-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SaA/Pxb/n96crwd62a/IjFazRqNKztZXLgmDowOW3X/jFK8UY/+o3YwWpYkVvE5t K3x3Pb8eT2sPx58YC/y9tA== 0001015402-03-001988.txt : 20030515 0001015402-03-001988.hdr.sgml : 20030515 20030515154229 ACCESSION NUMBER: 0001015402-03-001988 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERCELL INTERNATIONAL CORP CENTRAL INDEX KEY: 0000745655 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 840928627 STATE OF INCORPORATION: NV FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-14306 FILM NUMBER: 03704804 BUSINESS ADDRESS: STREET 1: 370 17TH ST STE 3290 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3035921010 MAIL ADDRESS: STREET 1: 370 17TH ST CITY: DENVER STATE: CO ZIP: 80202 FORMER COMPANY: FORMER CONFORMED NAME: INTERCELL CORP DATE OF NAME CHANGE: 19920703 10QSB 1 doc1.txt 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 March 31, 2003 OR [ ] TRANSITION REPORT PURUSANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-14306 INTERCELL INTERNATIONAL CORPORATION ----------------------------------- (Exact name of small business issuer as specified in its charter) Nevada 84-0928627 ------ ---------- (State or other jurisdiction of I.R.S. employer incorporation or organization) identification number) 370 17th Street, Suite 3640 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 May 14, 2003 there were 8,651,251 shares of the registrant's sole class of common shares outstanding. Transitional Small Business Disclosure Format Yes No X --- --- INTERCELL INTERNATIONAL CORPORATION INDEX PART I - FINANCIAL INFORMATION Item 1. Financial Statements Page ---- Independent Accountants' Report 1 Condensed Consolidated Balance Sheet - March 31, 2003 2 Condensed Consolidated Statements of Operations - Three months and six months ended March 31, 2003 and 2002 3 Condensed Consolidated Statement of Changes in Stockholders' Deficit - Six months ended March 31, 2003 4 Condensed Consolidated Statements of Cash Flows - Six months ended March 31, 2003 and 2002 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis 13 PART II - OTHER INFORMATION Item 1. Legal Proceedings 17 Item 2. Changes in Securities 17 Item 4. Controls and Procedures 17 Item 6. Exhibits and Reports on Form 8-K 18 SIGNATURE 19 CERTIFICATION INDEPENDENT ACCOUNTANTS' REPORT ------------------------------- Board of Directors Intercell International Corporation We have reviewed the accompanying condensed consolidated balance sheet of Intercell International Corporation and subsidiaries as of March 31, 2003, the related condensed consolidated statements of operations for the three-month and six-month periods ended March 31, 2003 and 2002, the condensed consolidated statement of changes in stockholders' deficit for the six-month period ended March 31, 2003, and the condensed consolidated statements of cash flows for the six-month periods ended March 31, 2003 and 2002. These interim condensed consolidated financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim condensed consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America. GELFOND HOCHSTADT PANGBURN, P.C. Denver, Colorado May 9, 2003 1
INTERCELL INTERNATIONAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheet March 31, 2003 (Unaudited) Assets ------ Current assets: Cash and cash equivalents $ 14,000 ------------- Total current assets 14,000 ------------- Total assets $ 14,000 ============= Liabilities and Stockholders' Deficit ------------------------------------- Current liabilities: Accounts payable and accrued liabilities $ 116,000 Derivative instruments (Note 2) 13,000 ------------- Total liabilities (all current) 129,000 ------------- Commitments and contingencies (Note 8) Stockholders' deficit (Note 6): Convertible preferred stock; $0.001 par value; 20,000,000 shares authorized; no shares outstanding - Common stock; $0.001 par value; 100,000,000 shares authorized; 8,651,251 shares issued and outstanding 9,000 Additional paid-in capital 36,871,000 Accumulated deficit (36,995,000) ------------- Total stockholders' deficit (115,000) ------------- Total liabilities and stockholders' deficit $ 14,000 ============= See accompanying notes to condensed consolidated financial statements.
