2 - Certificates of Amendment to the Certificate of Incorporation of
Registrant (1)
3.3 - By-Laws (1)
4.1 - Form of Warrant Agreement (1)
4.2 - Form of Unit Purchase Option (1)

10.3 - 1990 Stock Option Plan (1)

> 10.4 - Agreement with Quest Enterprises, Inc. (2)
>     10.5 - Representative Agreement with RF Electronic Sales, Inc. (5)
>     10.6 - Memorandum of Understanding with Advanced Systems Development Inc.
>     (5)
>     10.7 - Organization Agreement among Microkim Ltd., Fairchild Data Inc.,
>     Teuza - A Fairchild Technology Venture Ltd. and Misat Ltd. (3)
>     10.8 - Agreements dated as of October 1, 1995 between Teledata
>     Communications Ltd., Microkim Ltd. and  ALL Systems, Inc. (6)
>     10.9 - Shareholders Agreement with Export Business & Services, Inc.
>     (7)
>     10.10 - Agreement with ArrayComm. Inc. (7)
>     10.11 - Stock Purchase Agreement between the Company, RadioTel Ltd. and
>     Clal Ventures Capital Fund Limited Partnership. (8)
>     10.12 - Agreement between the Company and Crossways Consulting Group,
>     Inc. (9)

(1) Filed with Registration Statement 33-405 12

(2) Filed with Form 10-Q for the quarter ended June 30, 1993

(3) Filed with Form 10-K for year ended September 30, 1992

(4) Filed with Form 10-KSB for the year ended September 30, 1993

(5) Filed with Form 10-KSB for the year ended September 30, 1994

(6) Filed with Form 10-KSB for year ended September 30, 1995 Reports on form
8-K

(7) Filed with Form l0-KSB for year ended September 30, 1996 None

> Filed with Form 10-KSB for year ended September 30, 1997
>     Filed with Form 10-KSB for year ended September 30,1998





































































MICEL CORP. AND SUBSIDIARY





CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2000





U.S. DOLLARS IN THOUSANDS









INDEX











|                                              | Page      
|--------------------------------------------- | ----------
|                                              |           
|Report of Independent Auditors                | F-2       
|                                              |           
|Consolidated Balance Sheet                    | F-3 - F-4 
|                                              |           
|Consolidated Statements of Operations         | F-5       
|                                              |           
|Statements of Changes in Shareholders' Equity | F-6       
|                                              |           
|Consolidated Statements of Cash Flows         | F-7       
|                                              |           
|Notes to Consolidated Financial Statements    | F-8 - F-24
|                                              |           
|Signatures                                    | F-25      







- - - - - - - -





|ERNST & YOUNG
|-------------















REPORT OF INDEPENDENT AUDITORS



To the Shareholders of



MICEL CORP. AND SUBSIDIARY









We have audited the accompanying consolidated balance sheet of Micel Corp.
(the Company) and its subsidiary as of September 30, 2000, and the related
consolidated statements of operations, changes in shareholders' equity and cash
flows for each of the two years in the period ended September 30, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of a certain affiliate,
the investment in which on the equity basis of accounting totaled $ 204
thousand as of September 30, 2000, and the Company's share in the net income of
which totaled $ 155 thousand and $ 53 thousand for each of the two
years in the period ended September 30, 2000, respectively. These financial
statements were audited by other auditors whose reports have been furnished to
us, and our opinion, insofar as it relates to data included for this affiliate,
is based solely on the reports of the other auditors.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of the other
auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of the Company and its
subsidiary as of September 30, 2000, and the consolidated results of their
operations and cash flows for each of the two years in the period ended
September 30, 2000, in conformity with accounting principles generally accepted
in the United States.











|Tel-Aviv, Israel           | KOST FORER & GABBAY                    
|-------------------------- | ---------------------------------------
|January 12, 2000           | A Member of Ernst & Young International
|MICEL CORP. AND SUBSIDIARY
|CONSOLIDATED BALANCE SHEET
|U.S. dollars in thousands 





|                                                |  |  |  | September 30,
|----------------------------------------------- |  |  |  | -------------
|                                                |  |  |  | 2000         
|ASSETS                                          |  |  |  |              
|                                                |  |  |  |              
|CURRENT ASSETS:                                 |  |  |  |              
|Cash and cash equivalents                       |  |  |  | $ 466        
|Trade receivables                               |  |  |  | 415          
|Other accounts receivable and prepaid expenses  |  |  |  | 44           
|Inventories (Note 3)                            |  |  |  | 676          
|                                                |  |  |  |              
|Totalcurrent assets                             |  |  |  | 1,601        
|                                                |  |  |  |              
|INVESTMENTS IN AN AFFILIATED COMPANIES (Note 4) |  |  |  | 217          
|                                                |  |  |  |              
|SEVERANCE PAY FUND                              |  |  |  | 156          
|                                                |  |  |  |              
|PROPERTY AND EQUIPMENT, NET (Note 5)            |  |  |  | 298          
|                                                |  |  |  |              
|Totalassets                                     |  |  |  | $ 2,272      







The accompanying notes are an integral part of the consolidated financial
statements.



