UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K12G3
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
October 18, 2006
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Date of Report (Date of earliest event reported)
INTERCELL INTERNATIONAL CORPORATION
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(Exact name of Registrant as specified in its charter)
Nevada 0-14306 84-0928627
- ----------------------------- ----------------------- ---------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
370 17th Street, Suite 3640
Denver, Colorado 80202
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(Address of principal executive offices) (Zip Code)
(303) 592-1010
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(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule
14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
SECTION 2 - FINANCIAL INFORMATION
ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
Pursuant to a Plan and Agreement of Reorganization between the Registrant and
NewMarket Technology, Inc., the Registrant has completed the acquisition of
NewMarket China, Inc. by share exchange. Two million common shares and two
hundred fifty thousand Series A Preferred shares were issued as consideration to
NewMarket Technology, Inc.
HISTORY OF NEWMARKET CHINA, INC.
NewMarket China, Inc. is a Nevada corporation formed in January, 2005 that was
wholly owned of NewMarket Technology, Inc. ("NMKT") until its recent acquisition
by Intercell International Corporation. The company was originally established
to be the Asian regional subsidiary for NMKT . Its mission was initially
designed to localize the business plan established by NMKT in North America and
to pursue merger and acquisition opportunities as well as organic business
growth initiatives in China. The rapid economic development in China presents
significant opportunities to provide services and products at favorable costs to
Global Markets.
NewMarket China, Inc. ("NMKC") concentrates on partnering with small to medium
size technology related companies in the services and product sectors in China.
Beyond organic business opportunities, NewMarket China extends management
expertise and infusion of working capital as required to assist qualified
Chinese companies in their growth objectives. The strategy is to establish
incremental goals and provide commensurate funding as well as support services,
which results in NMKC acquiring a majority interest in the partner. The long
term strategy when engaging with qualified partners is to achieve the
characteristics appropriate for listing on a United States or other public
trading venue allowing for public investor funding to support the next stage of
enterprise growth.
Following its formation in the United States, NewMarket China established its
first Chinese operation by forming a Wholly Owned Foreign Entity ("WOFE")
subsidiary named Clipper Technology, Inc. ("CLPTEC") which is registered to
operate in the city of Shanghai, China.
CLPTEC has been licensed by Shanghai Municipal Government to engage in the
consulting, development, implementation, and maintenance of technology systems
which include both software and peripherals for computing, communication, and
data exchanges related to general business application as well as the specialty
fields of medical, security, military and homeland defense applications. The
company is also licensed to engage in prototype development of security systems
as well as OEM sourcing for production of hardware related to the above business
activities.
2
Following the creation of CLPTEC, NewMarket China negotiated the formation of a
joint venture ("JV") between CLPTEC and a consortium of Chinese technology firms
collectively named the Huali Group. The forming of a JV provided NMKC an
accelerated entry into China's rapidly growing economy which would have taken
years to accomplish though organic growth. The JV also provides a firm
foundation from which to explore other avenues of business. The terms of the JV
agreement assign CLPTEC 51% ownership to the Huali Group's 49%. The JV was
registered in the city of Ningbo, China and named Clipper Huali Co., LTD. The JV
specializes in the distribution and value added reselling of software and
hardware products that include both Chinese and well known foreign brands such
as Hewlett Packard, Sony and IBM.
OWNERSHIP CHART
NewMarket China, Inc.
|
Clipper Technology, Inc.
(100% WOFE in China)
|
51% Joint Venture (Hualia Group owns 49%)
|
Clipper Huali Co. LTD.
PLAN OF OPERATIONS
NewMarket China, Inc. (NMKC), its subsidiary Clipper Technology, Inc. (CLPTEC),
and the Clipper Hauli JV are start up companies. After NewMarket Technology's
(NMKT) first visit to China in the later part of 2003, NMKT expended significant
time and resources aggressively pursuing business opportunities and opening
relationships. NewMarket recognizes that relationship building is the keystone
to closing business opportunities and sustaining operations in China. NewMarket
China was then formed to extend the strong network of working relationships
established by NMKT. These relationships include both business and political
leaders. One of NewMarket China's most significant relationships is with Gaozhi
Science and Technology, Ltd. Gaozhi has been instrumental in providing counsel,
guidance, and personal involvement, where necessary, through the complex
governmental process of starting up a company in China. Gaozhi's CEO and
President Mr. Liu Xing Xie provided both staff support and temporary facilities
during the early stages of establishing offices in China for NewMarket China and
CLPTEC. In addition to being the president of a leading Shanghai Technology
company, Mr. Liu, is also Vice Chairman of the Shanghai Chamber of Commerce and
a Standing Member of the Shanghai Committee of the C.P.P.C.C. (Chinese Peoples
Political Consultative Counsel).
3
As part of the plan to build long term business and political relationships NMKC
has engaged two associates to help develop business in China. Dr. Larry Wu who
was formerly the Second Secretary for Science and Technology at the Chinese
Embassy in Washington D.C. leads initiatives in China's Capitol, Beijing. Dr.
James Jiang, CEO of GaozhiSoft, a subsidiary of Gaozhi Science and Technology,
is CLPTEC's business development partner and served as interim CEO of CLPTEC
during the initial start up phase of the company. Each assists NewMarket China
and CLPTEC's business development efforts in China as well as with other
NewMarket Technology initiatives in South America, North America, and Singapore.
Dr. Wu provides an early assessment of business opportunities. Based upon his
government background he additionally seeks potential favorable involvement of
Government organizations at both the National and Municipal level. Economic
development in China is driven by such organizations in the form of different
incentive programs. Such incentives are being offered by government
organizations dedicated to attracting and developing "high-tech" type businesses
in China.
Dr. Jiang has extensive business experience in both China and Singapore. He
played a key role in the establishment of the CLPTEC Huali JV. By virtue of
NewMarket China and CLPTEC's relationship with Dr. Jiang, CLPTEC is in early
discussions to acquire GaozhiSoft and possibly partner on IPTV (Internet
Protocol Television) service initiative.
CLPTEC-HUALI JOINT VENTURE (JV)
NewMarket China focused its early sales efforts in technology products and
services by partnering CLPTEC with a regional consortium named the Huali Group.
The Hauli Group contributed an established sales base and good reputation for
service. CLPTEC entered into a Joint Venture ("JV") agreement with the Huali
Group structured so that CLPTEC acquired a fifty one (51%) share for (Y) 510,000
($64000 USD). The JV is registered in the city of Ningbo, China under the name
"Clipper Huali Co., LTD." The Huali Group's principle shareholder is Mr. Zhang
Wei Lin and consists of three companies that sell and service technology
hardware and software products as well as peripherals for computer networking.
