Washington, DC 20549
FORM 8-K / A-1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
October 14, 1996
-------------------------------------------------
Date of Report (Date of earliest event reported)
INTERCELL CORPORATION
-----------------------------------------------------
(Exact name of Registrant as specified in its charter)
Colorado 0-14306 84-0928627
------------------------------------------------------------
(State or other (Commission File (IRS Employer
jurisdiction Number) Identification
of incorporation) Number)
7201 East Camelback Road, Suite 250
Scottsdale, Arizona 85251
--------------------------------------------------------
(Address of principal executive offices ) (Zip Code)
(602) 952-1528
------------------------------------------------------
(Registrant's telephone number, including area code)
4455 East Camelback Road, E-160
Phoenix, Arizona 85018
-------------------------------------------------------
(Former name or former address)
<PAGE>
ITEM 2.
On October 14, 1996, Intercell Corporation ("Registrant") by virtue of a merger
of A.C. Magnetics, d/b/a M.C. Davis & Company, an Arizona corporation, into
Cellular Magnetics, Inc., an Arizona corporation (the "Subsidiary"), a wholly
owned subsidiary of the Registrant acquired substantially all of the properties,
assets and business operations of A.C. Magnetics, Inc., d/b/a M.C. Davis &
Company.
In connection with the Merger, the Registrant paid the shareholders of A.C.
Magnetics, d/b/a M.C. Davis & Company, the sum of Eight Hundred Thousand Dollars
($800,000.00) cash. In addition, the Registrant issued Two Hundred and
Seventy-Seven Thousand, Seven Hundred and Seventy-Eight (277,778) of its common,
restricted, no par value shares, valued at approximately $3.60 per share to the
shareholders of A.C. Magnetics, Inc., d/b/a M.C.
Davis & Company.
The Registrant timely filed a Current Report of Form 8-K, dated October 14,
1996, reporting in Item 2, the acquisition by Registrant of A.C. Magnetics,
Inc., d/b/a M.C. Davis & Company, with the Securities and Exchange Commission.
The Registrant further reported in Item 7 of such Report, that it would file
financial statements of the acquired corporation within the time period and as
specified by the rules relating to filing reports on a Current Report on Form
8-K, by amendment.
2
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
A. Financial Statements
Page
1. A.C. Magnetics, Inc., d/b/a M.C. Davis & Company 4
(a) Independent Auditors' Report 5
(b) Consolidated Balance Sheets -
December 31, 1995 and September 30, 1996 6
(c) Consolidated Statement of Operations -
For the Two Years Ended December 31, 1995 and
the Nine Months Ended September 30, 1996 7
(d) Consolidated Statements of Stockholder's Equity -
For the Two Years Ended December 31, 1995 and
the Nine Months Ended September 30, 1996 8
(e) Consolidated Statements of Cash Flows -
For the Two Years Ended December 31, 1995 and
the Nine Months Ended September 30, 1996 9
(f) Notes to Consolidated Financial Statements 10-13
2. Pro Forma Combined Statement of Operations(Unaudited)
For the Year Ended September 30, 1996, with an
accompaning Note to unaudited Pro Forma Combined
Statement of Operations thereon. 14-16
B. Exhibits
Exhibit 2.1 Plan and Agreement of Merger, dated October 14, 1996 by
and between A.C. Magnetics, Inc., d/b/a M.C. Davis &
Company, Cellular Magnetics, Inc. and Intercell
Corporation. (Previously Filed.)
Exhibit 2.2 Opinion of KPMG Peat Marwick, dated November 21, 1996.
3
<PAGE>
AC MAGNETICS, INC.
dba M.C. DAVIS CO., INC.
Consolidated Financial Statements
December 31, 1995 and September 30, 1996
(With Independent Auditors' Report Thereon)
4
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
AC Magnetics, Inc.:
We have audited the accompanying consolidated balance sheets of AC Magnetics,
Inc. and subsidiary as of December 31, 1995 and September 30, 1996 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years ended December 31, 1994 and 1995 and the nine-month period
ended September 30, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of AC Magnetics, Inc.
and subsidiary as of December 31, 1995 and September 30, 1996 and the results of
their operations and their cash flows for the years ended December 31, 1994 and
1995 and the nine-month period ended September 30, 1996 in conformity with
generally accepted accounting principles.