|MICEL CORP. AND SUBSIDIARY
|--------------------------
|CONSOLIDATED BALANCE SHEET

U.S. dollars in thousands (except share data)



|                                                                                                             |  |  |  | September 30,
|------------------------------------------------------------------------------------------------------------ |  |  |  | -------------
|                                                                                                             |  |  |  | 2000         
|                                                                                                             |  |  |  |              
|LIABILITIES AND SHAREHOLDERS' EQUITY                                                                         |  |  |  |              
|                                                                                                             |  |  |  |              
|CURRENT LIABILITIES:                                                                                         |  |  |  |              
|Trade payables                                                                                               |  |  |  | $ 327        
|Other accounts payable and accrued expenses                                                                  |  |  |  | 197          
|                                                                                                             |  |  |  |              
|Totalcurrent
      liabilities                                                                               |  |  |  | 524          
|                                                                                                             |  |  |  |              
|ACCRUED SEVERANCE PAY                                                                                        |  |  |  | 217          
|                                                                                                             |  |  |  |              
|COMMITMENTS AND CONTINGENT LIABILITIES (Note 8)                                                              |  |  |  |              
|                                                                                                             |  |  |  |              
|SHAREHOLDERS' EQUITY (Note 9):                                                                               |  |  |  |              
|Common stock, $ 0.01 par value - 25,000,000 shares
      authorized; 6,289,880 shares issued and outstanding |  |  |  | 63           
|Additional paid-in capital                                                                                   |  |  |  | 7,832        
|Accumulated deficit                                                                                          |  |  |  | (6,364)      
|                                                                                                             |  |  |  |              
|Totalshareholders' equity                                                                                    |  |  |  | 1,531        
|                                                                                                             |  |  |  |              
|                                                                                                             |  |  |  | $ 2,272      











The accompanying notes are an integral part of the
consolidated financial statements.





|MICEL CORP. AND SUBSIDIARY                                 
|-----------------------------------------------------------
|CONSOLIDATED STATEMENTS OF OPERATIONS                      
|U.S. dollars in thousands (except share and per share data)



|                                                                                               |  | Year ended   
|---------------------------------------------------------------------------------------------- |  | -------------
|                                                                                               |  | September 30,
|                                                                                               |  | (* 1999      
|                                                                                               |  |              
|Revenues                                                                                       |  | $ 2,202      
|Cost of revenues                                                                               |  | 1,525        
|                                                                                               |  |              
|Gross profit                                                                                   |  | 677          
|                                                                                               |  |              
|Research and development expenses, net (Note 10e)                                              |  | 1,674        
|Selling and marketing expenses, net                                                            |  | 250          
|General and administrative expenses                                                            |  | 902          
|                                                                                               |  |              
|Totaloperating expenses                                                                        |  | 2,826        
|                                                                                               |  |              
|Operating loss                                                                                 |  | (2,149)      
|Financial income(expenses) income, net (Note 10f)                                              |  | 38           
|                                                                                               |  |              
|Loss before earnings from affiliated company
      and minority interest (Note 7d)             |  | (2,111)      
|Equity in earnings of affiliated company                                                       |  | 53           
|Effect of deconsolidation of investment                                                        |  | -            
|                                                                                               |  |              
|Net Income (loss)                                                                              |  | $ ( 2,058)   
|                                                                                               |  |              
|Basic and diluted net income (loss) per share                                                  |  | $ ( 0.33)    
|                                                                                               |  |              
|Weighted average number of shares used in computing
      basic and diluted net loss per share |  | 6,286,298    

*) Restatement.



The accompanying notes are an integral part of the consolidated financial
statements.





|MICEL CORP. AND SUBSIDIARY                                      
|----------------------------------------------------------------
|STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
      (DEFICIENCY)
|U.S. dollars in thousands (except share data)                   





|                                                                                    |              |            |          |            |                |             
|----------------------------------------------------------------------------------- | ------------ | ---------- | -------- | ---------- | -------------- | ------------
|                                                                                    | Common stock | Additional | Receipts |            |                | Total       
|                                                                                    | Number of    |            | paid-in  | on account | Deferred stock | Accumulated 
|                                                                                    | shares       | Amount     | capital  | of shares  | compensation   | deficit     
|                                                                                    |              |            |          |            |                |             
|Balance as of October 1, 1999                                                       | 5,900,380    | $ 59       | $ 7,606  | $ 400      | $ (317)        | $ (* (7,615)
|Receipts on account of shares                                                       | -            | -          | -        | 375        | -              | -           
|Compensation from issuance of warrants to
      consultants                         | -            | -          | 140      | -          | -              | -           
|Deferred stock compensation                                                         | -            | -          | 33       | -          | (33)           | -           
|Amortization of deferred stock compensation                                         | -            | -          | -        | -          | 121            | -           
|Net loss                                                                            | -            | -          | -        | -          | -              | (* (2,058)) 
|                                                                                    |              |            |          |            |                |             
|Balance as of September 30, 1999                                                    | 5,900,380    | 59         | 7,779    | 775        | (229)          | *( (9,673)  
|Issuance of share capital, net                                                      | 387,500      | 4          | 771      | (775)      | -              | -           
|Exercise of options                                                                 | 2,000        | **) -      | 1        | -          | -              | -           
|Compensation from issuance of warrants to
      consultants                         | -            | -          | 54       | -          | -              | -           
|Amortization of deferred stock compensation                                         | -            | -          | -        | -          | 81             | -           
|Adjustment to carrying amount of investment, as a result of private
      placement | -            | -          | (773)    | -          | 148            | -           
|Net income                                                                          | -            | -          | -        | -          | -              | 3,309       
|                                                                                    |              |            |          |            |                |             
|Balance as of September 30, 2000                                                    | 6,289,880    | $ 63       | $ 7,832  | $ -        | $ -            | $ (6,364)   



*) Restatement.