The JV is headquartered in Ningbo, China and has the majority share of the
business market in China's Zhejiang Province. Ningbo was chosen as the
headquarters as it is the hub of many large manufacturing and service provides
which is the customer base for the technology products and services sold by the
JV. The JV currently is staffed at 101 employees and is expected to have a
revenue run rate of twenty five million USD ($25 million) by the last quarter of
2006.
THE HUALI GROUP OF COMPANIES CONSIST OF:
Ningbo Kaifaxu Huali Electronics & Computer Co.
Ningbo Huali Computer Network Co.
Ningbo Huali Jiangbei Computer Co. LTD
4
THE CLIPPER HUALI CO. LTD IS HEADQUARTERED IN NINGBO:
303 Jia Fong Nan Road
Ningbo, 310012
Peoples Republic of China
Clipper Technology, Inc. is headquartered in Shanghai:
2f No. 123 Qinjiang Road
Shanghai, 200233
Peoples Republic of China
2006 OPERATIONS FORECAST
June YTD 3rd Quarter
1)
------------------------- ----------------------
Revenue $2,620,714 $3,983,459
COS $2,545,203 $3,879,298
Operating Expenses $ 67,690 $ 86,773
EBITDA $ 7,819 $ 17,388
Net Profit $ 5,708 $ 16,813
1) Three months (June, July, August) actual.
The JV has concentrated its sales primarily in China's Zhejiang Province (South
&West of Shanghai). Within this regional area, the JV enjoys a dominant share of
the market for its products and services. To make substantial gains in revenue
the JV will have to expand its boundary of operations. NMKC/CLPTEC are reviewing
the merit of expanding sales into the Provinces of Jiangsu, Hunan, Henan, and
Hebei which are west and north of the current sales territory. The strategy is
to initially develop and market areas beyond first tier cities such as Shanghai
(because of mature penetration) and to focus on less mature markets to maximize
initial sales momentum at the most cost effective level. An assessment of the
market expansion is underway with a target to match the current sales level in
the new territory within a twelve to eighteen month timeframe. A plan is
expected to be complete by the end of 2006 for Board of Director review that
will outline the organizational infrastructure, market penetration strategy and
capital requirements.
5
OTHER PROGRAMS UNDERWAY
While expansion of the Clipper Huali JV is being planned, other initiatives are
underway by NMKC as well:
1. To leverage China's substantial technical resources, NMKC/CLPTEC is pursuing
the U.S. demand for a more competitive technical labor pool to meet global
competition. Agreements are being formed with Chinese software firms to provide
IT Outsourcing services to the US Market.
2. In conjunction with IT Outsourcing initiatives, initial discussions are
underway to acquire an interest in GaozhiSoft, Inc. a small software development
firm with proprietary software used by China Mobile (Listed on NY Stock
Exchange)and China Unicom (Listed on NASDAQ).
3. NMKC/CLPTEC is also exploring a possible partnering with the GaozhiNet Co.,
Ltd, a company that has developed proprietary IPTV technology that enables the
distribution of movies and other audio/video entertainment over the Internet to
home televisions. The content will initially target Chinese speaking audiences
but will expand to a broader customer base. The system is in beta trials in S.
E. Asia (i.e. Singapore, Malaysia and Indonesia) as well as China.
4. As demand grows for products manufactured in China because of favorable labor
rates, an increasing number of foreign firms are seeking a conduit to Original
Design Manufacturing (ODM) and limited production run resources. NMKC and CLPTEC
are exploring opportunities to bring these higher value manufacturing resources
to foreign markets.
IT OUTSOURCING
The general business plan involves the development of a network of Chinese
partner firms that NewMarket China can draw upon to fulfill potential customer
requirements. These customers will initially be in the United States, but
ultimately they may be based anywhere in the world. The network of partner firms
are intended to be developed with a goal of being able to provide a range of
skills that can meet any customer requirement. NMKC recently hosted a Trade
Mission to China for US IT Managers in September 2006 to introduce the U.S.
market to the outsourcing opportunities in China.
Planned business domains include such industries as Banking, Financial Services,
Healthcare, and Telecommunications A complete range of software capabilities are
being developed.
The current recognized leader in Offshore IT Outsourcing is India. India boasts
many advantages, but the forecast conducted by India's National Association of
Software and Services Companies (NASSCOM) indicates an inability to meet future
demands for Outsourcing as readily as in the past. As a result, the cost of
Indian Outsourcing is increasing because of reduced supply.
6
In addition, major Indian Outsourcing companies are currently building
operations in China to augment capacity in India. Because of this development,
NewMarket China intends to position itself to offer more cost efficient IT
outsourcing directly to its customers as opposed to the approach contemplated by
India-which is assumed to involve an intermediary step in the process resulting
in potentially higher cost. NewMarket China and CLPTEC plan to position their
firms to directly provide Chinese resources to foreign customers providing an
alternative to Indian Outsourcing.
China also has competitive advantages over India in the IT/programming area.
These advantages include, but are not limited to, superior infrastructure,
higher literacy rates, a greater numbers of engineering graduates, lower labor
rates, and high government investment in the IT Industry.
MV3 PROGRAM (IPTV ENTERTAINMENT)
The entrainment industry is shifting from a physical to digital distribution
model. CLPTEC's partner, Gaozhi Science and Technology, Ltd, has acquired
various licenses to distribute Chinese entertainment content globally. Movies,
TV Shows, Educational Programs, and other advertisement will be digitally
distributed using proprietary software and hardware called MV3 that was
developed by GaozhiNet, Ltd a subsidiary of Gaozhi Science and Technology, Ltd.
The MV3 solution enables any household with a broadband Internet connection to
digitally receive movies and other entertainment media using a "set top box."
NMKC is in negotiations with firms in the US that have established networks that
serve Chinese audiences. While Chinese content presents a niche market
opportunity in the US, S.E. Asia (i.e. Singapore, Malaysia, & Indonesia)
entertainment demand from all sources is expected to exhibit a compound growth
at over nine (9%) percent annually (Price Waterhouse-Coopers). As a comparison
the global market is expected to grow at 6.6 % Percent annually.
NMKC has been engaged as a consultant to help establish a Franchise Network
outside China for MV3 systems. The trial of the MV3 system was initiated in
Singapore in late August 2006, to address any technical issues with the system.
The trial will be expanded to Malaysia and Indonesia in the fall. Testing in the
US is not expected until 2007. The marketable price point in S.E. Asia appears
to be at about Twenty USD ($20) a month for a subscription. A target of twenty
thousand subscribers has been set as the test market.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the date of this Report, the number of
shares of common stock owned of record and beneficially by executive officers,
directors and persons who hold 5.0% or more of the outstanding common stock of
the Company as of October 31, 2006. Also included are the shares held by all
executive officers and directors as a group.
