<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
Registration No. 33-92662
PROSPECTUS
1,075,600 SHARES
ICC TECHNOLOGIES, INC.
COMMON STOCK
($.01 PAR VALUE)
This Prospectus relates to the offer for sale of up to 1,075,600 shares
of Common Stock, $.01 par value, (the "Common Stock" or "Shares") of ICC
Technologies, Inc. (the "Company" or "ICC"), from time to time after the date
hereof by certain stockholders and warrant holders ("Warrant Holders") of the
Company (the Warrant Holders and such stockholders are collectively referred to
as the "Selling Securityholders" and individually as a "Selling
Securityholder"). Except as described below, the Company will not receive any
portion of the proceeds from the sale of the Shares offered hereby. See "PLAN
OF DISTRIBUTION AND SELLING SECURITYHOLDERS."
The Shares will be offered by the Selling Securityholders for resale by
this Prospectus from time to time after the date hereof in one or more
transactions in the over-the-counter market, in negotiated transactions, or
private transactions, or otherwise, or a combination of such methods of sale,
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Selling Securityholders
may effect such transactions by selling the Shares to or through
broker-dealers, and such broker-dealers may receive compensation in the form of
underwriting discounts, concessions or commissions (which compensation may be
in excess of customary commissions). Any broker-dealers that participate in
the distribution of the Shares may be deemed to be underwriters and any
commissions received by them and any profit on the resale of Shares positioned
by them might be deemed to be underwriting discounts and commissions under the
Securities Act of 1933 (the "Act"). Each of the Selling Securityholders may
also be deemed to be an underwriter as defined in the Act.
The Company's Common Stock is traded in the over-the-counter market and
is quoted on the National Association of Securities Dealers, Inc., Automated
Quotation System ("NASDAQ") Small Cap market listings under the symbol "ICGN."
See "RISK FACTORS AND CERTAIN INVESTMENT CONSIDERATIONS." On July 7, 1995, the
reported last sale price of the Common Stock, as reported by NASDAQ, was
$15.375.
THE SECURITIES BEING SOLD HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK. THE COMPANY HAS EXPERIENCED LOSSES SINCE INCEPTION. SEE "RISK FACTORS
AND CERTAIN INVESTMENT CONSIDERATIONS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") NOR
HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The expenses relating to the offering, which are estimated at
approximately $263,411, will be borne by the Company.
The Date of this Prospectus is August 22, 1995
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No one has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection
with the offer made hereby. If given or made, such information or
representations must not be relied upon as having been authorized by the
Company or the Selling Securityholders. This Prospectus does not constitute an
offer to sell or solicitation of an offer to buy, nor shall there be any sale
of these securities by anyone in any State in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under the
securities law of any such State, or in which the person making such offer or
solicitation is not qualified to do so, or to any person to whom it is unlawful
to make such offer or solicitation. Except where otherwise indicated, this
Prospectus speaks as of its date and neither the delivery of this Prospectus
nor any sale made hereunder shall, under any circumstances, create an
implication that there has been no change in the affairs of the Company since
the date hereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith files
reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information filed by the Company can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Commission's Regional Offices at 500
West Madison Street, Chicago, Illinois 60661 and 7 World Trade Center, Suite
1300, New York, New York 10048. Copies of such material can be obtained from
the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates.
The Company's Common Stock trades in the over-the-counter market,
as reported by the National Association of Securities Dealers Automated
Quotation System, 1735 K Street, N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company hereby incorporates by reference into this Prospectus
(i) its Annual Report on Form 10-K for the year ended December 31, 1994, which
incorporates by reference certain portions of its definitive Proxy Statement
dated April 11, 1995 distributed to the Company's stockholders in connection
with the annual meeting of stockholders held on June 1, 1995, (ii) its
Quarterly Report on Form 10-Q for the Quarter ended March 31, 1995, (iii) its
Quarterly Report on Form 10-Q/A for the Quarter ended March 31, 1995, (iv) its
Quarterly Report on Form 10-Q/A2 for the Quarter ended March 31, 1995 (v) its
Quarterly Report on Form 10-Q for the Quarter ended June 30, 1995,and (vi) the
description of the Company's Common Stock, $.01 par value, which is included in
the Company's registration statement on Form 10 dated September 15, 1985, filed
by the Company on September 16, 1985 to register such securities under Section
12 of the Securities Exchange Act of 1934 (Commission File No. 0-13865).