**)





The accompanying notes are an integral part of the consolidated financial
statements.





|MICEL CORP. AND SUBSIDIARY                                                       
|---------------------------------------------------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS                                            
|U.S. dollars in thousands                                                        
|                                                                                 
|                                                                                 
|                                                                                 
|Cash flows from operating activities:                                            
|Net loss                                                                         
|Adjustments to reconcile net loss to net cash used in operating
      activities:
|Depreciation                                                                     
|Equity in earnings of affiliated company                                         
|Compensation from issuance of warrants to consultants                            
|Amortization of deferred stock compensation                                      
|Compensation due to issuance of stock in subsidiary                              
|Effect of deconsolidation of investment                                          
|Decrease (increase) in trade receivables                                         
|Decrease (increase) in other accounts receivable and prepaid expenses            
|Decrease (increase) in inventories                                               
|Increase (decrease) in trade payables                                            
|Increase (decrease) in other accounts payable and accrued expenses               
|Increase in accrued severance pay, net                                           
|Others                                                                           
|                                                                                 
|Net cash used in operating activities                                            
|                                                                                 
|Cash flows from investing activities:                                            
|Purchase of property and equipment                                               
|Proceeds from sale of property and equipment                                     
|Proceeds from loan to an affiliated company                                      
|                                                                                 
|Net cash used in investing activities                                            
|                                                                                 
|Cash flows from financing activities:                                            
|Repayment of long-term debt                                                      
|Proceeds from long-term debt in former subsidiary                                
|Short-term bank credit, net                                                      
|Proceeds from exercise of options                                                
|Receipts on account of shares                                                    
|Issuance of subsidiary's shares to a third party                                 
|Receipts on account of minority shares in a subsidiary                           
|                                                                                 
|Net cash provided by financing activities                                        
|                                                                                 
|Increase (decrease) in cash and cash equivalents                                 
|Cash and cash equivalents at the beginning of the year                           
|                                                                                 
|Cash and cash equivalents at the end of the year                                 
|                                                                                 
|Supplemental disclosure of cash flow activities:                                 
|Cash paid during the year for interest                                           
|Supplemental disclosure of non-cash financing activities:                        
|Issuance of share capital, net, in respect of receipts on account of
      shares

*) Restatement.

The accompanying notes are an integral part of the consolidated financial
statements.



NOTE 1:- GENERAL

Micel Corp. (the Parent or Micel) was incorporated on June 25, 1987 and
operates in the United States of America, and in Israel through its Israeli
subsidiary (collectively the Company). The principal business activities of the
Company are the production, development and marketing of electronic equipment.
The Company primarily markets its products in the United States and in Israel.

Micel's subsidiary and affiliates:

a. Microkim Ltd. (Microkim):

Microkim a wholly owned subsidiary of Micel was founded in 1972 in Israel, by
M/A Comm, Microkim is dedicated to providing advanced products for a broad range
of military and commercial applications. The Company is a 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.

b. RadioTel Ltd. (RadioTel):

RadioTel was established in 1996 in Israel to develop a managed wireless
Synchronous Digital Hierarchy (SDH) transmission network.

These wireless networks are used to extend the existing and future
infrastructure while at the same time supplying full transparency of all
protocols with the same reliability and uninterrupted service of wireline
services.

As of March 27, 2000, Micel held 51.5% of the shares in RadioTel. On March
27, 2000, RadioTel converted a loan in the amount of $ 1,200 into 419,860 Class
B Preferred shares and completed a private placement of 3,072,990 class C
Preferred shares to third parties and existing shareholders for net proceeds of
aproximately $ 10,185, at which time, Micel's ownership decreased to 33.7%, and
RadioTel, which had previously been fully consolidated, was accounted for by the
equity method. As a result of deconsolidation the Company recorded a restatement
regarding to previous years.(see note 4). The consolidated statements of
operations include details of operations of Radio Tel for the six months period
ended March 31, 2000.

c. Micel Wireless Corp. (Micel Wireless):

Micel Wireless, 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 is 50% held by the Parent and 50% held by Export Business
& Services, Inc. (EBS) and accounted for by the equity method.













> 

Major customers data; percentage of total revenues:

The revenues as for the year ended September 30, 2000 derived from limited
number of customers which the two major customers represents 50 % of the total
revenues.

e. Major supplier data:

The Company depends on a limited number of components suppliers. The
Companys major supplier provides an approximately 30% of the components. If
any of these suppliers becomes unable or unwilling to continue to supply the
components, no severe damage could infect the Company due to its ability to
engage with other suppliers.



NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements are prepared according to United States
generally accpted accounting principles (US GAAP):

The significant accounting policies applied in the financial statements are
as follows:

a. Use of estimates:

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

b. Principles of consolidation:

> 

The consolidated financial statements include the accounts of the
        parent and its subsidiary. Intercompany accounts and transactions have
        been eliminated on consolidation.

Financial statements in US dollars:

The functional currency of the Company and its subsidiary is the U.S dollar,
as the U.S. dollar is the primary currency of the economic environment in which
the Company and its subsidiary have operated and expect to continue to operate
in the foreseeable future. The majority of Microkim's and Radiotels
operations are currently conducted in Israel and most of the Israeli expenses
are currently paid in new Israeli shekels (NIS); however, most of the expenses
are denominated and determined in U.S dollars. Most of Microkim's and
Radiotels sales and Financing activities including loans, equity transactions
and cash investments, are made in U.S. dollars. In addition, all of Micel's
costs are incurred in dollars.

Company's management believes that the dollar is the primary currency in the
economic environment in which it operates, therefore the dollar is its
functional and reporting currency and, accordingly, monetary accounts maintained
in currencies other than the dollar (principally cash and liabilities) are
remeasured using the foreign exchange rate at the balance sheet date.
Operational accounts and non-monetary balance sheet accounts are measured and
recorded at the rate in effect at the date of the transaction. The effects of
foreign currency remeasurement are reported in the statement of operations as
financial income, or expenses, as appropriate.

d.

> The Company considers all highly liquid
>           investments, originally purchased with maturities of three months or
>           less, to be cash equivalents.

e.



> Inventories are stated at the lower of cost or
>           market value. Inventory write-offs are provided to cover risks arising
>           from slow-moving items or technological obsolescence.
>           Cost is determined as follows:
>           
>           Raw materials: Using the weighted average basis.
>             In process inventories: Raw materials and
>             components - on the weighted average basis.
>             Labor and overhead - on the basis of actual
>             costs.

f.



