<PAGE> 1
CONFORMED COPY
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 1995, or
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____ or ____
Commission file number 0-13865
ICC TECHNOLOGIES, INC.
-------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 23-2368845
------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
441 North 5th Street, Suite 102
Philadelphia, Pennsylvania 19123
------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (215) 625-0700
Former name, former address and former fiscal year if
changed since last report: not applicable
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
------- -------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, par value $.01 per share
13,303,141 shares outstanding as of August 7, 1995.
<PAGE> 2
INDEX TO FORM 10-Q REPORT
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
------ --------------------- --------
<S> <C> <C>
Item 1. Financial Statements (Unaudited)
Balance Sheets at June 30, 1995 and December 31, 1994 3
Statements of Operations - Three months and six months
ended June 30, 1995 and 1994 4
Statements of Cash Flows - Three months and six months
ended June 30, 1995 and 1994 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 10
PART II OTHER INFORMATION
Item 1. Legal proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
</TABLE>
2
<PAGE> 3
ICC TECHNOLOGIES, INC
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
----------------- -------------------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 1,179,618 $ 1,114,335
Receivables -
Employees 28,667 28,667
Engelhard/ICC 324,771 124,095
Inventories, net 11,000 16,960
Prepaid expenses and other 15,292 65,210
----------------- ------------------
Total current assets 1,559,348 1,349,267
RESTRICTED BANK CERTIFICATE OF DEPOSIT 2,500,000 0
INVESTMENTS IN NET ASSETS OF AND LOANS TO ENGELHARD/ICC 0 1,048,255
PROPERTY AND EQUIPMENT, net 4,357 0
----------------- ------------------
Total assets $ 4,063,705 $ 2,397,522
================= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable -
Trade $ 2,772 $ 93,838
Current portion of long-term debt 150,000 0
Accrued liabilities 154,893 182,944
----------------- ------------------
Total current liabilities 307,665 276,782
----------------- ------------------
LOSSES OF ENGELHARD/ICC IN EXCESS OF INVESTMENTS IN NET ASSETS 2,584,541 0
----------------- ------------------
NOTES PAYABLE TO STOCKHOLDERS 0 150,000
----------------- ------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value -
Series F, authorized, issued and outstanding 6,885 shares
(liquidation value $12,329,986 at June 30, 1995 and $11,632,063 at
December 31, 1994) 69 69
Series G Convertible, authorized and issued 400 shares;
350 shares outstanding (liquidation value $626,797 at June 30, 1995
and $591,318 at December 31, 1994) 4 4
Series H Convertible, authorized, issued and outstanding 1,500 shares
at June 30, 1995 and December 31, 1994 15 15
Series I, authorized, issued and outstanding 500 shares
at June 30, 1995 and December 31, 1994 5 5
Series J, authorized, issued and outstanding 225 shares
at June 30, 1995 and December 31, 1994 2 2
Common stock, $.01 par value, authorized 50,000,000 shares,
issued 12,926,707 shares at June 30, 1994 and 12,288,632
shares at December 31, 1994 129,267 122,887
Note receivable from issuance of Common Stock (2,200,000) 0
Additional paid-in capital 33,197,474 29,241,534
Accumulated deficit (29,783,907) (27,222,346)
Less: Treasury common stock, at cost, 66,227 shares (171,430) (171,430)
----------------- ------------------
Total stockholders' equity 1,171,499 1,970,740
----------------- ------------------
Total liabilities and stockholders' equity $ 4,063,705 $ 2,397,522
================= ==================
</TABLE>
The accompanying notes are an integral part of the financial statements.
