FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly period ended December 31, 1999
OR
[ ] TRANSITION REPORT PURUSANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-14306
INTERCELL CORPORATION
---------------------
(Exact name of small business issuer as specified in its charter)
Colorado 84-0928627
-------- ----------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
370 17th Street, Suite 3580
Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (303) 592-1010
Not applicable
(Former name, former address or former fiscal year, if changed since last
report)
Indicate by check mark whether the issuer (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
----- -----
As of February 7, 1999 there were 99,891,188 shares of the registrant's sole
class of common shares outstanding.
Transitional Small Business Disclosure Format Yes No X
----- -----
<PAGE>
INTERCELL CORPORATION AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS PAGE
----
Condensed Consolidated Balance Sheet
December 31, 1999 1
Condensed Consolidated Statements of Operations
Three Months Ended December 31, 1999 and 1998 2
Condensed Consolidated Statement of Changes in Stockholders' Deficit
Three Months Ended December 31, 1999 3
Condensed Consolidated Statements of Cash Flows
Three Months Ended December 31, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements
Three Months Ended December 31, 1999 and 1998 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 11
PART II - OTHER INFORMATION 13
ITEM 2. CHANGES IN SECURITIES 13
ITEM 6. EXHIBITS 14
SIGNATURES
<PAGE>
INTERCELL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Assets
- ------
<S> <C>
Current assets:
Cash and cash equivalents $ 95,000
Total current assets 95,000
Notes Receivable 22,000
Investment in land held for sale 500,000
Restricted cash 21,000
Other assets 54,000
----------
Total assets $ 692,000
==========
Liabilities and Stockholders' Deficit
- -------------------------------------
Current liabilities:
Accounts payable $ 807,000
Accrued liabilities 360,000
Notes payable to related parties 136,000
Notes payable - other 381,000
Convertible debentures 826,000
Deferred gain on sale of subsidiary stock 423,000
Liabilities of discontinued operations 3,347,000
----------
Total current liabilities 6,280,000
----------
Commitment and Contingencies
Stockholders' deficit:
Convertible preferred stock; 10,000,000 shares authorized:
Series C; 41 shares issued and outstanding
(liquidation preference of $510,000) 421,000
Series D; 1,080 shares issued and outstanding
(liquidation preference of $3,024,000) 2,646,000
Warrants to acquire common stock 3,075,000
Common stock; no par value; 100,000,000 shares authorized
83,962,605 shares issued and outstanding 22,505,000
Additional paid-in capital 7,726,000
Accumulated deficit (41,567,000)
Receivable from sale of subsidiary stock ( 394,000)
----------
Total stockholders' deficit ( 5,588,000)
----------
Total liabilities and stockholders' deficit $ 692,000
==========
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
1
<PAGE>
INTERCELL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Three Months Ended
December 31,
----------------------
1999 1998
---- ----
<S> <C> <C>
General and administrative expense $ 873,000 417,000
------- -------
Loss from operations (873,000) (417,000)
------- -------
Interest income 1,000 -
Interest expense ( 32,000) ( 20,000)
------- -------
( 31,000) ( 20,000)
------- -------
Loss from continuing operations (904,000) (437,000)
------- -------
Discontinued operations:
Loss from operations to be disposed of - ( 67,000)
------- -------
Loss from discontinued operations - ( 67,000)
------- -------
Net loss (904,000) (504,000)
Deemed dividend on Series C preferred stock relating
to relating to in-the-money conversion terms ( 7,000) ( 14,000)
Accrued dividends on Series D preferred stock ( 38,000) ( 37,000)
Accretion on Series C preferred stock ( 14,000) ( 29,000)
------- -------
Net loss applicable to common
stockholders $(963,000) (584,000)
======= =======
Net loss per share, basic and diluted, applicable
to common stockholders:
Loss from continuing operations $( 0.01) ( 0.02)
Loss from discontinued
operations - -
------- -------
Net loss $( 0.01) ( 0.02)
======= =======
Weighted average number of common shares outstanding 80,949,160 37,514,481
========== ==========
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
2
<PAGE>
INTERCELL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Convertible
Preferred Stock Warrants to Common Stock
--------------- Acquire ------------