/S/ KPMG PEAT MARWICK LLP
Phoenix, Arizona
November 21, 1996
5
<PAGE>
<TABLE>
<CAPTION>
AC MAGNETICS, INC.
dba M.C. DAVIS CO., INC.
Consolidated Balance Sheets
December 31, 1995 and September 30, 1996
December 31, September 30,
Assets 1995 1996
------
------------------ ------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 66,309 111,821
Accounts receivable, net of allowance of $0 at December 31, 1995
and $2,938 at September 30, 1996 125,799 155,922
Inventories 224,062 265,390
Prepaid expenses 7,127 10,591
------------------ ------------------
Total current assets 423,297 543,724
------------------ ------------------
Property, plant and equipment, net 311,792 297,821
------------------ ------------------
$ 735,089 841,545
================== ==================
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Current portion of long-term debt $ 67,133 105,000
Note payable to related party 80,000 80,000
Accounts payable 34,195 98,268
Accrued wages 20,336 9,432
Other accrued liabilities 7,032 335
------------------ ------------------
Total current liabilities 208,696 293,035
Long-term debt, less current portion 47,000 56,964
------------------ ------------------
Total liabilities 255,696 349,999
------------------ ------------------
Subsequent event (note 9)
Stockholders' equity:
Common stock, no par value per share. Authorized 1,000,000
shares; one vote per share; 1,000 shares issued and outstanding 200,000 200,000
Retained earnings 279,393 291,546
------------------ ------------------
Total stockholders' equity 479,393 491,546
------------------ ------------------
$ 735,089 841,545
================== ==================
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
AC MAGNETICS, INC.
dba M.C. DAVIS CO., INC.
Consolidated Statements of Operations
Years ended December 31, 1994 and 1995 and
nine-month period ended September 30, 1996
December 31, December 31, September 30,
1994 1995 1996
------------------ ------------------ ------------------
<S> <C> <C> <C>
Revenue $ 1,513,844 1,702,951 1,338,401
Cost of goods sold 1,293,014 1,248,653 924,969
------------------ ------------------ ------------------
Gross margin 220,830 454,298 413,432
Operating expenses:
Selling, general and administrative 226,146 244,848 286,659
------------------ ------------------ ------------------
Total operating expenses 226,146 244,848 286,659
------------------ ------------------ ------------------
Operating income (loss) (5,316) 209,450 126,773
Other income (expense):
Interest income -- 609 1,176
Interest expense (28,717) (23,767) (9,880)
Other, net (11,233) (8,896) (363)
------------------ ------------------ ------------------
Total other expense (39,950) (32,054) (9,067)
------------------ ------------------ ------------------
Net income (loss) $ (45,266) 177,396 117,706
================== ================== ==================
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
AC MAGNETICS, INC.
dba M.C. DAVIS CO., INC.
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1994 and 1995 and
nine-month period ended September 30, 1996
Common Stock Total
--------------------------------------- Retained Stockholders'
Shares Amount Earnings Equity
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Balance at January 1, 1994
1,000 $ 200,000 147,263 347,263
Net loss -- -- (45,266) (45,266)
------------------ ------------------ ------------------ ------------------
Balance at December 31, 1994
1,000 200,000 101,997 301,997
Net income -- -- 177,396 177,396
------------------ ------------------ ------------------ ------------------
Balance at December 31, 1995
1,000 200,000 279,393 479,393
Net income -- -- 117,706 117,706
Dividends paid ($106 per
share) -- -- (105,553) (105,553)
------------------ ------------------ ------------------ ------------------
Balance at September 30, 1996
1,000 $ 200,000 291,546 491,546
================== ================== ================== ==================
</TABLE>
See accompanying notes to consolidated financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
AC MAGNETICS, INC.
dba M.C. DAVIS CO., INC.