-3-
<PAGE> 4
ICC TECHNOLOGIES, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------------------ ------------------------------
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES $ 0 $ 0 $ 6,500 $ 88,360
COST OF GOODS SOLD 0 0 5,961 80,335
-------------- -------------- -------------- --------------
Gross Profit (Loss) 0 0 539 8,025
-------------- -------------- -------------- --------------
OPERATING EXPENSES:
Marketing 0 0 0 155,283
Engineering and development 0 0 0 150,523
General and administrative 419,237 337,482 683,485 487,169
-------------- -------------- -------------- --------------
Total operating costs 419,237 337,482 683,485 792,975
-------------- -------------- -------------- --------------
(Loss) from operations (419,237) (337,482) (682,946) (784,950)
INTEREST:
Interest income 93,707 11,072 203,061 17,240
Interest expense on stockholders' loans (4,125) (3,736) (8,188) (7,986)
-------------- -------------- -------------- --------------
89,582 7,336 194,873 9,254
-------------- -------------- -------------- --------------
EQUITY INTEREST IN NET LOSS OF ENGELHARD/ICC (1,073,505) 0 (2,073,488) 0
-------------- -------------- -------------- --------------
NET (LOSS) (1,403,160) (330,146) (2,561,561) (775,696)
CUMULATIVE PREFERRED STOCK
DIVIDEND REQUIREMENTS (456,774) (65,375) (508,649) (130,750)
-------------- -------------- -------------- --------------
NET (LOSS) APPLICABLE TO COMMON STOCKHOLDERS $ (1,859,934) $ (395,521) $ (3,070,210) $ (906,446)
============== ============== ============== ==============
NET (LOSS) PER COMMON SHARE $ (0.15) $ (0.04) $ (0.24) $ (0.09)
============== ============== ============== ==============
WEIGHTED AVERAGE COMMON SHARES 12,749,218 10,913,049 12,540,386 10,542,098
============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE> 5
ICC TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended June 30,
---------------------------------------
1995 1994
--------------- ------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (2,561,561) $ (775,696)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 413 26,807
Equity interest in net loss of Engelhard/ICC 2,073,488 0
Increase in bad debt and inventory reserve 0 57,000
(Increase) decrease in:
Receivables (200,676) 53,017
Inventories 5,960 (67,664)
Prepaid expenses and other 49,918 30,610
Increase (decrease) in:
Accounts payable (91,066) (16,350)
Accrued expenses 61,257 (153,653)
--------------- ------------------
Net cash used in operating activities (662,267) (845,929)
--------------- ------------------
Cash Flows from Investing Activities:
Repayments of loans from Engelhard\ICC 1,500,000 0
Purchase of restricted certificate of deposit (2,500,000) 0
Purchases of property and equipment, net (4,770) (9,300)
--------------- ------------------
Net cash used in investing activities (1,004,770) (9,300)
--------------- ------------------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock and warrants, net 1,732,320 4,680,369
Repayments of borrowings from stockholders 0 (185,272)
Borrowings from Engelhard Corporation 0 400,000
--------------- ------------------
Net cash provided by financing activities 1,732,320 4,895,097
--------------- ------------------
Net increase in cash and cash equivalents 65,283 4,039,868
Cash and Cash Equivalents, Beginning of Period 1,114,335 1,142,674
--------------- ------------------
Cash and Cash Equivalents, End of Period $ 1,179,618 $ 5,182,542
=============== ==================
</TABLE>
The accompanying notes are an integral part of the financial statements.
-5-
<PAGE> 6
ICC TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 1995
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair
presentation have been included. For further information, refer to the
financial statements and footnotes thereto for the year ended
December 31, 1994 included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1994. Results of operations for the
six months ended June 30 are not necessarily indicative of results of
operations expected for the full year.
(2) BUSINESS AND GOING CONCERN CONSIDERATIONS
Business
ICC Technologies, Inc. ("ICC" or the "Company") is a Delaware
Corporation. On February 7, 1994, pursuant to the terms and
conditions of a Joint Venture Asset Transfer Agreement ("Transfer
Agreement"), by and among ICC, its newly formed wholly owned
subsidiary, ICC Desiccant Technologies, Inc. ("I Partner"), and
Engelhard Corporation ("Engelhard") and its newly formed wholly owned
subsidiary, Engelhard DT, Inc. ("E Partner"), ICC and Engelhard,
through their respective subsidiaries, formed a Pennsylvania general
partnership named "Engelhard/ICC" (the "Partnership"). In exchange
for a 50% interest in the Partnership, ICC transferred to the
Partnership through its wholly-owned subsidiary, I Partner,
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, and Engelhard, in exchange
for a 50% interest in the Partnership, (a) contributed to the
Partnership through its wholly-owned subsidiary, E Partner,
$8,634,000, (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 Engelhard and the
Partnership licensed to each other certain technology rights, and (d)
agreed to provide credit support to the Partnership in the amount of
$3,000,000.