2
INTERCELL INTERNATIONAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Operations Three and Six Months Ended March 31, 2003 and 2002 (Unaudited) Three Months Ended Six Months Ended March 31, March 31, --------- --------- 2003 2002 2003 2002 ----------- ---------- ---------- ----------- General and administrative expense $( 41,000) ( 467,000) ( 92,000) ( 504,000) Gain on sale and exchange of affiliate stock (Note 2) 19,000 503,000 87,000 532,000 Unrealized gain (loss) on derivative instruments (Note 2) 19,000 ( 550,000) 19,000 ( 550,000) Interest income - 1,000 - 2,000 Equity in losses of affiliate (Note 2) ( 8,000) ( 94,000) ( 51,000) ( 247,000) Interest expense - ( 2,000) - ( 4,000) ----------- ---------- ---------- ----------- Net loss ( 11,000) ( 609,000) ( 37,000) ( 771,000) ----------- ---------- ---------- ----------- Accretion on series C preferred stock - - - ( 1,000) ----------- ---------- ---------- ----------- Net loss applicable to common stockholders $( 11,000) ( 609,000) ( 37,000) ( 772,000) =========== ========== ========== =========== Basic and diluted loss per share, applicable to common stockholders $ * ( 0.07) * ( 0.09) =========== ========== ========== =========== Weighted average number of common shares outstanding: Basic and Diluted 8,651,251 8,551,251 8,651,251 8,420,344 =========== ========== ========== ===========
* Less than ($0.01) per share. See accompanying notes to condensed consolidated financial statements. 3
INTERCELL INTERNATIONAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statement of Changes in Stockholders' Deficit Six Months Ended March 31, 2003 (Unaudited) Common Stock Warrants to Additional Total ------------ Acquire Paid-In Accumulated Stockholders' Shares Amount Common Stock Capital Deficit Deficit --------- -------- ------------- ---------- ------------ ----------- Balances, October 1, 2002 8,651,251 $ 9,000 10,000 36,861,000 (36,958,000) (78,000) Expired warrants - - (10,000) 10,000 - - Net loss - - - - (37,000) (37,000) --------- -------- ------------- ---------- ------------ ----------- Balances, March 31, 2003 8,651,251 $ 9,000 - 36,871,000 (36,995,000) ( 115,000) ========= ======== ============= ========== ============ ===========
See accompanying notes to condensed consolidated financial statements. 4
INTERCELL INTERNATIONAL CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended March 31, --------- 2003 2002 ------------ ------------ Cash flows from operating activities: Net loss $( 37,000) ( 771,000) Adjustments to reconcile net loss to net cash used in operating activities: Expense incurred in exchange for derivative - 450,000 Unrealized (gain) loss on derivative instruments ( 19,000) 550,000 Gain on sale and exchange of affiliate stock ( 87,000) ( 532,000) Equity in losses of affiliate 51,000 247,000 Changes in operating assets and liabilities: Decrease in receivable - 2,000 Decrease in accounts payable and accrued liabilities ( 8,000) ( 13,000) ------------ ------------ Net cash used in operating activities ( 100,000) ( 67,000) ------------ ------------ Cash flows from investing activities: Proceeds from sale of affiliate stock and warrants to purchase affiliate stock 111,000 503,000 Payment received on related party advances - 51,000 ------------ ------------ Net cash provided by investing activities 111,000 554,000 ------------ ------------ Cash flows from financing activities: Payment on note payable to related party - ( 128,000) Payment on note payable to shareholder - ( 8,000) ------------ ------------ Net cash used in financing activities - ( 136,000) ------------ ------------ Net increase in cash and cash equivalents 11,000 351,000 Cash and cash equivalents, beginning of period 3,000 31,000 ------------ ------------ Cash and cash equivalents, end of period $ 14,000 382,000 ============ ============ Supplemental disclosure of cash flow information: Cash paid for interest $ - 4,000 ============ ============ Supplemental disclosure of non-cash investing and financing activities: Reduction in related party receivable and accrued interest in exchange for affiliate common stock $ 43,000 - Sale of investment in land held for sale in exchange for affiliate common stock - 247,000 Conversion of preferred stock to common stock - 48,000 Reduction in receivable under agreement to sell affiliate stock and related deferred gain - 394,000 Common stock issued in exchange for note payable to shareholder - 36,000 Accretion on preferred stock - 1,000