7
SHAREHOLDERS/ NUMBER OF SHARES OWNERSHIP
BENEFICIAL OWNERS PERCENTAGE
- --------------------------------- ------------------------------ ----------
NewMarket Technology, Inc. 2,000,000 common shares 7.7%
250,000 Preferred Series A(2) 100%
Asia Pacific Venture Partners, LP 2,000,000 Preferred Series B(3) 100%
Philip Rauch (1) 0 0%
Bruce Noller (1) 0 0%
Philip Verges (1) 0 0%
John Verges (1) 0 0%
All directors and executive
officers as a group (4 persons)
- --------------------
1) These Officers and Directors are also Officers and Directors of
NewMarket Technology, Inc. which owns 2,000,000 common shares and
250,000 Preferred Series A shares. Each of these persons is deemed to
be a control party of NewMarket Technology, Inc.
2) Conversion privileges
3) Conversion privileges
Each principal shareholder has sole investment power and sole voting power over
the shares.
EXECUTIVE COMPENSATION
DIRECTOR COMPENSATION
Directors received no cash compensation for their service to the Company as
directors, but can be reimbursed for expenses actually incurred in connection
with attending meetings of the Board of Directors.
SUMMARY COMPENSATION TABLE OF DIRECTORS
Name Annual Meeting Fees Consulting Number of Number of
Retainer ($) Fees/Other Fees Shares (#) Securities
Fees ($) ($) Underlying
Options SARS (#)
- -------------------- ------------ ----------------- --------------- ------------ ------------------
Philip Rauch $0 $0 $0 0 0
Bruce Noller $0 $0 $0 0 0
Philip Verges $0 $0 $0 0 0
8
EXECUTIVE OFFICER COMPENSATION
The annual compensation for the executive officers of the Company for the post
reorganization operations has not yet been determined, but is expected to be
established by a resolution of the Company's Board of Directors in the near
future. The Company has not entered into any employment agreements with its
executive officers to date. The Company may enter into employment agreements
with them in the future.
The following table and notes set forth the annual cash compensation paid to
officers of the Company.
SUMMARY COMPENSATION TABLE OF EXECUTIVES
Name & Principal Fiscal Annual Annual Bonus Awards/Other Restricted Securities
Position Year Salary ($) ($) Annual Stock Award(s) Underlying
Compensation Options/SARS
($) (#)
- ----------------- ----- ---------- --------------- ------------- -------------- -------------
Philip Rauch, CFO 2006 $0 $0 $0 $0 0
John Verges, CEO 2006 $0 $0 $0 $0 0
Option/SAR Grants Table (None)
Aggregated Option/SAR Exercises in Last Fiscal Year an FY-End Option/SAR value
(None)
Long Term Incentive Plans - Awards in Last Fiscal Year
(None)
WARRANTS
The following table sets forth information with respect to options to purchase
common stock of the Company granted during fiscal year ended December 31, 2005.
NON-QUALIFIED OPTIONS
Name Date Issued Number Issued Exercise Expiration Date Consideration
Price
- ------------- ----------- ------------- --------- ---------------- --------------
None.
9
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUE
Name Shares Acquired Value Realized Number of Securities Value of Unexercised
on Exercise (#) ($) Underlying Unexercised In the Money
Option/SARs at FY-End (#) Options/SARs at
Exercisable / Unexercisable FY-End ($)
Exercisable /
Unexercisable
- ----------------- --------------- -------------- ---------------------------- ----------------------
None.
No other compensation not described above was paid or distributed during the
last fiscal year to the executive officers of the Company. There are no
compensatory plans or arrangements, with respect to any executive office of the
Company, which result or will result from the resignation, retirement or any
other termination of such individual's employment with the Company or from a
change in control of the Company or a change in the individual's
responsibilities following a change in control.
INCENTIVE STOCK OPTIONS
None.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to a Plan and Agreement of Reorganization between the Registrant and
NewMarket Technology, Inc., the Registrant has completed the acquisition of
NewMarket China, Inc. by share exchange. Two million common shares and two
hundred fifty thousand Series A Preferred shares were issued as consideration to
NewMarket Technology, Inc.
LEGAL PROCEEDINGS
None.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
10
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The Company budget for operations in next year is as follows:
SEP 06 YTD FORECAST 4TH 2006 ANNUAL 2007 BUDGET
EXPENSE QUARTER FORECAST FORECAST
- ------------------------------ ---------------- --------------- ---------------- ---------------
Cost of Sale $ 19,754 $ 4,939 $ 24,693 $ 32,000
Operating Expenses 175 44 219 $300
G&A 370 93 463 $600
Other Income& Expense 18 5 23 $30
Income Tax 37 9 46 $70
---------------- --------------- ---------------- ---------------
Total $ 20,354 $ 5,089 $ 25,443 $ 33,000
CAPITAL REQUIREMENTS ( current business expansion and M&A engagements) $ 5,500
2006 2007
---------------- ---------------
Employees Shanghai 5 10
Employees Ningbo 101 125
The Company reserves the right to change any or all of the budget categories in
the execution of its business attempts without purchaser approval. None if the
line items are considered to be fixed or unchangeable in the budget.
The Company will require additional capital to support its budget. The Company
has no committed source for any funds as of date herein. No representation is
made that any funds will be available when needed. In the event funds cannot be
raised when needed, the Company may not be able to carry out its business plan,
and could fail in business as a result of these uncertainties.
LIQUIDITY
The Company's cash balance at December 31, 2005 was $868,453. Operating
activities for the year ended December 31, 2005 exclusive of changes in
operating assets and liabilities provided $192,006, as well as a decrease in
receivables and other current assets of $622,236, offset by a decrease in
accounts payable and accrued and other current liabilities of $646,688.
11
Since inception, the Company has financed operations primarily through short
term borrowing from banks and third-party institutions and vendor financing. The
start-up nature of the Company may require further need to raise cash through
equity sales at some point in the future in order to grow operations.
Accordingly, if revenues are insufficient to meet needs, the Company will
attempt to secure additional financing through traditional bank financing or a
debt or equity offering; however, because the start-up nature of the Company,
the Company be unsuccessful in obtaining such financing or the amount of the
financing may be minimal and therefore inadequate to implement the continuing
plan of operations. There can be no assurance that the Company will be able to
obtain financing on satisfactory terms or at all, or raise funds through a debt
or equity offering. In addition, if the Company has nominal funds by which to
conduct its operations, it will negatively impact its potential revenues.