Consolidated Statements of Cash Flows
Years ended December 31, 1994 and 1995 and
nine-month period ended September 30, 1996
December 31, December 31, September 30,
1994 1995 1996
------------------ ------------------ ------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (45,266) 177,396 117,706
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 48,647 51,221 41,588
(Gain) loss on sale of property, plant and
equipment 7,454 (1,945) (11,660)
Changes in operating assets and liabilities:
Decrease(increase) in accounts receivable 58,045 13,202 (30,123)
Decrease(increase) in inventories (304) 23,461 (41,328)
Decrease(increase) in prepaid expenses
and other assets (39,029) 66,624 (3,464)
Increase (decrease) in accounts payable (25,849) (68,610) 64,073
Increase (decrease) in accrued liabilities (3,378) 2,938 (17,601)
------------------ ------------------ ------------------
Net cash provided by operating
activities 320 264,287 119,191
------------------ ------------------ ------------------
Cash flows from investing activities:
Purchase of property, plant and equipment (78,182) (30,860) (36,529)
Proceeds from sale of property, plant and
equipment 7,000 4,000 20,572
------------------ ------------------ ------------------
Net cash used in investing activities (71,182) (26,860) (15,957)
------------------ ------------------ ------------------
Cash flows from financing activities:
Repayment of long-term debt (1,417) (161,167) (67,133)
Repayment of related party notes payable -- (10,000) --
Borrowing from financial institutions 67,000 -- 114,964
Payment of dividends -- -- (105,553)
------------------ ------------------ ------------------
Net cash provided by (used in) financing
activities 65,583 (171,167) (57,722)
------------------ ------------------ ------------------
Net increase (decrease) in cash and cash
equivalents (5,279) 66,260 45,512
Cash and cash equivalents, beginning of period 5,328 49 66,309
------------------ ------------------ ------------------
Cash and cash equivalents, end of period $ 49 66,309 111,821
================== ================== ==================
Supplemental disclosure of cash flow
information: Cash paid for:
Interest $ 21,172 27,958 13,234
================== ================== ==================
</TABLE>
See accompanying notes to consolidated financial statements.
9
<PAGE>
AC MAGNETICS, INC.
dba M.C. DAVIS CO., INC.
Notes to Consolidated Financial Statements
(1) ORGANIZATION
AC Magnetics, Inc. dba M.C. Davis Company (the Company) manufactures and
markets miniature and sub-miniature custom passive electronics for use by
original equipment manufacturers.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of AC
Magnetics, Inc. dba M.C. Davis Company and its wholly-owned subsidiary
M.C. Davis Internacional S.P. de C.B. All significant intercompany
balances and transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
All highly liquid securities with original maturities of three months or
less at the date of purchase are considered to be cash equivalents.
CONCENTRATIONS OF CREDIT RISK
The Company sells products to customers, primarily electronic equipment
manufacturers, and extends credit based on an evaluation of the customer's
financial condition, generally without requiring collateral. Exposure to
losses on receivables is principally dependent on each customer's
financial condition. The Company monitors its exposure for credit losses
and maintains allowances for anticipated losses.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method)
or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and are depreciated using
an accelerated method over the estimated useful lives of the assets.
Buildings are depreciated over thirty-one years; equipment, fixtures and
vehicles are depreciated over five to seven years.
REVENUE RECOGNITION
The Company recognizes revenue from sales when a product is shipped.
INCOME TAXES
The stockholders have elected that the Company be taxed as a Subchapter
"S" Corporation (S Corporation) for federal and State of Arizona income
tax purposes. All tax attributes of the Company are passed through to the
stockholders and related income taxes are to be paid by the stockholders.
Therefore, no provision or liability for federal or State of Arizona
corporate income taxes is reflected in the accompanying financial
statements.
10
<PAGE>
AC MAGNETICS, INC.
dba M.C. DAVIS CO., INC.
Notes to Consolidated Financial Statements, Continued
FOREIGN CURRENCY TRANSLATION
The functional currency for the Company's foreign operations is their
local currency. Assets and liabilities of foreign operations are
denominated in U.S. dollars, and revenue and expenses are translated into
U.S. dollars using average exchange rates for the year. Transaction gains
and losses are included in operations and were not significant for the
years ended December 31, 1994 and 1995 and for the nine-month period
ended September 30, 1996.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(3) INVENTORIES
Inventories are summarized as follows:
December 31, September 30,
1995 1996
--------------- --------------
Raw materials $ 169,363 186,273
Work in process 36,257 38,000
Finished goods 43,442 71,117
Less: reserve for obsolescence (25,000) (30,000)
-------------- --------------
$ 224,062 265,390
============== ==============
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is summarized as follows:
December 31, September 30,
1995 1996
-------------- --------------
Land $ 5,000 5,000
Buildings 222,000 222,000
Machinery and equipment 374,899 370,984
Office furniture and fixtures 14,512 19,132
Vehicles 17,550 22,718
-------------- --------------
Total 633,961 639,834
Less accumulated depreciation (322,169) (342,013)
-------------- --------------
$ 311,792 297,821
=============== ==============
11
<PAGE>
AC MAGNETICS, INC.