(2)
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All documents filed subsequent to the date of this Prospectus by
the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 prior to the termination of the offering described in this
Prospectus shall be deemed to be incorporated by reference in this Prospectus
and to be a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide, without charge, to each person,
including any beneficial owner, to whom this Prospectus is delivered, on the
oral or written request of such person, a copy (without exhibits, unless such
exhibits are specifically incorporated by reference into the information that
this Prospectus incorporates) of any and all information that has been
incorporated by reference in this Prospectus. Written or telephone requests
for such information should be directed to Manfred Hanuschek, Chief Financial
Officer and Treasurer, ICC Technologies, Inc., 441 North 5th Street,
Philadelphia, Pennsylvania 19123, telephone: (215)625-0700.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Information by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Risk Factors and Certain Investment Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Plan of Distribution and Selling Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
(3)
<PAGE> 4
THE COMPANY
ICC Technologies, Inc. (the "Company"), a Delaware
corporation, was incorporated in May, 1984. Initially, the Company was in the
business of selling to end-users energy produced principally by cogeneration
equipment acquired by the Company by lease or purchase from third parties.
Subsequently, the cogeneration equipment was utilized as part of a desiccant
cooling system, in which waste heat generated by the cooling system was used
for winter space heating and/or driving the desiccant cooling process, although
the Company also continued to sell or lease cogeneration equipment for use with
the air conditioning systems manufactured by others and to sell electrical
energy generated by the system.
On February 7, 1994, the Company and Engelhard Corporation
("Engelhard"), through their respective subsidiaries, formed a Pennsylvania
general partnership named "Engelhard /ICC" (the "Partnership"). In exchange
for a 50% interest in the Partnership, the Company transferred to the
Partnership substantially all of its assets, with the exception of cash and
certain other assets not related to the desiccant air conditioning business,
subject to certain liabilities. Engelhard, in exchange for a 50% interest in
the Partnership, (a) contributed to the Partnership approximately $8,600,000,
(b) entered into a Supply Agreement pursuant to which it agreed to supply
desiccants to the Partnership, (c) entered into a Technology License Agreement
pursuant to which it and the Partnership licensed to each other certain
technology rights, and (d) agreed to provide certain credit support to the
Partnership in the amount of $3,000,000. In addition, Engelhard extinguished a
$900,000 obligation due to it by the Company.
The Partnership was formed to engage in the business of
designing, manufacturing and selling desiccant wheel components and desiccant
air conditioners for the dehumidification cooling market, the industrial
drying/dehumidification market and the air conditioning and microbe reduction
market for health care facilities ("Partnership Business"). The desiccant air
conditioning business conducted by the Company prior to the formation of the
Partnership is now being conducted by the Partnership. As a result, the
Company has become principally a holding company owning, through its
wholly-owned subsidiary, a 50% interest in the Partnership. Although the
Company is not permitted, under the partnership agreement for the Partnership,
to engage directly or indirectly in any activities which would conflict with
the Partnership Business as long as the Partnership is in effect, the Company
is not precluded from engaging in other activities. The Company is no longer
marketing cogeneration systems or energy contracts and its activity in the
cogeneration business is confined to selling the small remaining inventory of
spare parts from that business. Although the Company is exploring the
possibility of pursuing other ventures, to date it has not entered into any
agreements or commitments to engage in any other activities.
In connection with the formation of the Partnership, the
Company granted to Engelhard an option to acquire 100% of the Company's
interest in the Partnership at the rate of 25% of such interest per year
starting in 1998, at a price equal to 95% of the fair market value of the
Partnership as determined by an investment banking firm selected by the Company
and Engelhard. The
(4)
<PAGE> 5
Partnership Agreement also provides that under certain circumstances such
option can be accelerated. There can be no assurances that Engelhard will or
will not exercise its option to purchase the Company's interest in the
Partnership.