RESULTS OF OPERATIONS FOR THE YEAR-ENDED DECEMBER 31, 2005
The Company commenced operations in 2005. Revenue for the year-ended December
31, 2005 was $22,884,991. Cost of sales was $22,151,124. Cost of sales as a
percentage of sales was 97%. General, administrative and operating expenses were
$455,281. Net income before extraordinary gain was $119,814. The Company
recorded an extraordinary gain of $245,890 related to the purchase of a majority
interest in the CLPTEC/Huali joint venture.
RESULTS OF OPERATONS FOR THE SIX-MONTHS ENDED JUNE 30, 2006 COMPARED TO THE SAME
PERIOD ENDED JUNE 30, 2005.
Revenue increased 37% from $9,529,783 for the six months ended June 30, 2005, to
$13,021,252 for the six months ended June 20, 2006 as a result of the Company's
expansion into additional municipalities.
Cost of sales increased 37% from $9,225,244 for the six months ended June 30,
2005 to $12,652,012 for the six months ended June 30, 2006 as a result of the
Company's expansion into additional municipalities. Cost of sales as a
percentage of sales was 97% and 97% for the six months ended June 30 2006 and
2005 respectively.
General, administrative and operational expenses increased 52% from $218,422 for
the six months ended June 30, 2005 to $332,452 for the six months ended June 30,
2006 as a result additional staffing requirements and professional fees
associated with the Company's growth.
Net income was $41,298 for the six months ended June 30, 2005 compared to a loss
of $8,033 as a result of increased general, administrative and operating
expenses as a percentage of sales.
CAPITAL RESOURCES
The only capital resources of the Company are its common stock. The Company has
been financed to date through a combination of short-term borrowing from banks
and other third parties and vendor financing.
12
SECTION 3 - SECURITIES TRADING MARKETS
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES
Pursuant to a Plan and Agreement of Reorganization between the Registrant and
NewMarket Technology, Inc., the Registrant has completed the acquisition of
NewMarket China, Inc. by share exchange. Two million common shares and two
hundred fifty thousand Series A Preferred (super majority) shares were issued as
consideration to NewMarket Technology, Inc. in the reorganization. Fifty
thousand Series B Preferred shares have been subscribed for by Asia Pacific
Venture Partners, LP but have not been issued. The Series B Preferred shares
will convert to 20% ownership of the common outstanding stock of Intercell on a
fully diluted basis.
SECTION 5 - CORPORATE GOVERNANCE AND MANAGEMENT
ITEM 5.01 CHANGES IN CONTROL OF REGISTRANT
Two million common shares and two hundred fifty thousand Series A Preferred
(super majority) shares were issued as consideration to NewMarket Technology,
Inc. in the reorganization. NewMarket Technology, Inc., through its Series A
Preferred Shares, votes a super majority over the common shares outstanding.
ITEM 5.02 DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF PRINCIPAL OFFICERS
RESIGNATION OF OFFICERS
On October 18, 2006, Mr. R. Mark Richards, the Chief Executive Officer of
Intercell International Corporation ("the Registrant") resigned as the Chief
Executive Officer of the Registrant, effective immediately.
On October 18, 2006, Ms. Kristi J. Kampmann, the Chief Financial Officer of the
Registrant, resigned as the Chief Financial Officer of the Registrant, effective
immediately.
APPOINTMENT OF OFFICERS
MR. JOHN VERGES, CHIEF EXECUTIVE OFFICER
On October 18, 2006, Mr. John Verges was appointed the Chief Executive Officer
and President of the Registrant. Mr. Verges is the Chief Executive Officer of
NewMarket China, which the Registrant is in the process of acquiring as a
wholly-owned subsidiary.
13
Mr. Verges holds a Bachelor of Science in Management Information Systems from
the University of Texas at Dallas. In addition, he earned a Masters of Business
Administration in Finance from the University of Texas at Dallas. Mr. Verges
served in the U.S. Navy for five years as a Naval Aviator. After completing his
active duty commitment, he worked in the private sector with several emerging
technology firms.
Mr. Verges is the brother of Mr. Philip Verges, the Chief Executive Officer and
Director of NewMarket Technology, Inc., a majority stockholder of the
Registrant. Mr. Philip Verges has also been appointed to the Board of Directors
of the Registrant (See below.)
At this time the Registrant has not entered into an employment agreement with
Mr. Verges.
MR. PHILIP RAUCH, CHIEF FINANCIAL OFFICER & DIRECTOR
On October 18, 2006, Mr. Philip Rauch was appointed the Chief Financial Officer
and a Director of the Registrant. Mr. Rauch is the Chief Financial Officer and a
Director of NewMarket Technology, Inc., a majority stockholder of the
Registrant.
Mr. Rauch holds a Bachelor of Science in Economics degree with honors from the
University of Pennsylvania Wharton School of Business, with a concentration in
finance and accounting. Since February 2004, Mr. Rauch has been the Chief
Operating and Financial Officer of Defense Technology Systems, Inc. Beginning in
1997, Mr. Rauch served in a senior capacity at AboveNet, Inc. (formerly
Metromedia Fiber Network, Inc.) as Vice President, Business Operations, and
later as Controller. From 1993 to 1997, Mr. Rauch was Vice President and Chief
Financial Officer of Columbus Construction, a heavy construction company with
several plant facilities. From 1989 to 1993, he was Vice President and Chief
Financial Officer of F. Garofalo Electric Co., a Local #3 IBEW engineering and
construction company. Mr. Rauch has further earned a certificate in Construction
Management from the Institute of Design and Construction in New York. He is
currently a member of the American Management Association and the Construction
Financial Management Association.
At this time the Registrant has not entered into an employment agreement with
Mr. Rauch.
APPOINTMENT OF DIRECTORS
MR. PHILIP VERGES, DIRECTOR
On October 18, 2006, Mr. Philip Verges was appointed to the Board of Directors
of the Registrant. Mr. Philip Verges is the Chief Executive Officer and Chairman
of NewMarket Technology, Inc.
Mr. Verges is a 1988 graduate of the United States Military Academy. His studies
at West Point centered on national security. Mr. Verges served with distinction
as a U.S. Army Captain in a wide variety of important engagements to include
research and development of counterterrorism communication technologies and
practices.
14
Mr. Verges' early career after the Army includes time in the Computer Sciences
Research and Development Department of General Motors as well as experience
teaching systems engineering methodology and programming to Electronic Data
Systems ("EDS") employees from 1991 to 1995. Mr. Verges' first business start-up
experience was at EDS in a new division concentrating on call center technology
in financial institutions. Later in 1995, he added to his start-up experience at
a $30 million technology services business with the responsibility to open a new
geographic region with a Greenfield operation. Mr. Verges founded NewMarket
Technology in 1997.