dba M.C. DAVIS CO., INC.
Notes to Consolidated Financial Statements, Continued
(5) LONG-TERM DEBT
Long-term debt is summarized as follows:
December 31, September 30,
1995 1996
------------ -------------
Notepayable, bank, interest at prime
plus 2%; due April 4, 1997;
collateralized by various assets;
repaid October 1996
$ -- 100,000
Notepayable, bank, interest at 9.75%;
due in 36 monthly payments of
$481; collateralized by a vehicle;
repaid October 1996 -- 14,964
Note payable, bank, interest at prime
plus 2%; due August 14, 1996;
24 monthly payments of $9,615;
collateralized by real
property deed of trust 40,769 --
Note payable, no interest; due
June 1998; collateralized by
building 67,000 47,000
Other 6,364 --
-------- --------
114,133 161,964
Less current portion 67,133 105,000
-------- --------
Long-term debt, net of current portion $ 47,000 56,964
======== ========
The future maturities of long-term debt after September 30, 1996 are as
follows:
Years ending September 30:
1997 $ 105,000
1998 56,964
---------
Total $ 161,964
=========
(6) RELATED PARTY TRANSACTIONS
On November 1, 1993, the Chairman of the Board of Directors of the
Company loaned $90,000 to the Company. The loan bears interest at 10%
with interest and principal payable upon demand. The loan is unsecured.
At December 31, 1994 and 1995 and September 30, 1996, the loan principal
balances were $90,000, $80,000 and $80,000, respectively. Interest is
paid upon demand and unpaid accrued interest is included in other accrued
liabilities. The loan and interest was paid in October 1996.
12
<PAGE>
AC MAGNETICS, INC.
dba M.C. DAVIS CO., INC.
Notes to Consolidated Financial Statements, Continued
(7) MAJOR CUSTOMERS
One customer accounted for 33%, 25% and 23% of revenue for the fiscal
periods ended December 31, 1994, December 31, 1995 and September 30,
1996, respectively. Another customer accounted for 18%, 11% and 18% of
revenue for the fiscal periods ended December 31, 1994, December 31, 1995
and September 30, 1996, respectively. A third and fourth customer
accounted for 14% and 13%, respectively, of revenue for the fiscal year
ended December 31, 1995.
(8) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure about
Fair Value of Financial Instruments," requires that the Company disclose
estimated fair values for its financial instruments. The following
summary presents a description of the methodologies and assumptions used
to determine such amounts.
LIMITATIONS
Fair value estimates are made at a specific point in time and are based
on relevant market information and information about the financial
instrument; they are subjective in nature and involve uncertainties,
matters of judgment and, therefore, cannot be determined with precision.
These estimates do not reflect any premium or discount that could result
from offering for sale, at one time, the Company's entire holdings of a
particular instrument. Changes in assumptions could significantly affect
these estimates.
Since the fair value is estimated as of September 30, 1996, the amounts
that will actually be realized or paid at settlement or maturity of the
instruments could be significantly different.
ACCOUNTS RECEIVABLE, ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The carrying amount is assumed to be the fair value because of the
short-term maturity of these instruments.
LONG-TERM DEBT
The carrying value of the Company's long-term debt approximates the terms
in the marketplace at which they could be replaced. Therefore, the fair
value approximates the carrying value of these financial instruments.
(9) SUBSEQUENT EVENT
Effective September 30, 1996, the Company was purchased by Intercell
Corporation in a stock for stock transaction. Each share of common stock
of the Company was exchanged for 277.78 shares of Intercell common stock.