Shares Amount Common Stock Shares Amount
------ ------ ------------ ------ ------
<S> <C> <C> <C> <C> <C>
Balances
October 1, 1999 1,150 $ 3,282,000 3,075,000 66,309,089 $22,231,000
Conversion of Series
C Preferred Stock ( 29) ( 274,000) - 17,653,516 274,000
Common stock issued
by subsidiary - - - - -
Accretion on
preferred stock - 14,000 - - -
Amortization of
deemed dividend - 7,000 - - -
Accrual of
preferred stock dividend - 38,000 - - -
Net loss - - - - -
----- --------- --------- ---------- ----------
Balance as of
December 31, 1999 1,121 $ 3,067,000 3,075,000 83,962,605 $22,505,000
===== ========= ========= ========== ==========
(Continued)
</TABLE>
3
<PAGE>
INTERCELL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, 1999
(CONTINUED)
<TABLE>
<CAPTION>
Receivable
Additional from Total
Paid-in Subsidiary Accumulated Stockholders'
Capital Stock sale Deficit Deficit
------- ---------- ------- -------
<S> <C> <C> <C> <C>
Balances
October 1, 1999 6,885,000 (394,000) (40,604,000) (5,525,000)
Conversion of Series
C Preferred Stock - - - -
Common stock issued
by subsidiary 841,000 - - 841,000
Accretion on
preferred stock - - ( 14,000) -
Amortization of
deemed dividend - - ( 7,000) -
Accrual of
preferred stock dividend - - ( 38,000) -
Net loss - - ( 904,000) ( 904,000)
--------- ------- ---------- ---------
Balance as of
December 31, 1999 7,726,000 ( 394,000) (41,567,000) (5,588,000)
========= ======== ========== =========
</TABLE>
4
<PAGE>
INTERCELL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $( 904,000) ( 504,000)
Less loss from discontinued operations - 67,000
---------- ----------
Loss from continuing operations ( 904,000) ( 437,000)
Adjustments to reconcile net loss to net cash used in
in operating activities:
Common stock of subsidiary issued for services 567,000 -
Other - 3,000
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable
and accrued liabilities 78,000 185,000
---------- ----------
Net cash used in continuing operations ( 259,000) ( 249,000)
---------- ----------
Net cash (used in) provided by discontinued
operations - -
---------- ----------
Cash flows from investing activities:
Other assets ( 48,000) 21,000
Payments received on notes receivable - 1,000
---------- ----------
Net cash provided by (used in) investing activities ( 48,000) 22,000
---------- ----------
Cash flows from financing activities:
Proceeds from sale of stock by subsidiary 180,000 -
Proceeds from notes payable and warrants 208,000 -
---------- ----------
Net cash provided by financing activities 388,000 -
---------- ----------
Net increase (decrease) in cash and cash equivalents 81,000 ( 227,000)
Cash and cash equivalents beginning of period 14,000 251,000
---------- ----------
Cash and cash equivalents end of period $ 95,000 24,000
========== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest $ - 2,000
========== ==========
Supplemental disclosure of noncash investing and financing activities:
1999 1998
---- ----
Conversion of note payable due related party
to common stock $95,000 -
Accretion on preferred stock 14,000 29,000
Amortization of deemed dividend on preferred stock 7,000 14,000
Accrual of preferred stock dividend 38,000 37,000
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
5
<PAGE>
INTERCELL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
1. BUSINESS, ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
- -------------------------------------------------------------------------
Presentation of Interim Information
The accompanying consolidated financial statements include the accounts of
Intercell Corporation, a Colorado corporation (the Company), and its significant
subsidiaries: Nanopierce Technologies, Inc. ("Nanopierce"), acquired February
26, 1998, Sigma 7 Corporation ("Sigma", a corporation that filed for voluntary
liquidation under Chapter 7 of the U.S. Bankruptcy Code on December 31, 1998),
Particle Interconnect Corp., and Arizcan Properties, Ltd. All significant
intercompany accounts and transactions have been eliminated in consolidation.
The Company has an approximate 33 percent ownership interest in Nanopierce at
December 31, 1999. Although the Company's ownership interest has been reduced
below 50 percent, the Company has continued to consolidate Nanopierce through
December 5, 1999, based on several factors which management believes constitute
a controlling financial interest in Nanopierce by Intercell, including common
ownership by the President, Director, and CEO of the Company, who is also
President, Director, and CEO of Nanopierce.