MR. BRUCE NOLLER, DIRECTOR
On October 18, 2006, Mr. Bruce Noller was appointed to the Board of Directors of
the Registrant. Mr. Noller is a Director of NewMarket Technology, Inc.
Mr. Noller is currently the President of Noller & Associates, Inc., Mr. Noller
brings to the Board over 25 years of Financial, Operational and Marketing
experience. Before he founded his own firm in 1994, he served as Vice President
for Integrated Control Systems, a worldwide management consulting firm. During
that time, Mr. Noller proposed and oversaw engagements with a variety of
industries including healthcare, distribution, manufacturing, retail, banking,
insurance, mining and telecommunications. With an approach that emphasizes
implementation with measurable results, Mr. Noller's current firm focuses on
improving existing financial and management systems. Mr. Noller has
International management consulting experience in Singapore, Malaysia, China,
Canada, Latin America and Europe.
ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL
YEAR
The Company has adopted a Designation of Rights, Privileges, and Preferences for
Series A Preferred Stock and authorized and issued two hundred fifty thousand
shares of Series A Preferred Stock. Series A Preferred is designated as holding
super majority voting rights over all common shares issued and outstanding.
ITEM 5.06 CHANGE IN SHELL STATUS
As a result of the acquisition outlined in Item 2.01, the Company is no longer
considered a shell under the definition thereof.
SECTION 8 - OTHER EVENTS
ITEM 8.01 OTHER ITEMS
The Company has adopted a new business plan in the systems integration sector,
through its acquisition of NewMarket China, Inc. (See Item 2.01).
15
SECTION 9 - FINANCIAL STATEMENTS AND EXHIBITS
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
A. FINANCIAL STATEMENTS :
--------------------
Audited financial statements of NewMarket China, Inc. for the
year ended December 31, 2005
Unaudited financial statements of NewMarket China, Inc. for
the six-months ended June 30, 2006
Consolidated Pro-Forma Balance Sheet (post transaction with
NewMarket China, Inc.)
B. EXHIBITS - None.
--------
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 hereunto duly authorized.
Dated: November 15, 2006 INTERCELL INTERNATIONAL CORPORATION
By:/s/John Verges
________________________________
John Verges
Chief Executive Officer
16
POLLARD-KELLEY AUDITING SERVICES, INC..........................................
AUDITING SERVICES 3250 WEST MARKET ST, SUITE 307
FAIRLAWN, OH 44333
330-836-2558
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
NewMarket China, Inc.
We have audited the accompanying balance sheets of NewMarket China, Inc. as of
December 31, 2005, and the related statements of income, changes in
stockholders' equity, and cash flows for the year ended December 31, 2005. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conduct our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit 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 financial statements referred to above present fairly, in
all material respects, the financial position of the Company at December 31,
2005, and the results of its operations and it cash flows for the year ended
December 31, 2005, in conformity with U.S. generally accepted accounting
standards.
Pollard-Kelley Auditing Services, Inc.
/S/ Pollard-Kelley Auditing Services, Inc.
Fairlawn, Ohio
November 7, 2006
New Market China, Inc.
Balance Sheet
December 31, 2005
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 868,453
Accounts receivable - trade 610,711
Accounts receivable - other 76,444
Inventory 1,104,087
Supplier advances 759,096
------------
TOTAL CURRENT ASSETS 3,418,791
Fixed Assets
Fixtures and equipment 18,349
Less: Accumulated depreciation (1,835)
------------
16,514
TOTAL ASSETS $ 3,435,305
============
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $ 543,078
Short-term borrowings 1,261,913
Accrued expenses 194,974
------------
TOTAL CURRENT LIABILITIES 1,999,965
MINORITY INTERESTS IN SUBSIDIARIES 798,348
STOCKHOLDER'S EQUITY
Common stock 1
Additional paid in capital 271,287
Retained earnings 365,704
------------
636,992
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 3,435,305
============
See accompanying notes and accountant's report.
New Market China, Inc.
Income Statement
For the Year Ending December 31, 2005
SALES $ 22,884,991
COST OF SALES 22,151,124
------------
GROSS PROFIT 733,867
EXPENSES
General and adminstrative 253,940
Operating expenses 201,341
Interest expense 87,532
Other taxes and surcharges 14,701
------------
557,514
INCOME FROM OPERATIONS 176,353
OTHER INCOME AND EXPENSE
Other income 72,535
Other expense (8,503)
------------
64,032
INCOME BEFORE TAXES 240,385
TAX PROVISION 50,214
MINORITY INTEREST IN SUBSIDIARIES 70,357
------------
INCOME BEFORE EXTRAORDINARY GAIN 119,814
EXTRAORDINARY GAIN
Extraordinary gain from purchase of interest in subsidiaries-net of taxes 245,890
------------
NET INCOME $ 365,704
============
EARNINGS PER SHARE
Income from operations $ 176
Extraordinary gain $ 246
Net Income $ 366
Average share outstanding 1,000
See accompanying notes and accountant's report.
New Market China, Inc.
Statement of Shareholder's Equity
For the Year Ending December 31, 2005
ADDITIONAL
COMMON STOCK PAID IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------------ ------------- ------------- ------------- ------------
Initial capital issue 1,000 $ 1 $ 271,287 $ - $ 271,288
Net Income - - - 365,704 365,704
------------ ------------- ------------- ------------- ------------
Balance December 31, 2005 1,000 $ 1 $ 271,287 $ 365,704 $ 636,992
============ ============= ============= ============= ============
See accompanying notes and accountant's report.
New Market China, Inc.
Statement of Cash Flows
For the Year Ending December 31, 2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 365,704
Adjustments to reconcile net earnings to net
cash provided (used) by operating activities:
Depreciation 1,835
Minority interest in subsidiaries earnings 70,357
Extrodinary gain (245,890)
Changes in Current assets and liabilities:
Accounts receivable - trade (62,744)
Accounts receivable - other 16,953
Inventory 114,043
Supplier advances 553,984
Accounts payable (476,565)
Accrued expenses (170,123)
-----------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES 167,554
CASH FLOWS FROM INVESTING ACTIVITIES
Currency translations (27,417)
Purchase of Fixed assets (18,349)
-----------
NET CASH (USED) BY INVESTING
ACTIVITIES (45,766)
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock 271,288
Decrease in short term borrowings (698)
Decrease in Long - term debt (1,406)
-----------
NET CASH USED BY
FINANCING ACTIVITIES 269,184
NET INCREASE (DECREASE) IN CASH 390,972
CASH ACQUIRED IN ACQUISITION 477,481
CASH AT BEGINNING OF PERIOD -
CASH AT END OF PERIOD $ 868,453
===========
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 87,532
===========
Taxes $ 50,214
===========
See accompanying notes and accountant's report.