In addition, the stockholders of the Company received $800,000 in cash
from Intercell.
13
<PAGE>
<TABLE>
<CAPTION>
Intercell Corporation
Pro Forma Combined Statement of Operations
(Unaudited)
Intercell M.C. Davis
------------ --------------------------------
Year ended Period ended Period ended
September 30, September 30, December 31, Pro forma Pro forma
1996 1996 1995 adjustments (1) combined
------------ ------------ ------------ --------------- ---------
<S> <C> <C> <C> <C> <C>
Net revenue ........................... $ 3,405,000 1,338,000 421,000 -- 5,164,000
Cost of sales ......................... 2,830,000 925,000 286,000 -- 4,041,000
------------ ------------ ------------ ------------ ------------
Gross profit ............ 575,000 413,000 135,000 -- 1,123,000
Selling, general, and
administrative
expenses ......................... 5,241,000 287,000 81,000 307,000 5,916,000
------------ ------------ ------------ ------------ ------------
Operating profit (loss) ............... (4,666,000) 126,000 54,000 (307,000) (4,793,000)
Interest expense, net ................. 87,000 9,000 8,000 -- 104,000
------------ ------------ ------------ ------------ ------------
Net income (loss) ....... $ (4,753,000) 117,000 46,000 (307,000) (4,897,000)
============ ============ ============ ============ ============
Net loss per share ...... (0.41)
Shares used computing per
share information ................ 12,057,565
============
</TABLE>
See Note to Unaudited Pro Forma Combined Statement of Operations.
14
<PAGE>
INTERCELL CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
The following unaudited pro forma combined statement of operations gives effect
to the acquisition by Intercell Corporation ("Intercell" or the "Company") of AC
Magnetics, Inc. dba M.C. Davis Co., Inc. ("M.C. Davis") in a transaction
accounted for by the purchase method. The unaudited pro forma combined statement
of operations includes the consolidated statement of operations of Intercell for
the year ended September 30, 1996, and M.C. Davis for the twelve months ended
September 30, 1996. The twelve months ended September 30, 1996 for M.C. Davis
includes the period from January 1, 1996 through September 30, 1996, appearing
elsewhere in this Form 8-K, and the three-month period from October 1, 1995
through December 31, 1995. Pro forma adjustments have been made to give effect
to the September 30, 1996, acquisition of M.C. Davis as if the acquisition had
occurred on October 1, 1995.
The following unaudited pro forma combined statement of operations is not
necessarily indicative of the future results of operations of the Company or the
results of operations which would have resulted had the Company and M.C. Davis
been combined during the period presented. In addition, the pro forma results
are not intended to be a projection of future results. The unaudited pro forma
combined statement of operations should be read in conjunction with the
consolidated financial statements of Intercell and subsidiaries to included in
the Annual Report on Form 10-K for the year ended September 30, 1996, which is
expected to be filed with the SEC by December 30, 1996, and the consolidated
financial statements of M.C. Davis and subsidiary appearing elsewhere in this
Form 8-K.
15
<PAGE>
NOTE TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(1) Pro Forma Adjustments:
The total purchase price of $1,800,000 has been allocated on a
preliminary basis to the net assets acquired based on their relative
estimated fair values as follows:
Current assets $ 544,000
Property, plant and equipment 383,000
Goodwill and other intangibles 1,223,000
Current liabilities assumed (293,000)
Other liabilities assumed (57,000)
------------
Total purchase price $ 1,800,000
============
Purchase price to be paid in cash $ 800,000
Fair market value of stock to be issued 1,000,000
------------
$ 1,800,000
============
The pro forma adjustments applied to the historical statement of
operations to arrive at the pro forma combined statement of operations
reflects amortization expense of $262,000 related to goodwill and other
intangibles resulting from the acquisition of M.C. Davis over its
estimated useful life. The pro forma adjustments also reflect
depreciation expenses of $45,000 related to fixed assets acquired in
the M.C. Davis acquisition over their estimated useful lives.
16
<PAGE>
SIGNATURE PAGE
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 hereunto duly authorized.
Date: December 14, 1996
INTERCELL CORPORATION
/s/ Gordon J. Sales
-------------------------------------
Gordon J. Sales,
President & Chief Executive Officer
17