In the opinion of the management of the Company, the accompanying unaudited
consolidated financial statements include all material adjustments, including
all normal recurring adjustments, considered necessary to present fairly the
financial position of and operating results for the periods presented. The
financial statements and notes are presented as permitted by Form 10-QSB, and do
not contain certain information included in the Company's last Annual Report on
Form 10-KSB for the fiscal year ended September 30, 1999. It is the Company's
opinion that when the interim statements are read in conjunction with the
September 30, 1999 Annual Report on Form 10-KSB, the disclosures are adequate to
make the information presented not misleading. Interim results are not
necessarily indicative of results for a full year or any future period.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has incurred
significant operating losses, and has a working capital deficiency and a
stockholders' deficit at December 31, 1999. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. The
independent auditors report on the Company's financial statements for the year
ended September 30, 1999 included a "going concern" explanatory paragraph,
meaning the auditors expressed substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or amounts and classifications of liabilities that
might result from the outcome of this uncertainty.
6
<PAGE>
INTERCELL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
As of September 30, 1999 and through December 31, 1999, the Company's remaining
operating subsidiary is Nanopierce, which is engaged in the design, development
and licensing of products using its intellectual property, the PI Technology.
At December 31, 1999 the Company owns approximately 33 percent of the
outstanding common stock of Nanopierce. The PI Technology consists of patents,
pending patent applications, patent applications in preparation, trade secrets,
trade names, and trade marks. The PI Technology improves electrical, thermal
and mechanical characteristics of electronic products. Nanopierce has
designated and is commercializing its PI Technology as the Nanopierce Connection
System (NCS) and markets the PI Technology to companies in various industries
for a wide range of applications. Nanopierce has not realized any royalty
revenue through December 31, 1999.
To address its current cash flow concerns, the Company has been in discussions
with investment bankers and financial institutions attempting to raise funds to
support current and future operations. This includes attempting to raise
additional working capital through the sale of additional capital stock (see
note 2) or through the issuance of debt. In addition, the Company, through
Nanopierce, is actively marketing the PI Technology, primarily through the
development of strategic relationships with established leaders in the
technology industry, the licensing of the PI Technology and/or the sale of
products incorporating the PI Technology.
Use of estimates
The preparation of consolidated 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 consolidated
financial statements and reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
Restricted Cash
Restricted cash consists of cash held in an escrow account in connection with
the Company's sale of a former subsidiary.
Reclassifications
Certain amounts in the 1998 financial statements have been reclassified to
conform with the 1999 presentation.
7
<PAGE>
INTERCELL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
2. AUTHORIZED CAPITAL
- ----------------------
The Company's authorized capital consists of, among other classes of securities,
100,000,000 common shares. As of February 7, 2000 there are 99,891,188 common
shares issued and outstanding. In addition, the Company has outstanding certain
classes of securities which are convertible into common shares which would, if
converted, cause the Company to exceed its authorized common shares. This is
prohibited by the laws of the State of Colorado and therefore until the Company
is able to convene a Special Meeting of the Shareholders pursuant to the proxy
solicitation requirements of Section 14 of the Securities Act of 1934, and the
law of the State of Colorado, it cannot permit such conversions, which means the
Company is or will be in default of certain terms and conditions of such
instruments. The securities affected consists of the following as of February
7, 2000:
(1) 26 shares of Series C Preferred shares,
(2) 1,080 shares of Series D Preferred shares,
(3) Warrants convertible into 2,637,450 shares; and
(4) Options convertible into 6,927,000 common shares.
The Company intends to promptly prepare and file proxy solicitation materials to
convene a Special Meeting of Shareholders to among other things, increase its
authorized common shares in an amount sufficient to permit the conversion of its
authorized and/or outstanding convertible securities.
3. LOSS PER SHARE
- ------------------
SFAS No. 128, Earnings per Share, requires dual presentation of basic and
diluted earnings or loss per share (EPS) with a reconciliation of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation. Basic EPS excludes dilution. Diluted DPS reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted in
the issuance of common stock that then shared in the earnings of the entity.