Until February 7, 1994 the Company was engaged in the
business of designing, manufacturing and marketing environmentally beneficial
and energy efficient desiccant cooling systems, in both a natural gas and an
electric version, for climate control for commercial buildings. The Company's
desiccant products were marketed to chain operators of supermarkets, department
stores, and to manufacturers, schools, healthcare facilities, federal, state
and local governments, and to users of all other types of air conditioning and
dehumidification products. The Partnership has continued such business and
markets its products to such potential users.
The Company believes that the desiccant cooling system it
has developed and which the Partnership is now further developing, is an
innovative and energy efficient technology for providing cooling and heating
for commercial facilities which, in its natural gas version, does not employ
the chemicals used in conventional air conditioning that cause damage to the
stratospheric ozone layer and contribute to global warming.
Effective February 7, 1994, substantially all of the
employees of the Company became employees of the Partnership. Such persons who
are now employed by the Partnership have experience and expertise in
manufacturing, engineering, energy economics, equipment service and
installation, sales and marketing and finance. The Company employed 5
full-time persons and the Partnership employed 176 full-time persons as of
December 31, 1994.
In April 1993, the Company began manufacturing certain of
the parts used in its systems, and assembling all of its own systems, at a
leased facility in Philadelphia, Pennsylvania. The Partnership is continuing
operations at this leased facility. The leases for the manufacturing and
office space occupied by, and certain other obligations of, ICC have been
assumed by the Partnership. In December 1994, the Partnership acquired the
real property and substantially all other manufacturing assets of an existing
facility in Miami, Florida where the honeycomb structures that are the base
material of the desiccant and thermal wheels (or "rotors") will be produced.
Purchased parts used in the manufacturing and assembling
of the Partnership's products are generally available from numerous suppliers
on a competitive basis. However, the Partnership has a requirements contract
with Engelhard for Engelhard's patented desiccant material. The desiccant
rotor currently used by the Partnership in its desiccant air conditioning
system is produced at its Miami, Florida facility.
Since July 1, 1994, the Company has announced publicly
through press releases E/ICC's ("E/ICC") development of new products and new
applications, the acquisition of new customers and other developments. The
following is a summary of such releases.
(5)
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The Company announced on July 7, 1994 an order for an E/ICC
DESI/AIR unit to be utilized in a casting/molding application, which order
amounted to approximately $70,000. On July 14, August 17 and November 2, 1994
the Company reported initial orders for 7 E/ICC's gas powered DESI/AIR units to
new and existing supermarket chain customers for an aggregate of approximately
$400,000. On August 2, 1994 the Company announced that E/ICC's desiccant air
conditioning systems had performed favorably in four field tests and that based
on inquiries received from prospective customers which were generated, in part,
from the efforts of the natural gas industry associations, and E/ICC's own
internal marketing estimates, E/ICC anticipated orders for up to 100 Desert
Cool units by year end. However, although the performance of the Desert Cool
units met E/ICC's expectations, the design of the Desert Cool units made it
difficult to service and to maintain the units and also to manufacture the
units in large quantities. As a result of these design problems, E/ICC slowed
it marketing efforts. In late 1994, E/ICC redesigned the Desert Cool unit to
correct the problems, and the marketing efforts resumed. However, during
fiscal year ended December 31, 1994 total orders for Desert Cool units
aggregated only 20, of which 16 were shipped. As of July 31, 1995, E/ICC had
shipped a total of 28 units and had firm orders for an additional 21 desert
cool units. On November 10, 1994, the Company reported a summary of certain
sales of Desert Cool units made by E/ICC during the summer of 1994 as reported
at an analysts conference and referred to the sale of 19 units (approximately
$600,000) over the summer of 1994. On January 18, 1995, the Company announced
the introduction of E/ICC's new electric unit called Desert Breeze which was
exhibited at the 1995 American Society of Heating, Refrigeration and Air
Conditioning Engineers Show held in Chicago on January 30, 1995. At that time,
E/ICC's management believed that the Desert Breeze could set a new standard for
the industry because the Desert Breeze is able to utilize waste heat from the
unit's cooling cycle to dry the air and make the cycle more efficient.