NEWMARKET CHINA, INC.
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
THE COMPANY
NewMarket China, Inc. (the "Company") is a Nevada corporation formed in
January, 2005. The Company is a wholly owned subsidiary of NewMarket
Technology, Inc. ("NMKT"). The company was established to be the Asian
Regional Subsidiary for NMKT. Its mission was initially designed to
localize the business plan established by NMKT in North America and to
pursue merger and acquisition opportunities, as well as organic
business growth initiatives in China.
The Company conducts its business in China through the formation of a
wholly-owned foreign entity ("WOFE"), Clipper Technology, Inc.
("CLPTEC"). Following the formation of CLPTEC, the Company formed a
joint venture with a consortium of Chinese technology firms, The Hauli
Group. CLPTEC is the majority shareholder of the joint venture.
The following summarize the more significant accounting and reporting
policies and practices of the Company:
A) USE OF ESTIMATES
The consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States. In
preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities as of the date of the statements of financial condition
and revenues and expenses for the year then ended. Actual results may
differ significantly from those estimates.
B) NET EARNINGS PER SHARE
Basic net earnings per weighted average common share is computed by
dividing the net income by the weighted average number of common shares
outstanding during the period.
C) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of NewMarket
China, Inc. its wholly owned subsidiaries, and majority-owned joint
ventures. All inter-company balances and transactions have been
eliminated.
D) CONCENTRATION OF CREDIT RISK
The Company sells its services and products to end users in the
technology and telecommunications industries, concentrated in the
Zhejiang Province of Eastern China. The Company believes these
customers represent virtually no credit risk. Accordingly, an allowance
for doubtful accounts is not required.
E) PROPERTY AND EQUIPMENT
All property and equipment is recorded at cost and depreciated over
their estimated useful lives, using the straight-line method, generally
three, five or seven years. Upon sale or retirement, the costs and
related accumulated depreciation are eliminated from their respective
accounts, and the resulting gain or loss is included in the results of
operations. Repairs and maintenance charges, which do not increase the
useful lives of the assets, are charged to operations as incurred.
Depreciation expense was $263,888 for the year ended December 31, 2005.
NEWMARKET CHINA, INC.
NOTES TO FINANCIAL STATEMENTS
F) INVENTORY
Inventory, which consists primarily of finished goods, is stated at the
lower of cost or market. Cost is determined using the weighted average
method.
G) REVENUE RECOGNITION
The Company engages in the business of consulting, development,
implementation, and maintenance of technology systems which include
both software and peripherals for computing, communication, and data
exchanges related to general business application as well as the
specialty fields of medical, security, military and homeland defense
applications. Revenue is recognized at the time of product shipment,
delivery, or installation, depending on when title passes, and when all
of the following have occurred: a firm sales agreement is in place,
pricing is fixed or determinable, and collection is reasonably assured.
H) CASH AND EQUIVALENTS
Cash equivalents are short-term investments with an original maturity
date of three months or less.
I) RESEARCH & DEVELOPMENT
Research and development expenses are expensed in the period incurred.
J) FOREIGN CURRENCY TRANSACTION AND TRANSLATION GAINS (LOSSES)
The principal operations of the Company are located in The People's
Republic of China. The Company bills in RMB, the local currency, and if
the Company payment is denominated in a foreign currency, the Company
translates the payment and records a foreign currency transaction gain
or loss in accordance with SFAS 52.
(2) STOCKHOLDERS' EQUITY
The Company has authorized 10,000,000 shares of $0.001 par value common
stock. The Company had 1,000 shares of common stock issued and
outstanding at December 31, 2005, of which NMKT is the sole
shareholder.
(3) INCOME TAXES
The Company is responsible for all corporate income taxes due locally
in China. Pursuant to United States-China tax treaty policies, the
Company recognizes taxes locally in China as a Foreign Tax Credit
against any corporate income tax liability in the United States.
(4) SHORT-TERM BORROWINGS
As of December 31, 2005, the Company had $1,261,913 in short-term
borrowings outstanding to Ningbo Commercial Bank, which consist of a
series of one-year loans due in the first quarter of 2006. The loans
have an annual interest rate of 4.87% and are unsecured.
(5) COMMITMENT AND CONTINGENCIES
A) LEASES The Company is obligated for its physical location under a
lease which expires in August, 2007. The lease requires monthly rent of
$900 until expiration.
B) LAWSUITS The Company is not currently a party to any lawsuits or
legal proceedings.
NEWMARKET CHINA, INC.
NOTES TO FINANCIAL STATEMENTS
(6) SUBSEQUENT EVENTS
In October, 2006, NMKT executed a definitive agreement with Intercell
International Corporation ("Intercell") whereby NMKT sold its 100%
interest in the Company to Intercell in exchange for 2 million shares
of Intercell common stock.
NewMarket China, Inc.
Consolidated Balance Sheet
June 30, 2006
-------------------
(Unaudited)
ASSETS
Current Assets
Cash & Cash Equivalents $ 422,519
Accounts Receivable 1,633,459
Inventory 1,318,969
Supplier Advances 414,920
Other current asset 384,524
-------------------
Total Current Assets 4,174,391
-------------------
Fixed Assets
Fixtures & Equipment 703,256
Accumulated Depreciation (295,064)
-------------------
Total Fixed Assets 408,191
Other Assets
Investment Securities 63,857
-------------------
Total Other Assets 63,857
TOTAL ASSETS $ 4,646,440
===================
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 864,691
Short-Term Borrowings 1,471,218
Accrued Expenses and other Payables 252,141
-------------------
Total Current Liabilities 2,588,050
-------------------
Total Long Term Liabilities -
-------------------
Stockholders' Equity
Common stock, $.001 par value, 1
authorized 100,000,000 shares; 1,000
issued and outstanding shares
Paid in Capital 1,506,090
Retained Earnings 552,300
-------------------
Total Stockholders' Equity 2,058,391
-------------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 4,646,440
===================
NewMarket China, Inc.