The investment in companies, over which the Company can
exercise significant influence (generally, entities in which the Company holds
20% to 50% of ownership or voting rights), are presented using the equity method
of accounting. The Company generally discontinues applying the equity method
when its investment (including advances and loans) is reduced to zero and it has
not guaranteed obligations of the affiliate of otherwise committed to provide
further financial support to the affiliate. Where the Company's share of an
affiliate's losses is greater than the investment in such affiliate and in which
the Company has guaranteed obligations of the affiliate, the excess amount is
presented as a liability.



g. Property and equipment, net:

> Property and equipment are stated at cost less
>           accumulated depreciation.
>           Depreciation is calculated using the straight-line
>           method, over the estimated useful lives of the assets as follows.



|                                   |  | Years 
|---------------------------------- |  | ------
|                                   |  |       
|Computers and peripheral equipment |  | 3 - 6 
|Motor vehicles                     |  | 6     
|Office furniture and equipment     |  | 6 - 14

Leasehold improvements are amortized by the straight-line method, over the
shorter of the estimated useful life or the lease term agreement.

The Company and its subsidiary periodically assess the recoverability of the
carrying amount of property and equipment and provide for any possible
impairment loss based upon the difference between the carrying amount and fair
value of such assets, In accordance with SFAS-121 Accounting for Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of of September 30,
2000, no impairment losses have been identified.



Income taxes:



The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards (SFAS) 109, Accounting for Income
Taxes. This Statement prescribes the use of the liability method whereby
deferred tax asset and liability account balances are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse The Company provides a valuation
allowance, if necessary, to reduce deferred tax assets to their estimated
realizable value.







Revenues from sales of products are recognized in accordance with SAB 101
Revenue Recognition In Financial Statements upon delivery, when persuasive
evidence of an agreement exists, no significant vendor obligations remain, the
fee is fixed or determinable, and collectibillity of the related receivable is
probable.

Warranty costs:



The provision for product warranties is recorded for probable
costs, in connection with warranties based on the Company's experience and of
the Company's management and engineering estimates.

The Company generally provides a warranty for parts and labor for one year
from delivery of the product, although in some cases a longer warranty period
may be given.

k.

Research and development costs are charged to expenses as
incurred.

Participation regards to the research and development costs
is offset against the research and development costs as long as the rights in
the research and development remain in the Company.

Royalty-bearing grants:

Royalty-bearing grants from the Government of Israel for the
funding of approved research projects are recognized at the time the Company is
entitled to such grants on the basis of the related costs incurred, and are
recorded as a reduction of research and development costs. The Company recorded
grants in the amount of $ 748 and $ 838 for the years ended September 30, 1999,
and 2000, respectively.





Non-royalty bearing grants:

Non-royalty bearing grants from the Government of Israel for
funding certain approved marketing activities are recognized at the time in
which the Company is entitled to such grants on the basis of the related costs
incurred, and are recorded as a reduction of selling and marketing expenses. The
Company recorded grants in the amount of $ 11 and $ 0 for the years ended
September 30, 1999, and 2000, respectively.







n.



Basic net loss per share is computed based on the weighted average number of
Common Shares outstanding during each year. Diluted net loss per share is
computed based on the weighted average number of Common Shares outstanding each
year, plus dilutive potential Common Shares considered outstanding during the
year, in accordance with FASB Statement No. 128 Earnings per Share.

All outstanding stock options, and warrants have been excluded from the
calculation of the diluted net loss per Common share because all of such
securities are anti-dilutive for all periods presented. The total numbers of
shares related to the outstanding options and warrants excluded from the
calculations of diluted net loss per share were 847,120 and 845,120 for the
years ended September 30, 1999 and 2000, respectively.



o. Concentration of credit risks:



Financial instruments that potentially subject the Company to
concentrations of credit risks consist principally of cash and cash equivalents
and trade receivables.



The Companys cash and cash equivalents are invested in
deposits with major U.S and Israeli banks. Such deposits in the United States
may be in excess of insured limits and are not insured in other jurisdictions.
Management believes that the financial institutions that hold the Companys
investments are financially sound and, accordingly, minimal credit risks exist
with respect to these investments.



The Companys trade receivables are derived from sales to
customers located primarily in Israel and the United States. The Company
performs ongoing credit valuations of its customers and, to date, has not
experienced major losses from bad debts.

p. Fair value of financial instruments:



The financial instruments of the Company at September 30,
1999 and 2000 consist of non-derivative financial instruments included in
working capital: cash and cash equivalents, trade receivables, accounts
receivable, trade payables, accounts payable and accrued expenses. Due to the
short-term maturities of these financial instruments, their fair value
approximates their carrying amount.

q. Stock-based compensation:

The Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25), in accounting for its
employee stock options plan. Under APB 25 when the exercise price equals or is
above the market price of the underlying stock on the date of grant, no
compensation expense is recognized.

The Company recorded an expense in accordance with APB 25 in the amount of $ 121
and $ 81 for the years ending September 30, 1999 and 2000, respectively.

The Company applies SFAS 123 Accounting for Stock based Compensation and EITF
96-18 Accounting for Equity Instruments that are issued to other than Employees
for Acquiring or in conjunction with selling Goods of Service with respect to
options issued to non-employees. SFAS 123 requires the use of an option
valuation model to measure the fair value of the options at the grant date.

The pro-forma disclosures required by FASB 123, are provided in Note 9a.

r



The Company applies EITF 98-5, Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratios, with respect to conversion of the shareholders loan
into the affiliate shares.



Severance pay:

The Companys liability for severance pay is calculated
pursuant to Israeli severance pay law based on the most recent salary of the
employees multiplied by the number of years of employment, as of the balance
sheet date. Employees are entitled to one months salary for each year of
employment or a portion thereof. The Companys liability for all of its
employees, is fully provided by monthly deposits with insurance policies and by
an accrual.