The Partnership was formed on February 7, 1994 to engage in the
business of designing, manufacturing and selling desiccant wheel
components and desiccant air conditioners for the dehumidification
cooling markets, industrial drying/dehumidification market and the air
conditioning and microbe reduction market for health care facilities
("Partnership Business"), and succeed to the desiccant air
conditioning business conducted by ICC prior to the formation of the
Partnership and the activities of ICC and Engelhard under the Joint
Development Agreement dated May 26, 1992. As a result of the
consummation of the Transfer Agreement, ICC has become principally a
holding company, owning a 50% interest in the Partnership through
ICC's wholly owned subsidiary, I Partner, which is a co-general
partner of the Partnership. Although ICC is not permitted to engage
directly or indirectly in any activities that would conflict with the
Partnership Business as long as the Partnership is in effect, ICC is
not precluded from engaging in other activities. ICC will, in fact,
continue the current cogeneration business activities that it has been
conducting on a very limited basis. Presently, although ICC 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.
6
<PAGE> 7
(2) BUSINESS AND GOING CONCERN CONSIDERATIONS, Continued
Prior to consummation of the Transfer Agreement, ICC was engaged in
the business of designing, manufacturing and marketing environmentally
beneficial and energy efficient, desiccant cooling systems for climate
control for commercial buildings. The Company's products were
marketed to chain operators of supermarkets, department stores, and to
manufacturers, schools, health care facilities, federal, state and
local governments, and to users of all other types of air conditioning
and dehumidification products. The Partnership has and the Company
expects the Partnership to continue to conduct such business and to
market its products to such potential users.
Going Concern
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.
Revenues and the Company's share of results of operations of
Engelhard/ICC have been insufficient to cover costs of operations for
the three and six months ended June 30, 1995. The Company has incurred
cumulative losses since inception of $29,783,907 and $27,222,346
through June 30, 1995 and December 31, 1994, respectively. In order
to continue operations, the Company has had to raise additional
capital to offset cash consumed in operating and investing activities.
The Company's continuation as a going concern is dependent on its
ability to: (i) generate sufficient cash flows to meet its obligations
on a timely basis, (ii) obtain additional financing as may be
required, and (iii) ultimately attain profitable operations and
positive cash flows from operations and its investment in the
Partnership. The accompanying financial statements do not include any
adjustments that may result from the Company's inability to continue
as a going concern.
In response to the aforementioned conditions, the Company has
transferred the net assets of the desiccant air conditioning line of
business to the Engelhard/ICC Partnership. ICC is not obligated to
contribute additional capital to the Partnership. ICC may be
requested by Engelhard to provide additional financial support to the
Partnership as a condition for Engelhard to provide additional
financial support to the Partnership. Until the Partnership generates
sufficient cash flows from operations, it will be primarily dependent
upon the partners to provide any required working capital. Because ICC
is a 50% partner, ICC will record its proportionate share of future
losses of the Partnership under the equity method of accounting to the
extent of any remaining balance of positive investment in and advance
to the Partnership or commitment to provide funds to the Partnership
in the future.
Management intends to raise additional capital as required to continue
operations and to pursue other business activities; however, there can
be no assurance that the Company will be able to raise additional
capital as required to continue operations or to pursue other
activities. See Note 4 Stock Transactions. Although the Company is
not obligated to contribute capital to the Partnership, management may
also consider raising additional capital to provide additional funding
to the Partnership, if needed.