Consolidated Statement of Operations
Six Months ended June 30, 2006
(Unaudited)
REVENUE $ 13,021,252
COST OF SALES 12,652,012
-----------------
GROSS MARGIN 369,239
-----------------
OPERATING EXPENSES
General and administrative expenses 221,925
Operating expenses 108,617
-----------------
Total expenses 330,542
-----------------
Income from operations 38,698
-----------------
OTHER INCOME (EXPENSE)
Interest expense (36,445)
Other income/(expense) (10,286)
-----------------
Total other income (expense) (46,731)
-----------------
Net loss $ (8,033)
=================
Loss per common share $ (8.03)
=================
Weighted average common
shares outstanding 1,000
=================
NEWMARKET CHINA, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2006
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
THE COMPANY
NewMarket China, Inc. (the "Company") is a Nevada corporation formed in January,
2005. The Company is a wholly owned subsidiary of NewMarket Technology, Inc.
("NMKT"). The company was established to be the Asian Regional Subsidiary for
NMKT. Its mission was initially designed to localize the business plan
established by NMKT in North America and to pursue merger and acquisition
opportunities, as well as organic business growth initiatives in China.
The Company conducts its business in China through the formation of a
wholly-owned foreign entity ("WOFE"), Clipper Technology, Inc. ("CLPTEC").
Following the formation of CLPTEC, the Company formed a joint venture with a
consortium of Chinese technology firms, The Hauli Group. CLPTEC is the majority
shareholder of the joint venture.
In October, 2006, NMKT executed a definitive agreement with Intercell
International Corporation ("Intercell") whereby NMKT sold its 100% interest in
the Company to Intercell in exchange for 2 million shares of Intercell common
stock.
The following summarize the more significant accounting and reporting policies
and practices of the Company:
A) USE OF ESTIMATES
The consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States. In
preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities as of the date of the statements of financial condition
and revenues and expenses for the year then ended. Actual results may
differ significantly from those estimates.
B) NET EARNINGS PER SHARE
Basic net earnings per weighted average common share is computed by
dividing the net income by the weighted average number of common shares
outstanding during the period.
C) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of NewMarket
China, Inc. its wholly owned subsidiaries, and majority-owned joint
ventures. All inter-company balances and transactions have been
eliminated.
D) CONCENTRATION OF CREDIT RISK
The Company sells its services and products to end users in the
technology and telecommunications industries, concentrated in the
Zhejiang Province of Eastern China. The Company believes these
customers represent virtually no credit risk. Accordingly, an allowance
for doubtful accounts is not required.
E) INVENTORY
Inventory, which consists primarily of finished goods, is stated at the
lower of cost or market. Cost is determined using the weighted average
method.
NEWMARKET CHINA, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2006
(UNAUDITED)
F) REVENUE RECOGNITION
The Company engages in the business of consulting, development,
implementation, and maintenance of technology systems which include
both software and peripherals for computing, communication, and data
exchanges related to general business application as well as the
specialty fields of medical, security, military and homeland defense
applications. Revenue is recognized at the time of product shipment,
delivery, or installation, depending on when title passes, and when all
of the following have occurred: a firm sales agreement is in place,
pricing is fixed or determinable, and collection is reasonably assured.
G) FOREIGN CURRENCY TRANSACTION AND TRANSLATION GAINS (LOSSES)
The principal operations of the Company are located in The People's
Republic of China. The Company bills in RMB, the local currency, and if
the Company payment is denominated in a foreign currency, the Company
translates the payment and records a foreign currency transaction gain
or loss in accordance with SFAS 52.
(2) SHORT-TERM BORROWINGS
As of June 30, 2006, the Company had $1,471,218 in short-term
borrowings outstanding to Ningbo Commercial Bank, which consist of a
series of one-year loans due in the first quarter of 2006. The loans
have an annual interest rate of 4.87% and are unsecured.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
On November 13, 2006, Intercell International Corporation (the "Company") signed
a definitive Agreement and Plan of Reorganization (the "Agreement") to acquire
NewMarket China, Inc. ("NewMaket China"). Pursuant to the Agreement,
effective November 13, 2006, the Company acquired 100% equity interest of
NewMarket China in exchange for all of the issued and outstanding stock of
NewMarket China, one thousand (1,000) common shares held by NewMarket
Technology, Inc. ("NewMarket Technology") to be exchanged for two million
(2,000,000) restricted common shares of the Company. The purchase method of
accounting conforms the accounting policies followed by the consolidated
entities. There were no significant accounting policy differences or other
items, which required adjustment in the accompanying unaudited pro forma
consolidated financial statements.
NewMarket China is a Chinese-based leader in the rapidly developing Chinese
software engineering market providing high quality outsourcing services to
global customers. In addition, the firm is a systems integrator and value added
reseller of major global hardware brands in the Chinese domestic market.
NewMarket China has established and continues to grow a highly capable network
of Chinese IT Service partners providing domain expertise in telecommunications,
multimedia, ERP and finance.
The accompanying unaudited condensed pro forma consolidated balance sheet gives
effect to the acquisition as if it had been consummated on June 30, 2006. The
accompanying unaudited condensed pro forma consolidated statements of operations
for the six months ended June 30, 2006 and June 30, 2005, give effect to the
acquisition as if it had been consummated on January 1, 2006, and January 1,
2005, respectively.
The unaudited pro forma consolidated financial statements should be read in
conjunction with the historical financial statements of (included herein) as
well as those of the Company. The unaudited pro forma consolidated financial
statements do not purport to be indicative of the financial position or results
of operations that would have actually been obtained had such transactions been
completed as of the assumed dates and for the periods presented, or which may be
obtained in the future. The pro forma adjustments are described in the
accompanying notes and are based upon available information and certain
assumptions that the Company believes are reasonable.
A preliminary allocation of the purchase price of has been made to major
categories of assets and liabilities in the accompanying pro forma financial
statements. The actual allocation of the purchase price and the resulting effect
on income (loss) from operations may differ significantly from the pro forma
amounts included herein. The pro forma adjustments represent the Company's
preliminary determination of purchase accounting adjustments and are based upon
available information and certain assumptions that the Company believes to be
reasonable. Consequently, the amounts reflected in the unaudited pro forma
consolidated financial statements are subject to change, and the final amounts
may differ substantially.