To increase its capacity to meet potential market demand
and to enable E/ICC to produce lower cost substrates for its systems, in
December, 1994 E/ICC acquired the assets of a manufacturing facility from Ciba
Geigy in Miami, Florida.
On January 25, 1995 the Company announced the order for
E/ICC's new product, the DESI/AIR 20,000 for approximately $109,000. This was
the DESI/AIR's first petro-chemical application. On May 16, 1995, the Company
announced foreign orders for 13 Desert Breeze and Desert Cool units for an
aggregate of $260,000. On June 1, 1995, the Company announced foreign orders
for 8 Desert Breeze units, 2 Desert Cool units in Japan, 7 DESI/AIR units to
Samsung and certain components to an Israeli company for total revenue of
approximately $400,000. On July 21, 1995 the Company announced an order for
certain components to Samsung related to a ship building application for
approximately $40,000.
In addition, although the revenues from the sale of units
only for the 12 months ended June 30, 1995 which included the orders for units
reported above, aggregated approximately $2.4 million, the gross margin
----------------
relating to unit sales was not significant. Moreover, all of the sales were
------------------------------------------
made by E/ICC pursuant to purchase orders. Although E/ICC is discussing
additional sales of units to
(6)
<PAGE> 7
these entities, E/ICC does not have any firm commitments relating to additional
sales of its units to such entities. Moreover, there is no assurance that any
additional sales will be made to such entities.
The executive offices of the Company and the Partnership
are based at the same location, 441 North 5th Street, Suite 102, Philadelphia,
Pennsylvania 19123. The Company's telephone number is (215) 625-0700.
(7)
<PAGE> 8
RISK FACTORS AND CERTAIN INVESTMENT CONSIDERATIONS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY
INVOLVES A HIGH DEGREE OF RISK. IN EVALUATING A PURCHASE OF SHARES,
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS, IN
ADDITION TO THE INFORMATION SET FORTH ELSEWHERE IN, AND INCORPORATED BY
REFERENCE INTO, THIS PROSPECTUS.
HISTORY OF LOSSES. The Company has suffered continued and
recurring losses since its inception, accumulating to approximately $28 million
through March 31, 1995, including the Company's reported share of losses
sustained by the Partnership through that date. While the Company believes
that the business strategy adopted by the Company as a holding company with a
50% general partner interest in the Partnership has potential for profits and
returns on investments in the future, there can be no assurance that the
Partnership or the Company will reach profitability in the near future, if
ever.
WORKING CAPITAL NEEDS AND NEED FOR FINANCING. Sales of the
Company's small remaining inventory of cogeneration equipment spare parts does
not and will not provide sufficient revenues to fund the Company's working
capital requirements, and the Company has no other source of revenues from
operations. Consequently, the Company will be required to raise additional
capital by selling equity in the Company or incurring debt. The Company
historically has obtained its financing needs mainly through the sale of
Company securities. There can be no assurance that any transactions to obtain
such capital would be consummated or that such additional capital, if obtained,
would be on a timely basis. Further, additional sales of equity in the Company
pose the risk of significant dilution to existing stockholders.
This Registration Statement includes the resale of shares
of Common Stock issuable upon the exercise of Warrants. If all of such
Warrants are exercised in full, the Company will receive the gross proceeds
from such exercise, in the amount of $4,558,750. There can be no assurance
that any or all of the Warrants will be exercised.
GOING CONCERN CONSIDERATIONS. The Company's financial
statements for the years ended December 31, 1992, 1993 and 1994 were prepared
on the assumption that the Company will continue as a going concern. The
Company's financial statements do not include any adjustments relating to the
recoverability of assets and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern. The
Company's continuation as a going concern would be dependent upon its ability
to generate sufficient cash flow to meet its obligations on a timely basis, to
obtain additional financing or refinancing as may be required and to attain
profitable operations and a positive cash flow. There is no assurance that
sufficient funding would be available when needed or that the Company would be
able to achieve a profitable level of operations and a positive cash flow. The
report of the Company's independent accountants on the Company's financial
statements as at, and
(8)
<PAGE> 9
for the fiscal year ended, December 31, 1994 include an explanatory paragraph
which refers to conditions that raise substantial doubt about the Company's
ability to continue as a going concern. The report of the Partnership's
independent accountants on the Partnership's financial statements as at
December 31, 1994 and for the period February 7, 1994 (date of formation) to
December 31, 1994 includes an explanatory paragraph which refers to conditions
that also raise substantial doubt about the Partnership's ability to continue
as a going concern.