Loss per share of common stock is computed based on the average number of common
shares outstanding during the year. Stock options, warrants, convertible debt
and convertible preferred stock are not considered in the calculation, as the
impact of the potential common shares (approximately 68,556,050 shares at
December 31, 1999 and approximately 46,839,850 shares at December 31, 1998)
would be to decrease loss per share. Therefore, diluted loss per share is
equivalent to basic loss per share.
8
<PAGE>
INTERCELL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
4. RISK CONSIDERATIONS
- -----------------------
BUSINESS RISK
The Company and its remaining operating subsidiary, Nanopierce, are subject to
risks and uncertainties common to technology-based companies, including rapid
technological change, dependence on principal products and third party
technology, new product introductions and other activities of competitors,
dependence on key personnel, and limited operating history.
5. DISCONTINUED OPERATIONS
- ---------------------------
Liabilities of discontinued operations at December 31, 1999, consist of Sigma
liabilities as follows:
Accounts payable and accrued liabilities $ 986,000
Notes payable 2,240,000
Other liabilities 121,000
----------
$ 3,347,000
===========
Notes payable of discontinued operations primarily consist of $1,700,000, 10%,
unsecured notes payable issued in a 1997 private placement, originally due in
October 1998.
The liabilities of $3,347,000 remain accrued by the Company as of December 31,
1999, pending a final judgment from the U.S. Bankruptcy Court as to the
disposition of these liabilities.
The $67,000 loss from discontinued operations for the three months ended
December 31, 1998 represents accrued interest on the notes payable to the date
of the bankruptcy filing.
6. SUBSIDIARY STOCK TRANSACTIONS
- ---------------------------------
During the three months ended December 31, 1999, Nanopierce issued 825,125
shares of its common stock for services of third parties, 722,513 shares of its
common stock for cash from third parties and 565,934 shares of its common stock
as partial payment on a note payable, accrued interest, and accounts payable due
to two officers of Nanopierce.
Nanopierce also issued options, warrants and convertible notes to purchase up to
11,392,500 common shares of Nanopierce. The options, warrants, and convertible
notes were issued in connection with additional financing, financing costs, and
services of employees.
9
<PAGE>
INTERCELL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
7. STOCKHOLDERS EQUITY
- -----------------------
During the three months ended December 31, 1999, the Company issued 17,653,516
shares of common stock in connection with Series C Preferred Stock conversions.
In January, 2000, the Company issued 5,928,583 shares of common stock in
connection with Series C Preferred Stock conversion and issued 10,000,000 shares
of common stock as a payment on the convertible debentures.
8. LICENSE AGREEMENTS AND LITIGATION
- -------------------------------------
Nanopierce has license agreements with third parties which allow the third
parties to utilize defined aspects of the intellectual property rights in return
for royalty fees. All but two license agreements are idle. Royalties and
maintenance payments from the two license agreements have been held in an escrow
account, outside of Nanopierce's control, pending the resolution of certain
legal issues.
On November 30, 1999, Nanopierce obtained a Court Order of Declaratory Judgment
that it has incontestable and exclusive ownership of all patents, patent
applications, licenses, trade names, trademarks, trade secrets and other
intellectual properties relating to the PI Technology. As part of the Court
Order, the original inventor of the technology is to receive all accrued and
future royalty payments from the license agreements outstanding as of September
3, 1996. The Company also granted to the original inventor of the technology a
two-year, royalty bearing, non-exclusive license to use the PI Technology for
certain specified applications.
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters, including the Nanopierce judgment, will not have a
material adverse effect on the financial statements of the Company.
10
<PAGE>
ITEM 2. MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The statements contained in this Form 10-QSB, if not historical, are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, and involve risks and uncertainties that could
otherwise, or other expectations described in such forward-looking statements.
Any forward-looking statement or statements speak only as of the date on which
such statements were made, and the Company undertakes no obligation to update
any forward-looking statement to reflect events or circumstances after the date
on which such statements are made or reflect the occurrence of unanticipated
events. Therefore, forward-looking statements should not be relied upon as
prediction of actual future results.
The independent auditors' report on the Company's financial statements for the
year ended September 30, 1999 included a "going concern" explanatory paragraph,
meaning the auditors have expressed substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to the
factors prompting the explanatory paragraph are discussed below and also in Note
1 of the audited financial statements contained in the Company's Annual Report
on Form 10-KSB for the fiscal year ended September 30, 1999.