The deposited funds include profits accumulated up to the
balance sheet date. The deposited funds may be withdrawn only upon the
fulfillment of the obligation pursuant to Israeli severance pay law or labor
agreements. The value of the deposited funds are based on the cash surrendered
value of these policies, and include immaterial profits.

Severance pay expenses amounted to $ 123 and $ 134 for the
years ended September 30, 1999, and 2000, respectively.



t. Future adoption of new accounting standard:



In June 1998, the Financial Accounting Standards Board issued
statement No. 133 (SFAS 133), Accounting for Derivative Instruments and Hedging
Activities (SFAS No. 133) as amended which is required to be adopted in years
beginning after June 15, 2000. Because of the Companys minimal use of
derivatives, management does not anticipate that the adoption of the new
statement will have a significant effect on earnings or the financial position
of the Company. Given the complexity of the new statement and that the impact
hinges on market values at the date of adoption it is extremely difficult to
estimate the impact of adoption unless adoption is imminent









> Reclassification:

Certain prior year amounts have been reclassified with
conform with current years financial statements presentation.













NOTE 3: - INVENTORIES

Inventories consist of the following:



|                       | September 30,
|---------------------- | -------------
|                       |              
|                       |              
|Raw materials          |              
|In process inventories |              
|                       |              
|                       |              



*) In process inventories include labor and overhead costs of
approximately $ 79.



NOTE 4: - INVESTMENTS IN AFFILIATED COMPANIES

> 

The Company applies the equity method of accounting to
    its investments in

Micel Wireless and Radiotel.





|a. Investment in Radiotel:                   |  |  |              
|-------------------------------------------- |  |  | -------------
|                                             |  |  | September 30,
|                                             |  |  | 2000         
|                                             |  |  |              
|Investment as of September 30, 1999 (I)      |  |  | (** (3,075)  
|Investment in Preferred class B shares       |  |  | 50           
|Equity in loses                              |  |  | (1,601)      
|Effect of deconsolidation of investment (ii) |  |  | 4,626        
|                                             |  |  |              
|                                             |  |  | $ -          



> Represent a restatement as a result of
>         misinterpretation of facts by not attributed importance to the Preferred
>         shares liquidation preference, and not as a result of mistaking
>         regarding to U.S. GAAP.
>         
>         
>         In case of deconsolidation
>         when the investee, which had been consolidated, had losses resulting in
>         negative investment account, accounting for the investment changes to
>         the equity method whereby the investment would not have



















|b. Investment in Micel Wireless: |  |  |              
|-------------------------------- |  |  | -------------
|                                 |  |  | September 30,
|                                 |  |  | 2000         
|                                 |  |  |              
|Investment in capital            |  |  | (* $ -       
|Accumulated income               |  |  | 217          
|                                 |  |  |              
|                                 |  |  | $ 217        



*) Represent an amount lower than $ 1.

**) Restatement.



NOTE 5: - PROPERTY AND EQUIPMENT, NET



|                                   |  |  | September 30,
|---------------------------------- |  |  | -------------
|                                   |  |  | 2000         
|Cost:                              |  |  |              
|Computers and peripheral equipment |  |  | $ 2,104      
|Motor vehicles                     |  |  | 93           
|Office furniture and equipment     |  |  | 54           
|Leasehold improvements             |  |  | 11           
|                                   |  |  | 2,262        
|Accumulated depreciation:          |  |  |              
|Computers and peripheral equipment |  |  | 1,859        
|Motor vehicles                     |  |  | 61           
|Office furniture and equipment     |  |  | 41           
|Leasehold improvements             |  |  | 3            
|                                   |  |  | 1,964        
|Depreciated cost                   |  |  | $ 298        



NOTE 6:- SHORT-TERM LINE OF CREDIT



> As of September 30, 2000, Microkim has an authorized
>       line of credit in the amount of $ 224 which is denominated in NIS and
>       bears interest at the rate of Prime +3%.
>       
>       The weighted average interest rate of the line of
>       credit for the year ended September 30, 2000 was approximately 13.1%.
>       
>       Microkim has an unused line of credit in the amount of
>       $ 224 as of September 30, 2000 (there is no fee for the unused portion of
>       the line of credit).

NOTE 7: - TAXES ON INCOME

a. Domestic (U.S.A.):



> As of September 30, 2000, Micel had approximately $
>           1.5 million in federal and state net operating losses carryforward to
>           offset against future taxable income. The net operating losses
>           carryforward expire in the years 2003 through 2020.

b. Foreign (Israel - Microkim):



> 1. Measurement of taxable income under the Income
>             Tax (Inflationary Adjustments) Law, 1985:
>             
>             Under this law, taxable income is measured in
>             real terms, in accordance with the changes in the Israeli CPI. The
>             Companys Israeli subsidiary elected to measure its results on the
>             basis of changes in the Israeli CPI. The difference between the
>             annual change in the Israeli CPI and in the NIS/dollar exchange rate
>             causes a further difference between taxable income and the income
>             before taxes shown in the financial statements. In accordance with
>             paragraph 9(f) of SFAS No. 109, the Company has not provided
>             deferred income taxes on the difference between the reporting
>             currency and the tax bases of assets and liabilities.
>             
>             2. Tax benefits under the Law for the
>             Encouragement of Capital Investments, 1959 (hereinafter - the Law):
>             
>             The production facilities and expansion programs
>             of Micorkim in Israel have been granted the status of Approved
>             Enterprise, under the Law. According to the provisions of the Law,
>             Microkim has elected to enjoy alternative benefits - waiver of
>             grants in return for tax exemption - and, accordingly, their income
>             is tax-exempt for a period of two years commencing with the year in
>             which it first earns taxable income. In the remaining eight years of
>             benefits, Microkim will be subject to a corporate tax of 10%-25%,
>             depending upon the rate of investment of foreign investors
>             (currently 10%).
>             
>             The period of tax benefits, detailed above, is
>             subject to limits of 12 years from the commencement of production,
>             or 14 years from the approval date, whichever is earlier.
>             Therefore, Microkim can utilize the benefits period up to August 28,
>             2005.
>             
>             Microkim has not yet commenced its benefits
>             period, since it has not yet earned taxable income.
>             
>             If a dividend is distributed out of such
>             tax-exempt profits, Microkim will be liable for corporate tax at the
>             rate of 10%-25% (currently 10%).
>             
>             Israeli taxable income not eligible for the
>             Approved Enterprise benefits is taxed at the regular corporate tax
>             rate of 36%.
>             
>             3. Tax benefits under the Israeli Law for the
>             Encouragement of Industry (Taxation), 1969: The Company is an
>             industrial company under the Law for the Encouragement of
>             Industry (Taxation), 1969 and, therefore, is entitled to certain tax
>             benefits, including accelerate rates of depreciation and deduction o