See accompanying notes to condensed consolidated financial statements. 5 INTERCELL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements Six Months Ended March 31, 2003 and March 31, 2002 (Unaudited) 1. BUSINESS, BASIS OF PRESENTATION AND MANAGEMENT'S PLAN - --------------------------------------------------------------- Business and Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of Intercell International Corporation, a Nevada corporation (the Company), Particle Interconnect Corp. (Particle) through November 2002, and Arizcan Properties, Ltd. (Arizcan) through October 2001. All significant intercompany accounts and transactions have been eliminated in consolidation. Particle, is an inactive subsidiary that was dissolved in November 2002. Arizcan was a subsidiary which owned an investment in land held for sale. In October 2001, Arizcan was sold (Note 5). In the opinion of the management of the Company, the accompanying unaudited condensed consolidated financial statements include all material adjustments, including all normal and recurring adjustments, considered necessary to present fairly the financial position and operating results of the Company 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, 2002. It is the Company's opinion that when the interim financial statements are read in conjunction with the September 30, 2002 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. Investment in NanoPierce As of March 31, 2003, the Company owns approximately 10.3% of the outstanding common stock of NanoPierce Technologies, Inc. ("NanoPierce"). The Company's President/CEO is also the President/CEO of NanoPierce and is also a member of the board of directors of both companies. The Company accounts for its investment in NanoPierce under the equity method of accounting due to the Company's ability to exercise significant influence over operating and financial policies of NanoPierce. NanoPierce is engaged in the design, development and licensing of products using its intellectual property, the PI Technology. The PI Technology consists of patents, pending patent applications, patent applications in preparation, trade secrets, 6 INTERCELL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements Six Months Ended March 31, 2003 and March 31, 2002 (Unaudited) trade names, and trademarks. The PI Technology is designed to improve electrical, thermal and mechanical characteristics of electronic products. The Company has designated and is commercializing its PI Technology as the NanoPierce Connection System (NCS(TM)) and markets the PI Technology to companies in various industries for a wide range of applications. NanoPierce has not realized any significant revenues through March 31, 2003. Due to continued operating losses and in order to comply with German legal requirements, NanoPierce Card Technologies, Gmbh (NCT), a wholly-owned German subsidiary of NanoPierce filed insolvency with the Courts of Munich, Germany, effective April 1, 2003 and was placed in receivership on that date. NCT activities through March 2003 consisted primarily of providing software development and implementation services and performing administrative, research and development, and selling and marketing activities. The Company's ownership interest in NanoPierce's outstanding common stock decreased from approximately 11.7% at October 1, 2002 to approximately 10.3% at March 31, 2003. The Company's ownership interest decreased by 0.50% due to the Company's sale of 300,842 NanoPierce shares during the six months ended March 31, 2003 (Note 2) and issuances of common stock by NanoPierce that resulted in an additional 1.05% decrease. During the six months ended March 31, 2003, the Company's ownership interest in NanoPierce increased by 0.13% as a result of the receipt of 74,870 shares of NanoPierce in satisfaction of a note receivable and accrued interest from an officer of the Company (Note 3) and 15,000 shares of NanoPierce from a director who had received such shares for services during the 2002 fiscal year, valued at $8,000. During the six months ended March 31, 2003, the carrying value of the investment in NanoPierce was reduced by the Company's proportionate share of net losses of NanoPierce ($51,000), resulting in a remaining investment balance of $0 at March 31, 2003. 7 INTERCELL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements Six Months Ended March 31, 2003 and March 31, 2002 (Unaudited) The summarized financial position and results of operation of NanoPierce as of March 31, 2003 and for the six-month periods ended March 31, 2003 and 2002, were as follows: Current assets $ 829,030 ------------ Long-term assets: Intellectual property, patents and trademark applications, net 834,310 Other, net 598,241 ------------ 1,432,551 ------------ Total assets $ 2,261,581 ============ Total liabilities (all current) $ 656,078 ------------ Stockholders' equity 1,605,503 ------------ Total liabilities and stockholders' equity $ 2,261,581 ============ 2003 2002 ------------ ----------- Revenues $ 99,579 67,967 Loss from operations $(1,851,323) (2,566,264) Net loss $(1,843,806) (2,521,689) At March 31, 2003, the Company owned 6,507,154 shares of NanoPierce