I'm gathering that not everyone has read the most recent Shareholder Update that was released by Intercell on February 26th. Once you read the update you might feel more similar to how I do about a reverse split.
If you need a copy of the letter please call Intercell at 303-592-1010. I'm sure they'll be happy to fax you a copy of the update.
Here is the answer to your question Will Lee -
"Interell as of the date of this letter, has the following securities, which are convertible or exercisable into its common stock, outstanding.
1. (a) Series B Preferred Shares. $50,000 face amount of these preferred shares remain outstanding. At today's market they are convertible into approximately 500,000 shares.
(b) Series B Warrants. These Warrants are convertible into 1,092,062 shares, at $3.9375 per share, exercisable at any time until July 1, 2001.
(c) Placement Agent Warrants. These Warrants are convertible into 330,159 shares, at $3.9375 per share, exercisable at any time until July 1, 2001.
2. (a) Series C Preferred Shares. $1,670,000 face amount of these preferred shares remain outstanding. At today's market they are convertible into approximately 16,000,000 shares.
(b) Series C Warrants. These Warrants are convertible into approximately 745,386 shares, at $3.25 per share, exercisable at any time until November 30, 2001.
(c) Placement Agent Warrants. These Warrants are convertible into 214,615 shares, at $3.25 per share, exercisable at any time until November 30, 2001.
3. Class D Preferred Shares. 1,080 Preferred shares in the principal amount of $2,700,000 were issued to eliminate the equivalent preferred shares of BMI Acquisition Group, Inc. the 100% owned subsidiary of Sigma 7. These shares cannot be exercised until January 1, 1999 and then only at a price equal to the then market price of the common stock multiplied by the following yearly factor based upon the year in which exercised:
1999 - 1.5
2000 - 1.3
2001 - 1.1
2002 - 1.0
and thereafter 0.9
4. Series A-1 and A-2 Debentures. The Company in its December 1997 Financing issued $1,500,000 of its debentures and related warrants.
(a) The Series A-1 $750,000 Debenture is convertible, at today's market price, into an estimates 7,500,000 shares. The Series A-1 Warrants are exercisable into 600,000 shares. 200,000 @ $0.17, $200,000 @ $0.50 and $200,000 @ $1.00, all of which are exercisable at any time until December 3, 2000.
(b) Placement Agent Warrants. 200,000 shares, at Closing bid of December 3, 1997, with expiration of December 3, 2002.
(c) The Series A-2 $750,000 Debenture is not convertible until May 7, 1999, the sixth business day after Maturity Date. The conversion price is 85% of the average closing bid price of the company's stock for the 5 preceding business days.
Assuming all of these outstanding securities were converted or exercised the Company would be required to issue at least an additional 27,182,224 shares. If all stock options held by employees and members of management were exercised, the Company would be required to issue an additional 6,527,000 shares. Fully diluted, the Company could have approximately 66,321,299 shares issued and outstanding. This does not take into account the shares issuable upon conversion of the Series D Preferred Shares or the Series A-2 Debentures and certain obligations arising out of the acquisition of Cellular Magentics, Inc., when it was originally acquired. It is impossible at this time to calculate the number of shares issuable upon such commitment or securities because they are dependent upon future events."
"If all Warrants held by the Debenture holders were exercised the Company would realize approximately $334,000. If the Warrants held by preferred stockholders were exercised, the Company would be in receipt of approximately $6,066,500. Exercise of outstanding warrants and options is considered unlikely since the market price is considerably lower than the exercise price."
" Given its present capital structure, Intercell will have a difficult time raising capital for future requirements and to create a market valuation on its common stock that is truly reflective of its present and future prospects."
OK... that's what the shareholder update had to say about the company's capital structure. In my personal opinion, this leads us right back to a very strong likelihood of a reverse split of at least 1:3, if not 1:6. Frankly, the fewer shares we end up with the better. I'd like to see 10 million shares or less outstanding, perhaps even less than that.
Again, I have have not discussed this with anyone at Intercell (or its subsidiaries). I have no idea if INCE is seriously considering a reverse, but I encourage them to do so at the appropriate time (not now, but after Nanopierce signs an alliance contract).
Reverses aren't always bad, as long as management does not use the lower float/outstanding share count to simply justify expanding the outstanding share base all over again through the subsequent issuance of more preferred shares or a secondary offering on the company's common shares. As long as INCE's capital requirements are not derived from selling INCE debentures, preferred shares, or common shares.... an INCE reverse split is a positive move at this point in INCE's life.
If on the other hand INCE chooses to shrink the number of outstanding shares just to expand it again .... we have a grave situation indeed. The company would probably lose all support in market and the share price would likely collapse, once and for all.
As always....these are my opinions and nothing else. I have not spoken with anyone at INCE about this.
Bill |