4. Microkim has accumulated foreign net operating
            losses carryforward for tax purposes as of September 30, 2000, which
            may offset taxable income for an indefinite period in the amount of
            approximately $ 4.3 million. Microkim expects that, during the
            period in which these tax losses are utilized, its income would be
            substantially tax exempt. Accordingly, there will be no tax benefit
            available from such losses, and no deferred taxes have been included
            in these financial statements.



c. Deferred tax assets:

Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.





|                                                          |  | September 30,
|--------------------------------------------------------- |  | -------------
|                                                          |  | 2000         
|                                                          |  |              
|Deferred tax assets from U.S. operating loss carryforward |  | $ 524        
|Valuation allowance                                       |  | (524)        
|                                                          |  |              
|Net deferred tax asset                                    |  | $ -          



Management currently believes that it is more likely than not
that the deferred tax regarding the loss carryforwards will not be realized in
the foreseeable future.



d. Loss before earnings (losses) from affiliated companies
and minority interest consists of the following:



|         |  | Year ended
      September 30,
|-------- |  | ------------------------------
|         |  | 1999                          
|         |  |                               
|Domestic |  | $ *) 145                      
|Foreign  |  | *) 1,966                      
|         |  |                               
|         |  | $ 2,111                       

> *) Reclassified.

NOTE 8: - COMMITMENTS AND CONTINGENCIES

a. Lease commitment:

> 

In 1998, Microkim entered into an operating lease
        agreement, for the Company's offices, which expires in December 2002 and
        the Company's warehouse, which expires in July 2003. The rental payments
        through the lease expiration date (which are linked to the CPI) equals
        approximately $ 9 per month. Rent expenses for the years ended
        September 30, 1999 and 2000 were approximately $ 110 and $ 91,
        respectively.





Future minimum rental payments under non-cancelable leases at
September 30, 2000, are as follows:





|2001 | $ 108
|---- | -----
|2002 | 108  
|2003 | 29   
|     |      
|     | $ 245





b. Royalty commitment:

> 

Microkim is committed to pay royalties to the Office
        of the Chief Scientist (OCS) and the BIRD Foundation in respect of
        products under development for which they participated by way of grant.
        The royalty is computed at the rate of 2% to 5% of proceeds from sales
        of such products, up to 100%-150% of the aggregate amount of such grants
        (dollar- linked). Royalties paid during the years ended September 30,
        1999 and 2000 totaled $ 27 and $ 29, respectively.



As of September 30, 2000, Microkim has a contingent
        liability to pay royalties in the amount of approximately $ 1,042.



c. Bank guarantees:

> 

In connection with certain contracts entered into
        with customers, Microkim is required to provide performance guarantees.
        The total performance guarantees outstanding at September 30, 2000
        amounted to approximately $ 64.



In respect to the abovementioned guarantees, Microkim
        recorded a floating charge on all of its assets.



d. Consulting agreement:



On December 30, 1998, the Company contracted the
        services of Crossways Consulting Group Inc. (CCG), for a period of four
        years beginning January 1, 1999. CCG will assist the Company with
        marketing strategies, and by introducing Micel to potential customers.

The Company pays CCG consulting fees in the amount of
        $ 6 per month. In addition, the Company is obliged to pay CCG 1.5% on
        the sales of its products or services to customers in North America that
        are provided by CCG during the term of the agreement and 18 months after
        the effective termination date of the agreement.



The Company has granted to CCG 220,000 options, at an
        exercise price of $ 2.00 per share, exercisable for a period of five
        years after the termination of the agreement, and vested at the rate of
        20%, commencing January 1, 1999.



Consulting fees and commissions paid for the years
        ended September 30, 1999 and 2000 amounted to $ 144 and $ 106,
        respectively.







NOTE 9: - SHAREHOLDERS' EQUITY



Stock option plan:

In November 1990, the Company's Board of Directors (the
Board) adopted, with the approval of its shareholders, the 1990 Stock Option
Plan (the Plan), as amended, through November 1996, which provides for the grant
of incentive and/or nonqualified stock options to purchase up to 800,000 shares
of Common stock to any officer, director, consultant or employee at the Board's
discretion. Generally, these options become exercisable over specified vesting
periods but may not be exercised after ten years from the date of grant. The
exercise price of the qualified options cannot be less than the fair market
value of the Company's Common stock at the time of grant

Where the Company has recorded deferred compensation for
options issued with an exercise price below the fair value of the Common shares,
the deferred compensation is amortized and recorded as compensation expenses
ratably over the vesting period of the options.