common stock, and based upon the closing bid price of $0.29 per share, the market value of the Company's investment in NanoPierce common shares at March 31, 2003, was approximately $1,887,000. The Company is subject to various restrictions on the sale and/or exchange of NanoPierce common shares owned by the Company, which limits the marketability of this investment. Management's Plans The Company has a working capital deficiency and a stockholders' deficit at March 31, 2003 and has no revenue producing operations. The Company has been able to sell and/or exchange shares of NanoPierce common stock held by the Company for cash or in exchange for services or liabilities in the past and may be able to perform similar sales/exchanges during 2003, subject to various restrictions on such sales/exchanges. 8 INTERCELL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements Six Months Ended March 31, 2003 and March 31, 2002 (Unaudited) The Company has also 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 or through the issuance of debt. 2. SALE OF AFFILIATE STOCK AND WARRANTS TO PURCHASE AFFILIATE STOCK - ----------------------------------------------------------------------------- Sale of Affiliate Stock During the six months ended March 31, 2003, the Company sold to unrelated third parties, 200,842 restricted shares of NanoPierce common stock held by the Company for cash of $61,000. The Company sold 166,667 shares for $0.30 per share and sold 34,175 shares for $0.33 per share. The closing market prices of the NanoPierce common stock on the transaction dates were $0.62 and $0.70 per share, respectively. The carrying value of the NanoPierce shares on the transaction dates was $0, resulting in a gain on the sale of affiliate stock of $61,000. Warrants to Purchase Affiliate Stock In October 2002, the Company sold 100,000 restricted shares of NanoPierce common stock and issued two warrants to purchase up to 300,000 shares of NanoPierce common stock held by the Company for $50,000 cash. Each warrant grants the holder the right to purchase up to 150,000 restricted shares of NanoPierce common stock held by the Company at an exercise price of $0.50 per share. The closing bid price of the NanoPierce common stock was $0.69 per share at the transaction date. The warrants are exercisable immediately; one warrant expires in October 2004, and one warrant expires in October 2007. Both warrants contain cashless exercise provisions at the option of the holder. At the date of the transaction, the warrants were valued at $32,000, and the 100,000 shares of NanoPierce stock were valued at $18,000. The warrants are considered derivative financial instruments and are therefore recorded in the balance sheet at fair value. Changes in the fair value of the warrants (unrealized gains and losses) are recognized currently in earnings (loss) of the Company. At March 31, 2003, neither warrant had been exercised, and the fair value of the derivatives was estimated to be $13,000. As a result, a $19,000 unrealized gain was recognized during the quarter ended March 31, 2003, to reflect the decrease in the fair value of the derivative instruments. 9 INTERCELL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements Six Months Ended March 31, 2003 and March 31, 2002 (Unaudited) In January and April 2002, the Company granted warrants to a third party in exchange for business consulting and advisory services. Under the warrants, the third party had the right to purchase up to 5,000,000 shares of NanoPierce common stock held by the Company at an exercise price of $0.50 and $1.39 per share. The warrants were considered derivative financial instruments and were therefore recorded on the balance sheet at fair value at the dates of the transactions. Changes in the fair value of the warrants were recognized in earnings (loss) of the Company through May 22, 2002, the date the warrants were cancelled. During the quarter ended March 31, 2002, the Company recognized a $550,000 unrealized loss on the derivatives. 3. NOTE RECEIVABLE - RELATED PARTY - --------------------------------------- Prior to October 1, 2001, the Company loaned $39,000 to an officer of the Company in exchange for an unsecured, 8% promissory note, which was due in September 2002. In November 2002, the Company received 74,870 common shares of NanoPierce valued at $43,000 ($0.58 per share; the closing bid price of the NanoPierce common stock on the date of the exchange) in satisfaction of the $39,000 promissory note and related accrued interest of $4,000. No gain or loss was recognized on the transaction. 