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FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 30, 1998
INTELLICELL CORP.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
001-12571 95-4467726
(Commission File Number) (I.R.S. Employer Identification No.)
9314 Eton Avenue
Chatsworth, California 91311
(Address of principal executive offices) (Zip Code)
(818) 709-2300
Registrant's telephone number, including area code
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Item 5. Other Events
In November 1998, Intellicell Corp. (the "Company") completed a private
placement (the "Note Offering") of $1,500,000 principal amount of three-year
unsecured and subordinated convertible notes (the "Notes") to a small group of
accredited individual investors. Each Note bore interest at the rate of 2% per
annum, and was due and payable, with the principal, in November 2001. Each $1.00
of principal amount of the Notes was convertible, at the Company's option, into
(i) one share of the Company's common stock, $0.01 par value ("Common Stock")
and (ii) a three-year redeemable warrant to purchase two-thirds of a share of
Common Stock at $1.00 per share (the "Warrants"), provided that the Note
Offering was ratified by the Company's stockholders. The cash proceeds of the
Note Offering of $1,500,000 were used to repay the amounts then outstanding
under the Company's line of credit and to increase the Company's working capital
and will be used for general corporate purposes, including, but not limited to,
increasing the Company's digital-based cellular telephone inventory. The Company
effected this private placement without registration under the Securities Act of
1933 in reliance upon the exemption from registration provided by Section 4(2)
of the Securities Act.
At the Company's annual meeting of stockholders on December 30, 1998, the
Company's stockholders ratified the Note Offering. On December 31, 1998, the
Company exercised its option to convert all of the Notes into a total of
1,500,000 shares of Common Stock and Warrants to purchase a total of 1,000,000
shares of Common Stock. Conversion of the Notes provided additional immediate
equity for the Company, while eliminating a significant long-term obligation of
the Company to repay the Notes in three years.
In connection with ratifying the Note Offering, the Company's stockholders
also approved the following at the annual stockholders meeting:
(a) A grant of options to purchase a total of 600,000 shares of Common
Stock at $1 per share to new management personnel and a representative of the
investors in the Note Offering as a finders fee. John Swinehart, the Company's
new Chief Executive Officer, has been granted options to purchase 200,000 shares
of Common Stock. The Company has granted to Mark M. Laisure in connection with
his becoming a director of the Company an option to purchase 200,000 shares of
Common Stock. The Company also has granted to Paul Skjodt, as a finders fee for
identifying investors for the Note Offering, an option to purchase 200,000
shares of Common Stock. The options granted to Messrs. Swinehart, Laisure and
Skjodt will expire ten years after issuance and 5/6ths of such options will be
immediately exercisable. The remaining 1/6th of such options will only vest and
be exercisable upon and pro rata to the extent that the Warrants issuable upon
conversion of the Notes are actually exercised.
(b) A grant by the Company to Vinay Sharma, a director of the Company, of
stock options to purchase 100,000 shares of Common Stock at $1.00 per share and
to Stephen Jarrett, a director of the Company, of stock options to purchase
50,000 shares of Common Stock at $0.375 per share under the Company's 1998 Stock
Option Plan. The options granted to Mr. Sharma will expire in five years and
vest twelve months after issuance. The options granted to Mr. Jarrett expire ten
years after issuance and vest one-third each year for three years. The Company's
shareholders also approved the Company's repricing from $3.81 per share to $1.00
per share of options held by J. Sherman Henderson, a director of the Company, to
purchase 100,000 shares of Common Stock and from $4.375 per share to $1.00 per
share of options held by Stephen Jarrett to purchase 50,000 shares of Common
Stock. The options held by Mr. Henderson expire in five years and vest twelve
months after issuance. The options held by Mr. Jarrett expire in ten years and
vest one-third each year for three years. The repriced options will be re-valued
at the time of repricing and, accordingly, there may be a charge to earnings
taken upon the repricing.
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(c) A repricing of the warrants (the "Public Warrants") that the Company
issued in December 1997 in the form of a dividend to all of its stockholders
(except for Ben Neman, the Company's Chairman of the Board and President) from
$4 per share to $1 per share. The Public Warrants entitle the holders to
purchase one share of Common Stock for each Public Warrant held. The Public
Warrants are redeemable by the Company at any time upon 30 days written notice
at a price of $0.01 per warrant, provided that the closing bid price of the
Common Stock on all 20 of the trading days ending on the third day prior to
giving notice has been equal to or greater than $7.00 per share.
The Company's stockholders also approved a proposed issuance by the
Company of new warrants (the "New Public Warrants") to all holders of the
Company's outstanding shares of Common Stock (except Ben Neman and the investors
in the Notes) to purchase one share of Common Stock at $1.00 per share for each
two shares of Common Stock held by such stockholders of record as of February
16, 1994. The New Public Warrants would be issued as a dividend of one New
Public Warrant for each two shares of Common Stock outstanding, with such
issuance to be made following registration of the issuance under the Securities
Act. The New Public Warrants would be redeemable by the Company at any time upon
30 days written notice at a price of $0.01 per warrant, provided the closing bid
price of the Common Stock for a period of 20 consecutive trading days has
exceeded $2.00 per share on each such day. The Public Warrants may not be
redeemed and the New Public Warrants would not be redeemable prior to the time
such warrants become exercisable, which will be following the registration under
the Securities Act of the shares of Common Stock issuable upon exercise of these
warrants. The Public Warrants are not publicly traded and the New Public
Warrants are not expected to be publicly traded. Neither the Public Warrants nor
the New Public Warrants will be transferable unless they are registered under
the Securities Act or an exemption from such Act is available.
The repricing of the Public Warrants and the issuance of the New Public
Warrants are designed to afford the Company's existing equity holders an
opportunity to acquire additional shares of Common Stock at the same price as
the investors in the Note Offering, and to encourage future exercises of
warrants to raise further capital for the Company. Proceeds from the exercise,
if any, of the Public Warrants and New Public Warrants will be used for general
corporate purposes.
(d) The Company's issuance to Sands Brothers & Co., Ltd. ("Sands") of
warrants to purchase shares of Common Stock in consideration for financial
advisory services provided by Sands in connection with the Note Offering. The
Company has issued to Sands a three-year warrant to purchase 150,000 shares of
Common Stock at $1.00 per share and has cancelled an existing option held by
Sands to purchase 100,000 shares of Common Stock at $3.813 per share.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTELLICELL CORP.
Date: February 8, 1999 By: /s/ David Kane
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David Kane, Chief Financial Officer
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