7
<PAGE> 8
(3) INVESTMENT IN ENGELHARD/ICC PARTNERSHIP
The following are the summarized unaudited financial results of the
Partnership:
<TABLE>
<CAPTION>
Quarter ended Quarter ended Six months Period
-------------- -------------- ---------- ------
June 30, 1995 June 30, 1994 ended June February 7 to
------------- ------------- ----------- --------------
30, 1995 June 30, 1994
-------- -------------
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Revenues $ 3,373,964 $467,548 $ 5,161,966 $617,244
Loss from operations (1,805,033) (1,373,073) (3,584,230) (1,943,217)
=========== =========== =========== ===========
Net loss ($2,147,011) $ (1,321,990) ($4,146,976) $ (1,870,265)
============= ============= ============= =============
<CAPTION>
BALANCE SHEET INFORMATION: June 30, 1995 December 31,
------------- ------------
1994
------
<S> <C> <C>
Cash $ 745,354 $ 648,451
Receivables 1,693,706 663,551
Inventory 3,643,533 2,439,509
Other current assets 200,277 75,836
Cash held in escrow 1,261,106 0
Property, plant and equipment 8,028,405 7,946,511
Other noncurrent assets 1,729,591 1,612,497
--------- ---------
Total Assets $ 17,301,972 $13,386,355
============ ===========
Current liabilities $ 1,247,792 $1,730,732
Revolving credit line 2,750,000 0
Long term debt 8,727,318 175,044
Notes payable to general partners 0 8,000,000
Partners capital 4,333,607 3,480,579
--------- ---------
Total Liabilities and equity $17,301,972 $ 13,386,355
=========== =============
</TABLE>
The Company's investment in the Partnership is owned by a subsidiary,
ICC Desiccant Technologies, Inc., whose principal asset is the
Partnership investment. The investment in the Partnership is
accounted for under the equity method of accounting. In the second
quarter 1995, the Partnership included in revenue $500,000 associated
with a technology license agreement entered into with a manufacturing
company located in Taiwan. In December 1994, the general partners each
loaned $4,000,000 to the Partnership in connection with the
acquisition of the real property and substantially all other assets of
an existing manufacturing facility located in Miami, Florida. In May
1995, $1,500,000 of the aforementioned loan was repaid to each general
partner, with the remaining amount, $2,500,000, for each general
partner, was converted into an investment into the Partnership. The
Company's proportionate share of losses in the Partnership are
$1,073,505 and $2,073,488 for the three and six months ended June 30,
1995 and $4,885,911 cumulative losses since inception. The Company's
share of losses have been recognized and offset against the Company's
investment in net assets and loans to Engelhard/ICC. At February 7,
1994, date of formation, the Company's investment in the Partnership
was approximately $0 and no losses of the Partnership were recognized
for the six months ended June 30, 1994.
Receivables from the Partnership were $324,771 at June 30, 1995.
Interest income earned from the Partnership in connection with the
aforementioned $4 million loan amounted to approximately $67,000 in
the second quarter of 1995. In May 1995, each general partner was
repaid $1,500,000 of the aforementioned loan, of which the remaining
amount, $2,500,000 for each general partner, was converted into an
investment into the Partnership. The Partnership provided
approximately $24,000 in various administrative office support
services to the Company. The Partnership in April 1995 obtained
financing from the issuance of industrial development revenue bonds up
to an
8
<PAGE> 9
(3) INVESTMENT IN ENGELHARD/ICC PARTNERSHIP, Continued
aggregate of $8.5 million . The proceeds of which were utilized to
repay a portion of the bridge financing provided by the general
partners and provided for improvements and capital equipment at the
Miami facility. As of June 30, 1995, $1,261,106 of proceeds were
held in escrow that were to be released upon the incurrance of
qualified expenditures. In May 1995, the Company guaranteed 50% of
the Partnership's indebtedness associated with the industrial
development revenue bonds; as a result, the continued loss of the
Partnership has resulted in the Investment being recorded as a
liability on the balance sheet. The Company has established an
irrevocable letter of credit for $2.5 million to support its portion
of the guarantee. The Company's letter of credit is collaterialized
by a certificate of deposit of $2.5 million.
The general partners are guarantors of the Partnership's long term
debt which totals $8,727,318.
(4) STOCK TRANSACTIONS:
Equity Investments-
On March 31, 1995, pursuant to a private placement, the Company issued
300,000 shares of Common Stock for gross proceeds of $3,300,000. At
closing cash of $1,100,000 was received along with a $2,200,000
promissory note. The promissory note is payable on the earlier of one
year or forty-five days after the date on which a registration
statement covering the 300,000 shares goes effective. The promissory
note is collateralized by the pledge of 200,000 shares of the Common
Stock purchased in such transaction. The Company granted warrants to
purchase 375,000 shares of Common Stock at $9 per share to the
placement agents in connection with the private placement. The
expenses accrued for in connection with the offering are estimated to
amount to approximately $120,000 at June 30, 1995, which has been
offset against gross proceeds received.