4. NOTE RECEIVABLE FROM AGREEMENT TO SELL AFFILIATE STOCK - ----------------------------------------------------------------- Prior to October 1, 2001, the Company entered into an agreement to sell 845,000 shares of NanoPierce common stock held by the Company in exchange for a $423,000 note receivable, classified as a reduction to stockholders' deficit. The purchaser had the option of putting back to the Company the 845,000 shares of NanoPierce common stock in full satisfaction of the note. In October 2001, the purchaser returned to the Company the 845,000 shares of NanoPierce common stock in satisfaction of the $394,000 remaining balance on the note receivable from the purchaser. 5. SALE OF INVESTMENT IN LAND HELD FOR SALE - --------------------------------------------------- In October 2001, the Company sold to a shareholder of the Company, all of the common stock of Arizcan, which had an investment in land held for sale with a carrying amount of $247,000, in exchange for 330,000 common shares of NanoPierce. The shares of NanoPierce were valued at $247,000 based on the quoted market price of the NanoPierce common stock at the date of the agreement, and no gain or loss was recognized on the transaction. 10 INTERCELL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements Six Months Ended March 31, 2003 and March 31, 2002 (Unaudited) 6. STOCKHOLDERS' EQUITY (DEFICIT) - ------------------------------------ In October 2001, the Company paid $10,000 and issued 226,365 shares of the Company's common stock in satisfaction of a $44,000 note payable and related accrued interest of $2,000 due to a shareholder. The market value of the Company's common stock at the date of issuance, based on the quoted market price per share, was $36,000. In December 2002, warrants to purchase 10,000 shares of common stock at an exercise price of $3.00 per share expired. 7. INCOME (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 EPS 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. Basic income (loss) per share of common stock is computed based on the weighted average number of shares outstanding during the period. Diluted EPS includes the potential conversion of stock options, warrants, and convertible preferred stock. Stock options, warrants and convertible preferred stock are not considered in diluted EPS for those periods with net losses in the calculation, as the impact of the potential common shares (approximately 338,850 shares at March 31, 2003 and 348,850 at March 31, 2002) would be to decrease loss per share. 11 INTERCELL INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements Six Months Ended March 31, 2003 and March 31, 2002 (Unaudited) 8. LITIGATION - -------------- Prior to October 1, 2001, the Company agreed to settle certain litigation and $135,000 of BMI Acquisition Group, Inc. (a subsidiary that was in Chapter 7 Bankruptcy prior to October 1, 2001) liabilities by paying $5,000 in cash and exchanging 37,000 restricted common shares of NanoPierce common stock held by the Company. The settlement agreement further stipulated that should the value of the NanoPierce shares be less than $100,000, based on the closing asked share price one year from the date of the settlement, the Company was to exchange additional shares of NanoPierce in an amount sufficient to obtain the $100,000 value. Based on the closing asked share price of the NanoPierce common stock on the one-year anniversary date, the Company recognized an additional liability of $74,000 at September 30, 2001. In June 2002, the Company agreed to pay $100,000 to settle the litigation and recorded an additional $26,000 of expense. The Company, NanoPierce and Louis DiFrancesco, the inventor of the PI Technology were involved in litigation relating to the NanoPierce ownership of its intellectual property and the rights as to who should receive royalty payments from licenses, which were outstanding as of September 3, 1996. In October 2002, NanoPierce, the Company and DiFrancesco signed a settlement agreement to be enforced by court order. The terms of the agreement do not require any future financial commitments of the Company and are not expected have any future financial impact on the Company's results of operations or cash flows. The court order, among other things, declares that NanoPierce owns the entire, exclusive, incontestable ownership, right, title and interest in the patents. The court order further declares Mr. DiFrancesco owns the sole, exclusive, and incontestable right, to receive and collect all royalties and other payment from all licenses outstanding on September 3, 1996. In addition, Mr. DiFrancesco was also granted a limited, two year, non-transferable, with no right to sublicense, royalty-bearing license. The Court Order could be appealed but has not been appealed. The Company is also involved in other various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of the matter discussed above and other matters will not have a material adverse impact either individually or in the aggregate on results of operations, financial position or cash flows of the Company. 