NO CASH DIVIDENDS. The Company has not declared any cash
dividends and does not expect to declare any cash dividends in the foreseeable
future. Payment of future dividends will rest within the discretion of the
Board of Directors and will depend, among other things, on the Company's
earnings, capital requirements and financial condition. No assurance can be
given that the Company's results of operations or its interest in the
Partnership will ever permit the payment of cash dividends. In addition, under
the terms of certain of the Company's debt instruments, the Company is
prohibited from paying or declaring any dividends, and under the provisions of
the Company's series of Preferred Stock all accrued dividends must be paid on
Preferred Stock prior to the payment of any dividends on Common Stock. As of
March 31, 1995, the accrued dividends on the Preferred Stock aggregated
approximately $909,000.
MARKET ACCEPTANCE OF THE COMPANY'S PRODUCTS. Since
February 7, 1994, the Partnership has been engaged principally in manufacturing
and installing a limited number of desiccant cooling systems and developing
additional systems. While the Company believes there is a significant number
of potential buyers for the Partnership's products, the sales and new orders
for 50 units received in the fiscal year ended December 31, 1994 were less than
expected by management during such period. There can be no assurance that
sufficient market acceptance can be attained or that the Partnership's products
can be sold at the prices anticipated.
PARTNERSHIP BUY-OUT OPTION. In connection with the
formation of the Partnership, the Company granted to Engelhard an option to
acquire 100% of the Company's interest in the Partnership at the rate of 25% of
such interest per year starting in 1998, at a price equal to 95% of the fair
market value of the Partnership as determined by an investment banking firm
selected by the Company and Engelhard. The Partnership Agreement provides that
under certain circumstances the Engelhard option can be accelerated. There can
be no assurances that Engelhard will or will not exercise its option to
purchase the Company's interest in the Partnership or the amount payable to the
Company upon such exercise.
PARTNERSHIP HISTORY OF LOSSES. The Partnership has
incurred since its formation on February 7, 1994, losses totalling
approximately $7,624,810 through March 31, 1995, of which the Company's 50%
share has been reflected in the Company's reported loss. While the Company
believes that the business strategy adopted by the Partnership has potential
for profits there can be no assurance that the Partnership will reach
profitability in the near future, if ever.
(9)
<PAGE> 10
PARTNERSHIP'S WORKING CAPITAL NEEDS. The Partnership does
not have sufficient sales to provide the capital from internal sources required
to fund operations. Consequently, the Partnership will be required to raise
additional capital through the Company and Engelhard. There can be no
assurance that such capital can be raised by the Partnership or that the
Company or Engelhard would be willing or able to provide it.
DEPENDENCE UPON A SINGLE PRODUCT. At the present time the
Partnership is dependent upon a single product, its desiccant-based cooling
systems. However, the Partnership has recently begun to offer a broader range
of products based upon its desiccant technology and included in a single
package together with traditional DX (direct expansion) cooling supplemental
equipment. In addition, the Partnership is actively pursuing other new
products and applications for the industrial and residential markets, as well
as for commercial customers, including its next generation of desiccant cooling
products. While the Company would be permitted to engage in any other activity
which would not conflict with the Partnership Business or compete with the
Partnership in the Partnership Business, the Company does not have any plans to
engage in, and has not entered into any agreement or commitment to engage in,
any other activities. There can be no assurance that the Company will be able
to, or that the Partnership would be able to, develop or successfully market
any new products.