The Company received proceeds of approximately $308,000 from the
exercise of stock options to purchase approximately 130,000 shares of
Common Stock granted under its option plans for the three month
period ended June 30, 1995. The Company received proceeds of
approximately $750,000 from the exercise of stock options to purchase
approximately 318,000 shares of Common Stock granted under its option
plans for the six month period ended June 30, 1995.
Preferred Stock-
The shares of Series G and H Convertible Preferred Pock may be
converted into Common Sock at the demand of the holder of such shares.
The conversion rates are 8170.56 shares of Common Stock for each
Series G share and 500 shares of Common Stock for each Series H share.
In April 1995, the Series F and G Preferred Stock began to accrue a
cash dividend at a rate equal to 15% of the respective accrued
liquidation preference. Accrued dividend for the period ended June
30, 1995 for the Series F and G preferred stock amounted to $385,312
and $19,587, respectively. In August 1995, the holders of 6,750 shares
of Series F Preferred Stock agreed to convert their shares into
925,000 shares of Common Stock.
9
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
(1) General Overview
Pursuant to the Transfer Agreement, on February 7, 1994, the Company
transferred substantially all of its assets, subject to certain liabilities,
to the Partnership in exchange for a 50% interest, through its subsidiary in
the Partnership. The Partnership was formed with Engelhard, which, through its
subsidiary also owns a 50% interest in the Partnership, and has an option to
purchase the Company's 50% interest upon certain terms and conditions.
Accordingly, the desiccant air conditioning business that was conducted by ICC
prior to the formation of the Partnership is now being conducted by the
Partnership, and ICC has become principally a holding company. Further,
substantially all of the employees of ICC have become employees of the
Partnership and the leases for the space occupied by, and certain other
obligations of, ICC have been assumed by the Partnership.
After the consummation of the Transfer Agreement, the remaining assets of the
Company, other than the investment in the Partnership, consisted of cash, a
note receivable from the Company's Chairman and assets related to the
cogeneration line of business, including accounts receivable, inventory,
property and equipment, and other assets. These assets have been evaluated for
impairment and are carried at their net realizable value. Revenues following
consummation of the Transfer Agreement consist of sales of remaining spare
parts related to the cogeneration line of business. The cogeneration line of
business was not part of the Transfer Agreement because Engelhard was not
interested in the activities of the cogeneration business.
Although ICC is not permitted to engage directly or indirectly in any
activities which would conflict with the Partnership Business as long as the
Partnership is in effect, ICC is not precluded from engaging in other
activities. Although ICC 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.
(2) Review of Losses from Operations
As described above, upon formation of the Partnership and the transfer of
substantially all of the Company's assets to the Partnership, the Company
became principally a holding company. Since formation of the Partnership, the
Company's sole activities have related to it's limited cogeneration operations
and the Company currently is not engaged in any activities that would generate
any significant revenues, although it does have continuing limited expenses.
See "Results of Operations- General Overview" and "Liquidity and Capital
Resources."
The Company's net loss for the six months ended June 30, 1995 was $2,561,561
compared with the net loss of $775,696 for the same period in 1994. The
Company's net loss for the three months ended June 30, 1995 was $1,403,160
compared with the net loss of $330,146 for the same period in 1994. This
increase in the loss is attributable to the Company's equity interest in the
Partnership's losses of $2,073,488 and $1,073,505 for the six and three
months ended June 30, 1995 as compared to none recognized for the same period
ended in 1994. The Partnership's losses are attributable to insufficient
revenues to cover operating expenses. In May 1995, the Company guaranteed 50%
of the Partnership's indebtedness associated with the industrial development
revenue bonds; as a result, the continued losses of the Partnership have
resulted in the Investment being recorded as a liability on the balance sheet.
At February 7, 1994, date of formation, the Company's investment in the
Partnership was approximately $0 and no losses of the Partnership were
recognized for the second quarter ended 1994.