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS Certain statements contained in this Form 10-QSB contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties that could cause actual results to differ materially from the results, financial or 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. RESULTS OF OPERATIONS General and administrative expenses during the six months ended March 31, 2003 were $92,000, compared to $504,000 for the six months ended March 31, 2002 ($41,000 and $467,000 for the three months ended March 31, 2003 and 2002, respectively). The net decrease of $412,000 is primarily attributable to a decrease in consulting expenses. During the six months ended March 31, 2002, the Company issued a warrant for common shares of NanoPierce to a third party for consulting services, in which $450,000 of expenses was recorded. Interest income and interest expense were not significant for the periods. The Company recognized gains of $87,000 for the six months ended March 31, 2003 on the sale and exchange of NanoPierce common stock, compared to gains of $532,000 for the six months ended March 31, 2002 ($19,000 and $503,000 for the three months ended March 31, 2003 and 2002, respectively). The condensed consolidated financial statements reflect the Company's investment in NanoPierce Technologies, Inc. ("NanoPierce") as an investment accounted for under the equity method of accounting. The Company's investment in NanoPierce was carried at zero at September 30, 2002, and therefore the equity method was suspended. During the six months ended March 31, 2003, the Company received NanoPierce shares in exchange for a note receivable and accrued interest. In addition, the Company, in May 2002, issued shares to a director for services, such shares were subsequently returned to the Company during the 2003 fiscal year. The NanoPierce shares were valued at $51,000. At March 31, 2003, the carrying amount of the investment in NanoPierce is zero after recording a loss of $51,000 from its equity in NanoPierce's losses for the six months ended March 31, 2003. 13 Therefore, the Company has again suspended the equity method of accounting. The Company accounts for its investment in NanoPierce under the equity method of accounting due to the Company's ability to exercise significant influence over operations and financial policies of NanoPierce even though the voting ownership interest is below 20% (approximately 10.3% at March 31, 2003). During the six months ended March 31, 2003, the Company recognized a net loss of $37,000 compared to a net loss of $771,000 during the six months ended March 31, 2002 ($11,000 and $609,000 for the three months ended March 31, 2003 and 2002, respectively). The decrease of $734,000 is explained by the issuance of the warrants for NanoPierce common shares for consulting services, and the decrease in the equity loss of affiliate of $51,000 for the six months ended March 31, 2003 compared to $247,000 for the six months ended March 31, 2002. LIQUIDITY AND CAPITAL RESOURCES During the six months ended March 31, 2003, the Company entered into an agreement with an unrelated third party to sell 100,000 shares of NanoPierce common stock held by the Company along with warrants to purchase up to 300,000 restricted shares of NanoPierce common stock held by the Company. In exchange for the NanoPierce common stock and warrants, the Company received $50,000 cash. The warrants have an exercise price of $0.50 per share. The closing bid price of the NanoPierce common stock was $0.69 per share at the date of grant. The first warrant of 150,000 shares has a term of two years. The second warrant of 150,000 shares has a term of five years. Both warrants provide for cashless exercise of the warrants and are exercisable immediately. The warrants were valued at $32,000 at the date of the issuance. The warrants are considered derivative financial instruments and are therefore recorded in the balance sheet at fair value. Changes in the fair value of the warrants (unrealized gains and losses) are recognized currently in earnings (loss) of the Company. At March 31, 2003, the fair value of the derivatives was estimated to be $13,000. In September 2001, the Company loaned $39,000 to an officer of the Company in exchange for an unsecured, 8% promissory note, which was due in September 2002. In November 2002, the Company received 74,870 common shares of NanoPierce value at $43,000 ($0.58 per share; the closing bid price of the NanoPierce common stock on the date of the exchange) in satisfaction of the $39,000 promissory note and related accrued interest of $4,000. No gain or loss was recognized on the transaction. 