UNCERTAINTIES RELATED TO MANUFACTURING AND UNIT COSTS. In
the past, the Company relied on contract manufacturers for the fabrication of
the Company's products and had, until April, 1993, fabricated only a limited
number of systems. In April 1993, the Company, and in February 1994 the
Partnership, commenced assembling and manufacturing its own products in a
leased facility located in Philadelphia, Pennsylvania and in December 1994 the
Partnership commenced producing honeycomb structures for its desiccant and
thermal rotors at its newly-acquired facility in Miami, Florida. The Company
anticipates that for the foreseeable future the Partnership will be able to
manufacture all of the Partnership's products at such facilities and that by
doing so will be able to reduce costs and delays. However, no assurance can be
given in that regard. Further, if conditions warrant, the Company believes the
Partnership could utilize contract manufacturers in the future. While the
Company believes that there are numerous contract manufacturing facilities
capable of fabricating the Partnership's products at costs acceptable to the
Partnership, there can be no assurance that the Partnership would not
experience delays or cost overruns in producing and delivering systems to
customers, or that contract manufacturers would not require substantial cash
deposits to secure purchase orders because of the Partnership's financial
condition.
UNCERTAINTIES RELATED TO PRODUCT PERFORMANCE. The Company
and the Partnership have installed only a limited number of desiccant cooling
systems. While the Company believes that product performance to date has been
commercially acceptable and is a reliable basis for estimating future
performance, there can be no assurance that the performance of the
Partnership's products in the future will meet expectations related to
efficiency, reliability or durability.
COMPETITION. There are a number of other firms in the
heating, ventilation and air conditioning equipment industry that have
significantly more resources and experience in the marketing
(10)
<PAGE> 11
and development of new products than does the Partnership. While the Company
believes that the Partnership has established proprietary product technology
and limited market acceptance for the types of products sold by the
Partnership, there can be no assurance that other firms will not develop
competing products that have advantages over the Partnership's products in
either price or performance.
SHARES ELIGIBLE FOR FUTURE SALES. There are 889,765 shares
of Company Common Stock presently outstanding which are "restricted securities"
as that term is defined under Rule 144 promulgated under the Securities Act of
1933, as amended, substantially all of which may be sold at any time, subject
to the restrictions of Rule 144. In addition, the Company has stock option
plans under which the Company has granted outstanding options for 3,293,218
shares and under which it may hereafter grant to employees and directors
options to purchase up to an additional 2,110,942 shares of Common Stock, which
underlying shares are covered by effective registration statements, and has
outstanding warrants to purchase 1,705,000 shares. Possible or actual sales
made under Rule 144, or pursuant to registration, or pursuant to other
exemptions from registration under the Securities Act of 1933, may have a
depressive effect upon the market price of the Company's Common Stock. None of
the above-referenced shares of the Company's Common Stock are subject to any
"lock-up" agreements.
CONTROL BY BOARD OF DIRECTORS. As of July 7, 1995, all
officers and directors of the Company as a group owned beneficially shares of
the outstanding Common Stock, Convertible Preferred Stock and presently
exercisable options and warrants having voting power (assuming exercise of the
options and warrants) equivalent to 6,076,235 shares or 33.9% of the
outstanding Common Stock. Of this amount, Irwin L. Gross, Chairman of the
Board, President and Chief Executive Officer of the Company, has voting power
equivalent to 2,685,421 shares of Common Stock, or approximately 17.8% of the
total voting power of the Company's outstanding equity securities. In his
capacity as Chairman of the Board, Mr. Gross is also the Voting Trustee of a
Voting Trust Agreement pursuant to which the Board of Directors have the power
to determine how 310,000 shares of Common Stock controlled under the trust,
which comprise more than 2.4% of the outstanding voting power of the Company
for the election of directors, are to be voted in, among other things,
elections to the Board of Directors. Consequently, Mr. Gross and the Board of
Directors can and will be able to continue to exercise significant influence
over the Company and its affairs.
MARKET FOR THE COMPANY'S SECURITIES. As of the date of
this Prospectus, the Company's Common Stock is listed on the NASDAQ Small Cap
Market. However, the Company has failed to meet NASDAQ listing requirements at
various times in the past. The Company intends to continue to meet NASDAQ
listing requirements by raising additional capital and from any profits which
may be generated by the Partnership in the future, but there can be no
assurance that the Company will be able to raise additional capital or that the
Partnership will become and remain profitable. In the event that the Company
is unable to maintain its NASDAQ listing, there would be no established trading
market for the Company's securities.
