Form 10QSB for INTERCELL INTERNATIONAL CORP
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15-Aug-2006
Quarterly Report
Management's Plans
The Company reported a net loss of $44,180 for the nine months ended June 30, 2006 ($30,037 for the three months ended June 30, 2006), and an accumulated deficit of $39,160,752 as of June 30, 2006.
On March 16, 2005, the Company (the Debtor) filed a voluntary petition for relief in the United States Bankruptcy Court, District of Colorado under Chapter 11 of Title 11 of the U.S. Bankruptcy Code. On April 5, 2006, the United States Bankruptcy Court, dismissed the Chapter 11 proceedings.
On August 7, 2006, the Company entered into an Agreement and Plan of Reorganization (the "Agreement") with NewMarket China, Inc. ("NewMarket China") and the sole shareholder of NewMarket China, NewMarket Technologies, Inc. ("NewMarket Technologies"). The Agreement provides that on the closing date, the Company will receive 1,000 restricted common shares of NewMarket China, which represents all of the issued and outstanding shares of NewMarket China in exchange for 2,000,000 shares of the Company's restricted common stock to be issued to NewMarket Technologies. The Company expects to finalize the merger on or before September 30, 2006.
NewMarket China, located in China, is the wholly-owned subsidiary of NewMarket Technologies, Inc. ("NewMarket Technologies"). NewMarket Technologies has combined a traditional systems integration and support services capacity with a specialized asset-based approach to assisting its clients with the delicate balance between maintaining legacy systems and gaining a competitive edge from the latest technology innovations. NewMarket Technologies provides certified integration and maintenance services to support the prevailing industry standard solutions.
In a separate agreement, NewMarket Technologies has agreed to purchase 1,000,000 shares of two series of preferred stock from the Company for $250,000. The funds have been put into escrow, with an unrelated third party escrow agent, with the express purpose to be used to negotiate and purchase the outstanding debt of not only the Company, but also its subsidiary, Brunetti. At June 30, 2006, approximately $58,617 worth the debt of Brunetti had been purchased. One of the series of the preferred stock will have majority voting rights. Additional terms for both series of preferred shares are in the process of being negotiated.
Results of Operations
On October 11, 2004, the Company ceased the operations of its wholly owned subsidiary, Brunetti DEC, LLC ("Brunetti"). On March 1, 2005, Brunetti filed a voluntary petition for relief in the United States Bankruptcy Court, District of Colorado under Chapter 7 of Title 7 of the U.S. Bankruptcy Code.
Loss from continuing operations for the nine months ended June 30, 2006 was $44,180 compared $177,546 for the nine months ended June 30, 2005 ($30,037 and $34,037 for the three months ended June 30, 2006 and 2005, respectively). The decrease of $133,366 for the nine months ended June 30, 2006, is explained by the decrease in general and administrative expenses as explained below.
General and administrative expenses during the nine months ended June 30, 2006 were $44,902, compared to $178,042 for the nine months ended March 31, 2005 ($30,268 and $34,064 for the three months ended June 30, 2006 and 2005, respectively). The decrease of $133,190 is primarily attributable to the decrease in operational and administrative activities as a result of the Chapter 11 proceedings.
During the nine months ended June 30, 2006, the Company recognized a net loss of $44,180 compared to a net loss of $281,586 during the nine months ended June 30, 2005($30,307 and $33,837 for the three months ended June 30, 2006 and 2005). The decrease of $237,406 is explained by an approximate $104,040 decrease in the loss from discontinued operations between 2006 and 2005 and a decrease of $133,366 in loss from continuing operations.
Liquidity and Capital Resources
During the nine months ended June 30, 2006, the Company used $22,898 in operating activities from continuing operations. The Company received a final payment of $35,000 on the work done in connection with a contract originally held by Brunetti. During the nine months ended June 30, 2006, the Company received $35,000 from financing activities from continuing operations. The $35,000 was in connection with the reduction of the $35,000 Letter of Credit placed by the Company. The Company had $35,193 of cash and cash equivalents at June 30, 2006, which is being used to support operations.
As of June 30, 2006, the Company owns approximately 0.07% of the outstanding common stock of Vyta Corp ("Vyta"). At June 30, 2006, the Company owns 23,244 shares of Vyta common stock, of which 7,500 shares are subject to warrant agreements, described below. The Company has classified its investment in Vyta as available for sale securities in which unrealized gains (losses) are recorded to shareholders' equity.
At June 30, 2006, the Company owns 15,744 shares of Vyta Corp common stock that are tradable, and based upon the closing bid price of $0.84 per share, the market value of the Vyta common shares at June 30, 2006, was $15,744. On January 31, 2006, Vyta instituted a 1 for 20 reverse split of its issued and outstanding common stock. As a result of the reverse split the number of shares held by the Company on January 31, 2006 decreased to 23,244 shares, of which 15,744 shares are tradable.
Prior to September 30, 2003, the Company entered into an agreement with an unrelated third party, to sell 5,000 shares of the Vyta common stock held by the Company along with warrants to purchase up to 15,000 restricted shares of Vyta common stock held by the Company. In exchange for the Vyta common stock and warrants, the Company received $50,000 cash. The warrants have an exercise price of $0.50 per share. The first warrant of 7,500 shares expired in October 2004. The second warrant of 7,500 shares has a term of 5 years.
The remaining warrant provides for cashless exercise and is exercisable immediately.
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 June 30, 2006, the fair value of the derivative was estimated to be $0.