All options outstanding as of September 30, 2000 were granted
at fair value.



















|                                           |  | Year ended September 30,
|------------------------------------------ |  | ------------------------
|                                           |  | 1999                    
|                                           |  |                         
|                                           |  | Number                  
|                                           |  | of                      
|                                           |  | options                 
|                                           |  |                         
|Outstanding at the beginning of
      Year |  | 335,500                 
|Exercised                                  |  | -                       
|                                           |  |                         
|Outstanding at the end of year             |  | 335,500                 
|                                           |  |                         
|Exercisable at the end of year             |  | 294,069                 



> The options outstanding as of September 30, 2000
>           (excluding warrants granted to consultants), have been separated into
>           ranges of exercise prices, as follows:



|Exercise price |  | Options
      outstanding as of
      September 30,
      2000 |  | Weighted
      average
      remaining
      contractual
      life
      (in years) |  | Weighted
      average
      exercise
      price |  | Options
      exercisable at
      September 30,
      2000 |  | Weighted
      average
      exercise
      price of
      exercisable
      options
|-------------- |  | -------------------------------------------------------------- |  | ------------------------------------------------------------------------------------ |  | ------------------------------------------------- |  | ----------------------------------------------------------- |  | ------------------------------------------------------------------------------------
|               |  |                                                                |  |                                                                                      |  |                                                   |  |                                                             |  |                                                                                     
|$ 0.60         |  | 53,500                                                         |  | 0.30                                                                                 |  | $ 0.60                                            |  | 53,500                                                      |  | $ 0.60                                                                              
|2.00           |  | 280,000                                                        |  | 2.95                                                                                 |  | 2.00                                              |  | 280,000                                                     |  | 2.00                                                                                
|               |  |                                                                |  |                                                                                      |  |                                                   |  |                                                             |  |                                                                                     
|$ 0.60 - 2.00  |  | 333,500                                                        |  |                                                                                      |  | $ 1.78                                            |  | 333,500                                                     |  | $ 1.78                                                                              



> 

Under FAS 123, pro forma information regarding net income and
        earnings per share is required (for grants issued after December 1995),
        and has been determined as if the Company had accounted for its employee
        stock option under the fair value method of the statement. The fair
        value for Micel's options was estimated at the date of grant using a
        Black-Scholes option pricing model with the following weighted-average
        assumptions for 1999 and 2000: risk-free interest rates of 6% and 5.75%
        dividend yields of 0% for both periods, volatility factors of the
        expected market price of the Company's Common Shares of 1.28 and 0.01
        and a weighted-average expected life of the options of five years and
        four years, respectively



The Black-Scholes option pricing model was developed
        for use in estimating the fair value of traded options that have no
        vesting restrictions and are fully transferable. In addition, option
        valuation models require subjective assumptions, including the expected
        stock price volatility. Because the Company's employee stock options
        have characteristics



Pro forma information under SFAS No. 123 is as
        follows:



|                                                        |  | Year ended
      September 30,
|------------------------------------------------------- |  | ------------------------------
|                                                        |  | (* 1999                       
|                                                        |  |                               
|Net income (loss) as reported                           |  | $ (2,058)                     
|                                                        |  |                               
|Pro forma net loss                                      |  | $ (2,136)                     
|                                                        |  |                               
|Pro forma basic and diluted net income (loss) per share |  | $ ( 0.34)                     



> *) Restatement.

b. Warrants:



> 1. From January 1993 through August 1998, the
>             Company issued warrants to consultants to purchase 291,620 shares of
>             Commn Stock at the range of $ 0.6 to $ 2 per share.
>             During 2000, 106,620 warrants that the Company
>             granted to Quest Enterprises Inc., a related party, expired.
>             2. In December 1998, the Company issued warrants
>             to consultants to purchase 220,000 shares of Common stock at $ 2.00
>             per share to be vested over a period of five years not later then
>             December 31, 2007. The Company account for this issuance as a
>             variable plan in accordance with EITF 96-18. Together with the
>             previous issuance, the number of warrants issued to consultants is
>             511,620.
>             
>             The Company recorded expenses in accordance with
>             FASB 123 and EITF 96-18, in the amount of $ 140 and $ 54 for
>             the years ended September 30, 1999 and 2000, respectively.
>             
>             The fair value for the warrants was estimated at
>             the measurement date using a Black-Scholes options pricing model
>             with the following weighted average assumptions for 1999 and 2000:
>             risk free interest rates of 6% and 5.75%, dividend yields of 0% for
>             both p



NOTE 10: - SELECTED STATEMENTS OF OPERATIONS DATA

The Company has two reportable segments: wireless network
development and radio frequency

The following data present the revenues, expenditures and
other operating data of the Company's operating segments.





|                                                                                   |  | Year ended
      September 30,
|---------------------------------------------------------------------------------- |  | ------------------------------
|                                                                                   |  | 1999                          
|Revenues:                                                                          |  |                               
|Radio frequency equipment                                                          |  | $ 2,202                       
|                                                                                   |  |                               
|                                                                                   |  | $ 2,202                       
|Operating loss:                                                                    |  |                               
|Wireless network development (**)                                                  |  | $ 2,142                       
|Radio frequency equipment                                                          |  | (277)                         
|Other unallocated loss                                                             |  | 22                            
|Adjustments to compensation expense in consolidation                               |  | 262                           
|                                                                                   |  |                               
|                                                                                   |  | $ 2,149                       
|Loss before earnings (losses) from affiliated company and minority
      interest: |  |                               
|Wireless network development (**)                                                  |  | $ 2,099                       
|Radio frequency equipment                                                          |  | (252)                         
|Other unallocated loss                                                             |  | 2                             
|Adjustments to compensation expense in consolidation                               |  | 262                           
|                                                                                   |  |                               
|                                                                                   |  | $ 2,111                       
|Tangible long-lived assets, net:                                                   |  |                               
|Wireless network developments (**)                                                 |  | $ (*) 562                     
|Radio frequency equipment                                                          |  | (*) 252                       
|Other unallocated amounts                                                          |  | 123                           
|                                                                                   |  |                               
|                                                                                   |  | $ (*) 937                     
|Capital expenditure:                                                               |  |                               
|Wireless network development (**)                                                  |  | $ 264                         
|Radio frequency equipment                                                          |  | 55                            
|                                                                                   |  |                               
|                                                                                   |  | $ 319                         

(*) Reclassified.