14 PLAN OF OPERATIONS Over the past two years, the Company has restructured itself in order to enhance its prospects for financing and future business operations and acquisitions. During the six months ended March 31, 2003, the Company completed the following significant transactions: - The Company sold to an unrelated third party 100,000 shares of the NanoPierce common stock held by the Company, along with warrants to purchase up to 300,000 shares of the NanoPierce common stock held by the Company for $50,000. The warrants have an exercise price of $0.50 per share and include provisions for a cashless exercise. - The Company sold an additional 200,842 shares of NanoPierce common stock held by the Company for an additional $61,000. - The Company received 74,870 common shares of NanoPierce valued at $43,000 ($0.58 per share; the closing bid price of the NanoPierce common stock on the date of the exchange) in satisfaction of the $39,000 promissory note and related accrued interest of $4,000 owed by an officer of the Company. - The Company received 15,000 common shares of NanoPierce valued at $7,500 ($0.50 per share; the closing bid price of the NanoPierce common stock on the date of the exchange) from a director to whom such shares were issued to for services as a director to the Company, during the 2002 fiscal year. As of March 31, 2003, the Company owns approximately 10.3% of the outstanding common stock of NanoPierce. The Company's President/CEO is also the President/CEO of NanoPierce and is also a Director on both Companies' boards of directors. The Company accounts for its investment in NanoPierce under the equity method of accounting due to the Company's ability to exercise significant influence over operating and financial policies of NanoPierce. NanoPierce is engaged in the design, development and licensing of products using its intellectual property, the PI Technology. The PI Technology consists of patents, pending patent applications, patent applications in preparation, trade secrets, trade names, and trade marks. The PI Technology is designed to improve electrical, thermal and mechanical characteristics of electronic products. The Company has designated and is commercializing its PI Technology as the NanoPierce Connection System (NCS(TM)) and markets the PI Technology to companies in various industries for a wide range of applications. NanoPierce Card Technologies, GmbH, a wholly owned subsidiary of NanoPierce, was placed in receivership on April 1, 2003. 15 NanoPierce has not realized any significant revenues through March 31, 2003. To the extent the Company's operations are not sufficient to fund the Company's capital requirements, the Company may enter into a revolving loan agreement with financial institutions, attempt to raise capital through the sale of additional capital stock, or through the issuance of debt, or sell shares of NanoPierce common stock held as an investment by the Company. At March 31, 2003, the Company owned 6,507,154 common shares of NanoPierce with a market value of $1,887,000, based upon a closing bid price of $0.29 per share. The Company is subject to various restrictions on the sale and/or exchange of NanoPierce shares owned by the Company, which limits the marketability of this investment. At the present time the Company does not have a revolving loan agreement with any financial institution nor can the Company provide any assurance that it will be able to enter into any such agreement in the future or be able to raise funds through the further issuance of debt or equity in the Company. The Company continues to evaluate additional merger and acquisition opportunities. 16 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company, NanoPierce Technologies, Inc. ("NanoPierce") and Louis DiFrancesco, the inventor of the PI Technology were involved in litigation relating to the NanoPierce ownership of its intellectual property and the rights as to who should receive royalty payments from licenses, which were outstanding as of September 3, 1996. On October 8, 2002, NanoPierce, the Company and DiFrancesco signed a settlement agreement to be enforced by Court Order. The Court Order, among other things, declares that NanoPierce owns the entire, exclusive, incontestable ownership, right, title and interest in the patents. The Court Order further declares Mr. DiFrancesco owns the sole, exclusive, and incontestable right, to receive and collect all royalties and other payment from all licenses outstanding on September 3, 1996. In addition, Mr. DiFrancesco was also granted a limited two year, non-transferable, with no right to sublicense, royalty-bearing license. The Court order could be appealed and has not been appealed. Management of the Company believes that there are no financial implications to the Company as a result of such settlement agreement. The Company is also involved in other various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of the matter discussed