INTERCELL INTERNATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 2006
Historical
-----------------------------------
ASSETS Intercell NewMarket Pro forma Pro forma
International China, Inc. adjustments consolidated
Corporation
---------------- ---------------- ---------------- ----------------
Cash and cash equivalents $ 44,570 $ 422,519 $ 250,000 (B) $ 717,089
Receivables - 1,633,459 1,633,459
Inventory - 1,318,969 1,318,969
Supplier advances - 414,920 414,920
Other current assets - 384,524 384,524
---------------- ---------------- ---------------- ---------------
Total current assets 44,570 4,174,391 250,000 4,468,961
---------------- ---------------- ---------------- --------------
Property and equipment, net - 408,191 408,191
---------------- ---------------- ---------------- --------------
Investment in Securities 13,225 63,857 77,082
Investment in NewMarket China - - 400,000 (C) -
(400,000) (C)
-
---------------- ---------------- ---------------- --------------
13,225 63,857 0 77,082
---------------- ---------------- ---------------- --------------
Total assets $ 57,795 $ 4,646,439 $ 250,000 $ 4,954,234
================ ================ ================ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 85,255 $ 864,689 $ $ 949,946
Short-term borrowings - 1,471,218 1,471,218
Accrued expenses and other liabilities 5,718 252,141 257,859
Discontinued operations 308,683 - 308,683
Notes payable 35,000 - 35,000
---------------- ---------------- ---------------- --------------
Total current liabilities 434,656 2,588,048 3,022,706
Long-term debt 0
---------------- ---------------- ---------------- --------------
Total liabilities 434,656 2,588,048 3,022,706
---------------- ---------------- ---------------- --------------
Stockholders' (deficit)/equity (376,861) 2,058,391 2,000 (A) 1,931,528
398,000 (A)
1,658,389 (A)
250 (B)
249,750 (B)
(1,506,091) (C)
(552,300) (C)
Total liabilities and stockholders'
(deficit) /equity $ 57,795 $ 4,646,439 $ 249,998 $ 4,954,234
================ ================ ================ ==============
Cstock 25,836.00 1 (1) 25,836
Apic 39,394,584 1,506,090 (1,506,090) 39,394,584
Pstck 250 250
Addtl Comprehensive Income 13,224 13,224
Ret earnings (39,116,575) 552,300 (552,300) (39,116,575)
Net Income (52,213) (52,213)
Total Stock Holder Equity 265,106 2,058,391 265,106
INTERCELL INTERNATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2006
Historical
-----------------------------------
Intercell NewMarket Pro forma Pro forma
International China, Inc. adjustments consolidated
Corporation
---------------- ---------------- ---------------- ----------------
Revenues $ - $ 13,021,252 $ $ 13,021,252
Cost of sales - (12,652,012) (12,652,012)
----------------- ----------------- ----------------- -----------------
Gross profit - 369,240 369,240
----------------- ----------------- ----------------- -----------------
Total operating expenses (39,600) (330,542) (370,142)
----------------- ----------------- ----------------- -----------------
Loss from operations (39,600) 38,698 (902)
----------------- ----------------- ----------------- -----------------
Other income (expense):
Interest income 274 - 274
Gain on acquisition - - 1,658,389 (A) 1,658,389
Interest expense - (36,445) (36,445)
Other - (10,286) (10,286)
----------------- ----------------- ----------------- -----------------
274 (46,731) 1,611,932
----------------- ----------------- ----------------- -----------------
Net loss $ (39,326) $ (8,033) $ 1,611,030
================= ================= =================
Basic and diluted net income per common share $ * $ 0.06
================= =================
Weighted average number of common
shares outstanding 23,836,323 2,000,000 (D) 25,836,323
================= =================
* less than $(0.01) per share
INTERCELL INTERNATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2005
Historical
-----------------------------------
Intercell NewMarket Pro forma Pro forma
International China, Inc. adjustments consolidated
Corporation
----------------- ----------------- ----------------- --------------
Revenues $ - $ - $ $ -
Direct cost of sales - - -
----------------- ----------------- ----------------- -------------
Gross profit - - -
----------------- ----------------- ----------------- -------------
Total operating expenses (82,185) - (82,185)
----------------- ----------------- ----------------- -------------
Loss from operations (82,185) - (82,185)
----------------- ----------------- ----------------- -------------
Other income (expense):
Interest income 65 - 65
Gain on investments 150 - 150
Gain on acquisition - - 1,658,389 (A) 1,658,389
Interest expense (555) - (555)
Other - - 0
----------------- ----------------- ----------------- -------------
(340) - 1,658,049
----------------- ----------------- ----------------- -------------
Discontinued operations (11,781) - (11,781)
Net (loss) income (94,306) - 1,564,083
----------------- ----------------- ----------------- -------------
Net (loss) income applicable to common shareholders $ (94,306) $ - $ $ 1,564,083
================= ================= ================= =============
Basic and diluted net income per common share * 0.06
================= =============
Weighted average number of common
shares outstanding 23,843,878 2,000,000 (D) 25,843,878
================= =============
* Less than $(0.01) per share.
INTERCELL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
AND STATEMENTS OF OPERATIONS
BALANCE SHEET AS OF JUNE 30, 2006, AND STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005
On November 13, 2006, the Intercell International Corporation (the "Registrant"
or, the "Company") acquired 100% of the equity interest in NewMarket China, Inc.
("NewMarket China"). The acquisition was accounted for using the purchase method
of accounting. The Company and NewMarket China agreed to utilize an acquisition
date of November 13, 2006, for accounting purposes.
The historical unaudited condensed consolidated financial information of
Intercell include the accounts of NewMarket China as of June 30, 2006. The
historical unaudited statement of operations information of NewMarket China
presented in the pro forma statement of operations for the six months ended June
30, 2006 and June 30, 2005.
Adjustments to the accompanying unaudited pro forma condensed consolidated
financial statements are as follows:
(A) This entry is recorded to reflect the acquisition of NewMarket China, Inc.
("NewMarket China") in exchange for for all of the issued and outstanding
stock of NewMarket China, one thousand (1,000) shares held by NewMarket
Technology, Inc. ("NewMarket Technology") to be exchanged for two million
(2,000,000) restricted common shares of the Company. The purchase price and
preliminary adjustments to historical book value are as follows:
Purchase price:
Common stock
(2,000,000 shares at $0.20 per share) $ 400,000
Book value of net assets acquired 2,058,391
-----------
Book value of net assets acquired in
excess of purchase price $ 1,658,389
===========
The Company has treated the value of the net assets acquired in excess of
the purchase price as an extraordinary gain on the acquisition.
(B) This entry is recorded to reflect the issuance of 250,000 Shares of the
Series A Preferred Shares to NewMarket Technology, Inc. (the sole
shareholder of NewMarket China) for $250,000 cash. The shares of Series A
Preferred Stock may be converted into that number of authorized but
unissued common stock, par value $0.001 per share of the Company, which
shall be equal to 60% ownership of the Company after giving effect to such
issuance on and as of the date of conversion.
(C) This entry is to eliminate the investment in NewMarket China and the equity
of NewMarket China at June 30, 2006.
(D) The weighted average number of common shares has been adjusted to reflect
the issuance of 2,000,000 shares that were issued by the Company to acquire
the issued and outstanding stock of NewMarket China. The adjustment is to
reflect the issuance as if it occurred at the beginning of each respective
period.