Intercell Corporation discontinued all operations of its majority owned
subsidiary Sigma 7 Corporation, a manufacturer of memory modules located in San
Diego, CA, on June 5, 1998. Sigma 7 Corporation subsequently filed for
liquidation under Chapter 7 of the United States Bankruptcy Code on December 30,
1998. The liabilities of $3,347,000 remain on the books pending a final
judgment from the U.S. Bankruptcy Court as to the disposition of these
liabilities.
The Company is currently engaged in the design, development and licensing of
products using its patented particle interconnect technology, through its 33
percent owned subsidiary, Nanopierce Technologies, Inc.
RESULTS OF OPERATIONS
The Company had no revenue from continuing operations for the three months ended
December 31, 1999 and 1998.
11
<PAGE>
The Company experienced a net loss of $904,000 for the three months ended
December 31, 1999 compared to a net loss of $504,000 for the three months ended
December 31, 1998. General and administrative expenses increased to $873,000
for the three months ended December 31, 1999 from $417,000 for the three months
ended December 31, 1998. This increase is primarily due to financing costs,
including commissions, of approximately $370,000 in the three months ended
December 31, 1999 incurred by Nanopierce in connection with various financing
arrangements (there were no similar costs in the 1998 period), and public
relations expenses which increased by approximately $150,000. These increases
were offset by a reduction in various other expenses including legal expenses.
Interest expense increased by $12,000 in the 1999 period as compared to the 1998
period as a result of the additional debt of the Company.
LIQUIDITY AND FINANCIAL CONDITION
The Company has a working capital deficit of $6,185,000 at December 31, 1999
compared to a working capital deficit of $6,074,000 at September 30, 1999.
The Company's liabilities increased to $6,280,000 at December 31, 1999 compared
to $6,088,000 at September 30, 1999. The increase was due in part to an
increase in notes payable issued to secure finances for operations over the six
month period ended December 31, 1999 by Nanopierce.
The Company's current operations are not generating positive cash flow. In
order to meet operating needs, the Company's 33 percent owned affiliate,
Nanopierce, in the three months ended December 31, 1999, raised $188,000 through
the issuance of Nanopierce's common stock and raised $102,500 through the
issuance of promissory notes and warrants. In January, 2000, Nanopierce issued
$1,500,000 principal amount of Nanopierce's 6% convertible debentures and
warrants to purchase 150,000 shares of Nanopierce's common stock for an
aggregate purchase price of $1,500,000. Nanopierce also issued, for the
aggregate purchase price of $100, a conditional warrant pursuant to which the
purchaser can purchase and the Company shall issue and sell up to an additional
$2,500,000 of Nanopierce's convertible debentures and additional warrants to
purchase 250,000 shares of common stock.
Since the Company's operations are not sufficient to fund the Company's capital
requirements, the Company may enter into a revolving loan agreement with a
financial institution, or attempt to raise additional capital through the sale
of additional capital stock (See Note 2) or through the issuance of debt. At
the present time the Company does not have a revolving loan agreement with any
financial institution nor can the Company provide assurances that it will be
able to raise funds through issuance of debt or equity in the Company.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standard Board (FASB) issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. This
statement, as amended by SFAS No. 137, is effective for fiscal years beginning
after June 15, 2000. Currently, the Company does not have any derivative
financial instruments and does not participate in hedging activities; therefore,
management believes that SFAS No. 133 will not impact the Company's financial
statements.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Nanopierce has license agreements with third parties, which allow the third
parties to utilize defined aspects of the intellectual property rights in return
for royalty fees. All but two license agreements are idle. Royalties and
maintenance payments from the two license agreements have been held in an escrow
account, outside the Company's control, pending the resolution of certain
issues. On November 30, 1999, the Company obtained a Court Order of Declaratory
Judgment that it has incontestable and exclusive ownership of all patents,
patent applications, licenses, trade names, trademarks, trade secrets and other
intellectual properties relating to the PI Technology. As part of the Court
Order, the original inventor of the technology is to receive all accrued and
future royalty payments from the licenses which were outstanding as of September
3, 1996. The Company also granted to the original inventor of the technology a
two-year, royalty bearing, non-exclusive license to use the PI Technology for
certain specified applications. The Company believes that the ultimate
disposition of legal matters will not have a material adverse impact on results
of operations, financial position, or cash flows.