(**) The wireless network development data is in respect to the period
between September 30, 1999 and March 31, 2000, which is the date that Radiotel
Ltd. ceased being consolidated.







|                                  |  | Year ended
      September 30,
|--------------------------------- |  | ------------------------------
|                                  |  | 1999                          
|Depreciation:                     |  |                               
|Wireless network development (**) |  | $ 116                         
|Radio frequency equipment         |  | 72                            
|                                  |  |                               
|                                  |  | $ 188                         

(*) Reclassified.



(**) The wireless network development data is in respect to
the period between September 30, 1999 and March 31, 2000, which is the date that
Radiotel Ltd. ceased being consolidated.





b. Summary information about geographical destinations:

The Company attributes revenues from external customers, on the basis of the
location of the end customers.

The following presents total revenues and long-lived assets for the year
ended September 30, 1999 and 2000:



|       |  | 1999     |  | 2000      
|------ |  | -------- |  | ----------
|       |  | Total    |  | Long-lived
|       |  | revenues |  | assets    
|       |  |          |  |           
|Israel |  | $ 648    |  | $ (*) 814 
|U.S.   |  | 1,554    |  | 123       
|       |  |          |  |           
|       |  | $ 2,202  |  | $ (*) 937 

(*) Reclassified.



c. Major customers data; percentage of total revenues:



|           |  | Year ended
      September 30,
|---------- |  | ------------------------------
|           |  | 1999                          
|           |  |                               
|Customer A |  | 32%                           
|           |  |                               
|Customer B |  | -                             
|           |  |                               
|Customer C |  | 24%                           
|           |  |                               
|Customer D |  | 23%                           







d. Sales by classes of products:



|                       |  | Year ended
      September 30,
|---------------------- |  | ------------------------------
|                       |  | 1999                          
|                       |  |                               
|Radar signal simulator |  | $ 837                         
|Frequency sources      |  | 1,211                         
|Support components     |  | -                             
|Other                  |  | 154                           
|                       |  |                               
|                       |  | $ 2,202                       

e. Research and development, net:



|                                |  | Year ended
      September 30,
|------------------------------- |  | ------------------------------
|                                |  | 1999                          
|Total cost                      |  | $ 2,422                       
|Less - grants and participation |  | 748                           
|                                |  |                               
|                                |  | $ 1,674                       

f. Financial expenses (income), net:



|                                                                                |  | Year ended
      September 30,
|------------------------------------------------------------------------------- |  | ------------------------------
|                                                                                |  | (**) 1999                     
|                                                                                |  |                               
|Financial income:                                                               |  |                               
|Interest and other                                                              |  | (96)                          
|Foreign currency translation adjustments                                        |  | (16)                          
|                                                                                |  | (112)                         
|Financial expenses:                                                             |  |                               
|Compensation due to conversion of shareholders' in an affiliated loan
      (*) |  | $ -                           
|Interest and other                                                              |  | 46                            
|Foreign currency translation adjustments                                        |  | 28                            
|                                                                                |  | 74                            
|                                                                                |  |                               
|                                                                                |  | $ (38)                        

(*) On March 27, 2000, the shareholders of RadioTel converted a loan in the
amount of
$ 1,200 into 419,860 Class B Preferred shares of NIS 0.01 par value each, at a
price per share of $ 2.858, which represents a discount of 15%. As a result of
the conversion of the shareholders' loan, the Company recorded $ 212 as
financial expenses, in accordance with EITF 98-5.

(**) Reclassified.



NOTE 11:- RELATED PARTY TRANSACTIONS

> 

On December 30, 1998, the Company contracted the services
    of Crossways Consulting Group Inc. (CCG), a marketing specialist, for a
    period of four years beginning January 1, 1999. CCG is 100% owned by one of
    the Company's shareholders (see also Note 8d).



NOTE 12:- SUBSEQUENT EVENTS



a. On November 24, 2000, 45,500 employee options to purchase
Common shares of the Company of $ 0.01 par value each and 5,000 options to
consultants to purchase Common shares of the Company of $ 0.01 par value each,
expired.



b. On November 8, 2000, 61,437 warrants that the company
granted to Quest Enterprises Inc. a related party, expired.



c. On December 12, 2000, the Company's Board of Directors
adopted a new stock options plan (2000 stock option plan). Under the plan, the
Company reserved options to purchase an aggregate of 900,000 Common shares of $
0.01 par value each to the Company's employees, directors, independent
contractors and consultants. The exercise price of the options shall not be less
than 100% of the fair market value at the date of grant.

- - - - - - - - - - - - -



SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



Dated:



| |     | MICEL CORP.        
| | --- | -------------------
| |     |                    
| | By: | s/Ron Levy         
| |     | Ron Levy, President



Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and dates indicated.



|SIGNATURE          |  | TITLE                                  
|------------------ |  | ---------------------------------------
|                   |  | DATE                                   
|                   |  |                                        
|s/Ron Levy         |  | Director, President and Chief Executive
|Ron Levy           |  | and Financial Officer                  
|                   |  |                                        
|s/Heather Loren    |  | Director                               
|Heather Loren      |  |                                        
|                   |  |                                        
|s/Barry Braunstein |  | Director                               
|Barry Braunstein   |  |                                        
|                   |  |                                        
|s/Barry Septinus   |  | Director                               
|Barry Septimus     |  |                                        









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