(11)
<PAGE> 12
PLAN OF DISTRIBUTION AND
SELLING SECURITYHOLDERS
The following table sets forth as of July 11, 1995 (a) the
name of each Selling Securityholder, (b) the nature of any position, office or
other material relationship which the Selling Securityholder has had within the
past three years with the Company, (c) the number of Shares beneficially owned
prior to the offering, (d) the number of Shares to be offered for the Selling
Securityholder's account, (e) the number of Shares to be beneficially owned by
the Selling Securityholder after completion of the offering, and (f) the
percentage of Common Stock to be beneficially owned by the Selling
Securityholder after completion of the offering.
<TABLE>
<CAPTION>
Percentage
Name of Number of Number of Common
Selling Relation- Shares Owned Number of of Shares Stock
Security- ship to Prior to Shares Owned After Owned After
holder Company Offering Offered Offering Offering (9)
--------- --------- -------- ------- -------- ------------
<S> <C> <C> <C> <C> <C>
Strategic 40,000(1) 40,000 -0- -0-
Growth
International Inc.
Mabon 100,000(2) 100,000 -0- -0-
Securities
Corp.
Broad 375,000(3) 375,000 -0- -0-
Capital
Corporation
Mark Hauser Director 265,000(4) 50,000 215,000 1.3
Reuben F.
Richards, Jr. 125,000(5) 125,000 -0- -0-
Huberfeld- 300,000(6) 300,000 -0- -0-
Bodner
Family
Foundation, Inc.
</TABLE>
(12)
<PAGE> 13
<TABLE>
<CAPTION>
Percentage
Name of Number of Number of Common
Selling Relation- Shares Owned Number of of Shares Stock
Security- ship to Prior to Shares Owned After Owned After
holder Company Offering Offered Offering Offering (9)
--------- --------- -------- ------- -------- ------------
<S> <C> <C> <C> <C>
Stephan R.
Levy 15,000(7) 15,000 -0- -0-
Helene Felder 18,000(7) 18,000 -0- -0-
Chester and
Sylvia Shure 15,600(7) 15,600 -0- -0-
William P. and
JoAnn S. Reiland 17,000(7) 17,000 -0- -0-
Wall Street
Consultants, Inc. 20,000(8) 20,000 -0- -0-
</TABLE>
-------------------
(1) Consists of warrants currently exercisable at $2.25 per share.
The warrants were issued pursuant to a Settlement Agreement
dated November 18, 1994 by and between the Company and Strategic
Growth International, Inc.
(2) Consists of warrants currently exercisable at $3.00 per share.
The warrants were issued pursuant to an Engagement Agreement
dated July 20, 1992 by and between the Company and Mabon
Securities Corp.
(3) Effective as of March 16, 1995, pursuant to resolutions adopted
by the Board of Directors of the Company on March 16, 1995, the
Company entered into an engagement agreement with Broad Capital
Corporation ("Broad") for the provision of financial services.
Pursuant to the engagement agreement, effective on March 31,
1995, the Company issued two warrants to Broad for an aggregate
of 375,000 shares of Common Stock of the Company. One warrant
is in the denomination of 250,000 shares and the other in the
denomination of 125,000 shares. The warrants are exercisable at
any time after March 31, 1995 and before 6:00 p.m. Philadelphia
time on the earlier of March 31, 1998 or the date which is nine
months after the effective date of a registration statement
under the Securities Act of 1933 which includes the Warrant
Shares; provided, however, that the warrant for 250,000 shares
is not exercisable unless, and only in the proportion that, that
certain Collateral Promissory Note of the Huberfeld-Bodner
Family Foundation, Inc. (the "Foundation") to the Company, in
the amount of $2,200,000 and dated March 31, 1995, is paid.