On July 1, 1998, the Company was served a summons and complaint naming it, its
subsidiary, Sigma and others affiliated with the Company, by Classic Trading,
Inc., a California corporation, with the Superior Court of the State California,
Count of Orange, CV 796047 (the " Classic Trading Lawsuit"). Classic Trading,
Inc. alleges breach of contact and believes that it is owed $135,000.00. The
Company has filed an answer denying the allegations. The litigation has not
been further prosecuted since then.
ITEM 2. CHANGES IN SECURITIES
The Company made the following unregistered sales of its securities from October
1, 1999 to December 31, 1999.
<TABLE>
<CAPTION>
DATE OF SALE TITLE OF SECURITIES SHARES CONSIDERATION PURCHASER
- ------------ ------------------- ---------- ------------------- -------------------------
<S> <C> <C> <C> <C>
10/05/99 Common 12,218,767 Series C Conversion Queensway Financial Group
10/26/99 Common 3,333,333 Series C Conversion The Gifford Fund, Ltd.
12/31/99 Common 2,071,416 Series C Conversion Capital Venture Group
</TABLE>
13
<PAGE>
EXEMPTION FROM REGISTRATION CLAIMED
All of the sales by the Company of its unregistered securities were made by the
Company in reliance upon Section 4(2) of the Act. All of the individuals and/or
entities listed above that purchased the unregistered securities were all known
to the Company and its management, through pre-existing business relationships,
as long standing business associates, friends, and employees. All purchasers
were provided access to all material information which they requested and all
information necessary to verify such information and were afforded access to
management of the Company in connection with their purchases. All purchasers of
the unregistered securities acquired such securities for investment and not with
a view toward distribution, acknowledging such intent to the Company. All
certificates or agreements representing such securities that were issued
contained restrictive legends, prohibiting further transfer of the certificates
or agreements representing such securities, without such securities either being
first registered or otherwise exempt from registration in any further resale or
disposition.
ITEM 6. EXHIBITS
EXHIBITS
Exhibit 11 Statement of Computation of Earnings per Share
Exhibit 27 Financial Data Schedule
14
<PAGE>
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.
INTERCELL CORPORATION
(REGISTRANT)
Date: February 14, 1999 By: /s/ Paul H. Metzinger
-----------------------------
Paul H. Metzinger, President,
Chief Executive Officer &
Chief Financial Officer
<PAGE>
EXHIBIT 11
INTERCELL CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET LOSS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
Three months
ended December 31,
1999 1998
---- ----
<S> <C> <C>
Net loss $( 904,000) ( 504,000)
Deemed dividends on Series C
preferred stock relating to
in-the-money conversion terms ( 7,000) ( 14,000)
Accrued dividends on Series D
preferred stock ( 38,000) ( 37,000)
Accretion on Series B and C
preferred stock ( 14,000) ( 29,000)
--------- ----------
Net loss applicable to common
$( 963,000) ( 584,000)
========= ==========
Weighted average number of common
shares outstanding 80,949,160 37,514,481
Common equivalent shares
representing shares issuable
upon exercise of outstanding
options and warrants - -
---------- ----------
80,949,160 37,514,481
========== ==========
Basic and diluted loss per share
applicable to common
to common shareholders:
Loss from continuing operations $( 0.01) ( 0.02)
Loss from discontinued
operations 0.00 0.00
--------- ----------
Basic and diluted loss per
common share $( 0.01) ( 0.02)
========= ==========
</TABLE>
Stock options, warrants and convertible preferred stock are not considered in
the calculations as the impact of the potential common shares (approximately
68,556,050 shares at December 31, 1999 and approximately 46,839,850 shares at
December 31, 1998) would be to decrease net loss per share.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CAPTION>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 95,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 95,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 692,000
<CURRENT-LIABILITIES> 6,280,000
<BONDS> 0
0
3,067,000
<COMMON> 22,505,000
<OTHER-SE> (31,160,000)
<TOTAL-LIABILITY-AND-EQUITY> 692,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 873,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,000
<INCOME-PRETAX> (904,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (904,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (904,000)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