above and other matters will not have a material adverse impact either individually or in the aggregate on either results of operations, financial position or cash flows of the Company. ITEM 2. CHANGES IN SECURITIES The Company made no unregistered sales of its securities from January 1, 2003 to March 31, 2003. ITEM 4. CONTROLS AND PROCEDURES A review and evaluation was performed by the Company's management, including the Company's Chief Executive Officer (the "CEO") and Chief Financial Officer (the "CFO"), of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of a date within 90 days prior to the filing of this quarterly report. Based on that review and evaluation, the CEO and CFO have concluded that the Company's current disclosure controls and procedures, as designed and implemented, were effective. There have been no significant changes in the Company's internal controls subsequent to the date of their evaluation. There were no significant material weaknesses identified in the course of such review and evaluation and, therefore, no corrective measures were taken by the Company. 17 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS: Exhibit 11 Computation of Net Loss Per Share Exhibit 99 Section 1350 Certification (b) REPORTS ON FORM 8-K: None. 18 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 INTERNATIONAL CORPORATION (REGISTRANT) Date: May 14, 2003 /s/Paul H. Metzinger -------------------------------------------- Paul H. Metzinger, President & CEO, Chief Financial Officer 19 CERTIFICATION ------------- I, Paul H. Metzinger, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Intercell International Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act rules 13a-14 and 15d-14) for the registrant and have: a. Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this quarterly report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. Presented in this quarterly report my conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. I have disclosed, based on my most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 14, 2003 /s/Paul H. Metzinger -------------------------------------- Paul H. Metzinger, Chief Executive Officer, President & Chief Financial Officer EX-11 3 doc2.txt COMPUTATION OF NET LOSS PER SHARE
EXHIBIT 11 INTERCELL INTERNATIONAL CORPORATION AND SUBSIDIARIES COMPUTATION OF NET LOSS PER SHARE (Unaudited) Three Months Ended Six Months Ended March 31, March 31, --------- --------- 2003 2002 2003 2002 ----------- ---------- ---------- ---------- Net loss $ ( 11,000) (609,000) ( 37,000) ( 771,000) Accretion on Series C preferred stock - - - ( 1,000) ----------- ---------- ---------- ---------- Net loss applicable to common shareholders ( 11,000) (609,000) ( 37,000) ( 772,000) =========== ========== ========== ========== Weighted average number of common shares outstanding 8,651,251 8,551,251 8,651,251 8,420,344 Common equivalent shares representing shares issuable upon exercise of outstanding options and warrants and convertible stock - - - - ----------- ---------- ---------- ---------- 8,651,251 8,551,251 8,651,251 8,420,344 =========== ========== ========== ========== Basic and diluted loss per share applicable to common shareholders * ( 0.07) * ( 0.09) ========== ==========
* Less than ($0.01) per share. Stock options, warrants and convertible preferred stock are not considered in the calculations for those periods with net losses as the impact of the potential common shares (approximately 338,050 at March 31, 2003 and 348,050 shares at March 31, 2002) would be to decrease net loss per share. EX-99 4 doc3.txt CERTIFICATION EXHIBIT 99 ---------- CERTIFICATION OF PRINCIPAL EXECUTIVE & FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 In connection with the accompanying Quarterly Report on Form 10-QSB of Intercell International Corporation for the quarter ended March 31, 2003, I, Paul H. Metzinger, Chief Executive Officer and Chief Financial Officer of Intercell International Corporation, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that: (1) such Quarterly Report on Form 10-QSB of Intercell International Corporation for the quarter ended March 31, 2003, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in such Quarterly Report on Form 10-QSB of Intercell International Corporation for the quarter ended March 31, 2003, fairly presents, in all material respects, the financial condition and results of operations of Intercell International Corporation. /s/Paul H. Metzinger ------------------------------ Paul H. Metzinger, Chief Executive Officer & Chief Financial Officer Date: May 14, 2003 A signed original of this written statement required by Section 906 has been provided to Intercell International Corporation and will be retained by Intercell International Corporation and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----