(13)
<PAGE> 14
(4) Consists of options and warrants of which warrants to purchase
100,000 shares are exercisable at $4.75 per share and warrants
to purchase 25,000 shares are exercisable at $3.25 per share,
all of which were issued pursuant to an engagement letter dated
October 25, 1993 by and between the Company and Hauser, Richards
& Company. An option to acquire 50,000 shares exercisable at
$8.125 was granted to Mr. Hauser pursuant to the Company's
Equity Plan for Directors. Warrants to purchase 90,000 shares
exercisable at $3.56 per share were issued directly to Mr.
Hauser for financial advisory services.
(5) Consists of warrants of which warrants to purchase 100,000
shares are exercisable at $4.75 per share and warrants to
purchase 25,000 shares are exercisable at $3.25 per share, all
of which were issued pursuant to an engagement letter dated
October 25, 1993 by and between the Company and Hauser, Richards
& Company.
(6) Effective as of March 31, 1995, the Company sold 300,000 shares
of its Common Stock to the Foundation at a price of $11.00 per
share, of which $1,100,000 was paid in cash and the balance of
$2,200,000 is evidenced by a Collateral Promissory Note (the
"Note"). The Note is not interest bearing and is payable on the
earlier of one year from its date or 45 days after the date on
which a Registration Statement covering the 300,000 shares has
become effective. The Note is secured by the pledge of 200,000
shares of the Common Stock purchased in the transaction and an
executed stock power with respect to such shares.
(7) Such Shares were acquired by the Selling Securityholders from
the Company at a purchase price of $1.50 per share pursuant to
the Company's private placements of Common Stock in March and
April of 1993.
(8) Such Shares were granted to the Selling Securityholder by the
Company in consideration for financial public relations
services performed during calendar year 1993.
(9) Assumes that all shares covered by this Prospectus are sold in
the offering.
The Shares will be offered by the Selling Securityholders for
resale by this Prospectus from time to time after the date hereof in one or
more transactions in the over-the-counter market, in negotiated transactions,
or private transactions, or otherwise, or a combination of such methods of
sale, at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. The Selling
Securityholders may effect such transactions by selling the Shares to or
through broker-dealers, and such broker-dealers may receive compensation in the
form of underwriting discounts, concessions or commissions (which compensation
may be in excess of customary commissions).
(14)
<PAGE> 15
USE OF PROCEEDS
The Company will not receive any portion of the proceeds of the
resale of the Shares by the Selling Securityholders. The gross proceeds to the
Company from the issuance of Shares upon the exercise of the Warrants, assuming
the exercise in full of the Warrants, will be $4,558,750. The expenses related
to the offering and exercise of the warrants are estimated to amount to
$263,411. None of the Warrant Holders has exercised his or her Warrants and,
therefore, no proceeds have been received as of the date hereof. There can be
no assurance that the Warrants will be exercised in full.
Upon the exercise of such Warrants, all of the net proceeds of
the issuance of the Shares will be used for general working capital purposes.
Pending expenditure, the Company will invest the net proceeds in short-term,
interest-bearing securities.
LEGAL MATTERS
The validity of the Shares will be passed upon for the Company
by Mesirov Gelman Jaffe Cramer & Jamieson, Philadelphia, Pennsylvania
19103-7598.
EXPERTS
The consolidated balance sheets as of December 31, 1994 and
December 31, 1993 and the consolidated statements of operations, changes in
stockholders' equity (deficit), and cash flows of the Company for each of the
three years in the period ended December 31, 1994, incorporated by reference in
this Prospectus, have been incorporated herein in reliance on the report, which
includes an explanatory paragraph which refers to conditions that raise
substantial doubt about the Company's ability to continue as a going concern,
of Coopers & Lybrand L.L.P., Independent Accountants, given on the authority of
that firm as experts in accounting and auditing.
The balance sheet as of December 31, 1994 and the statement of
operations, changes in partners' capital and cash flows for the period February
7, 1994 (date of formation) to December 31, 1994, of the Partnership,
incorporated by reference in this Prospectus, have been incorporated herein in
reliance on the report, which includes an explanatory paragraph which refers to
conditions that raise substantial doubt about the Partnership's ability to
continue as a going concern, of Coopers & Lybrand L.L.P., Independent
Accountants, given on the authority of that firm as experts in accounting and
auditing.
(15)