10
<PAGE> 11
The Company's general and administrative expenses increased $81,755 or 24% for
the three month period ended June 30, 1995 compared to the same period in 1994
primarily as the result of increased payroll expenses and investor relations
consulting expenses. The Company's general and administrative expenses
increased $196,316 or 40% for the six month period ended June 30, 1995 compared
to the same period in 1994 primarily as the result of increased payroll
expenses, investor relations consulting expenses and non-recurring
reimbursement of expenses of $250,000 under the joint development program
recorded during 1994. The Company provided $30,000 for the three and six months
ended June 30, 1995 for services rendered in 1993 by an investor relations
vendor. Pursuant to an agreement with the vendor, the obligation was satisfied
by the issuance of 20,000 shares of common stock. The Company's expenses
related to marketing, engineering and development decreased or was eliminated
in 1995 as compared to 1994 primarily as a result of the transfer of
substantially all operations to the Partnership on February 7, 1994.
Net loss per share of common stock was $.24 for the six month period ended June
31, 1995, compared with $.09 per share for the same period of 1994.
Liquidity and Capital Resources
General Overview.
The independent accountants report on the audit of the Company's 1994 financial
statements includes an explanatory paragraph regarding substantial doubts about
the Company's ability to continue as a going concern. The Company's financial
statements have been prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. The Company has suffered recurring losses accumulating to
$29,783,907 as of June 30, 1995. The Company's continuation as a going concern
is dependent upon its ability to: (i) generate sufficient cash flows to meet
its obligations on a timely basis, (ii) obtain additional financing or
refinancing as may be required and (iii) ultimately, attain profitable
operations and positive cash flow from its operations and its investment in the
Partnership.
In response to the aforementioned conditions, (i) the Company raised additional
equity in 1994 as discussed below and (ii) the Company entered into the
Transfer Agreement with Engelhard which was consummated and the Partnership was
formed on February 7, 1994. The formation of the Partnership has substantially
reduced the Company's level of operations and has provided, principally because
of the financial support by Engelhard Corporation, much needed capital to fund
operations in connection with the desiccant air conditioning business now being
conducted by the Partnership. The independent accountants report on the audit
of the Partnership's 1994 financial statements also includes an explanatory
paragraph regarding substantial doubts about the Partnership's ability to
continue as a going concern. The Partnership's continuation as a going concern
will remain dependent upon its ability to: (i) generate sufficient cash flows
to meet its obligations on a timely basis, (ii) obtain additional financing or
refinancing as may be required and (iii) ultimately, attain profitable
operations and positive cash flow from operations.
Although the Company is currently considering financing arrangements, does not
have any firm commitments, understandings or agreements for such additional
capital and no assurance can be made that capital will be obtained on a timely
basis.
11
<PAGE> 12
Management believes that the Company currently has sufficient resources to
support its operations until at least June 1996. Management believes the
Partnership will require additional capital contributions during 1995 of which
the Company's share is estimated to be approximately $2 million in cash. The
additional capital needs of the Partnership during 1995 are expected to be
satisfied primarily through proceeds from the collection of its note receivable
from issuance of Common Stock. The Company is not aware of any additional
capital contribution requirements of the Partnership other than identified
above; however, there can be no assurance that additional capital contributions
will not be made. To the extent capital contributions are required the Company
would expect to satisfy the requirements by seeking equity financing. The
Company's ability to successfully obtain equity financing in the future is
dependent in part on market conditions and the performance of the Partnership.
There can be no assurance that the Company will be able to obtain equity
financing in the future.
In the second quarter of 1995, the Company received cash proceeds of
approximately $308,000 from the issuance of common stock through the exercise
of stock options. In the first quarter of 1995, the Company received cash
proceeds of approximately $1.5 million from the issuance of common stock
through private placements and the exercise of stock options. Offering
expenses of the private placement are estimated to amount to $120,000 at June
30, 1995. The Company's cash balance at June 30, 1995 was $1,179,618.
In December 1994, the general partners each loaned $4,000,000 to the
Partnership in connection with the acquisition of the real property and
substantially all other assets of an existing manufacturing facility located in
Miami, Florida. In May 1995, each general partner was repaid $1,500,000 of the
aforementioned loan, of which the remaining amount, $2,500,000 for each general
partner, was converted into an investment into the Partnership. In April 1995
the Partnership obtained financing from the issuance of industrial development
revenue bonds up to an aggregate of $8.5 million. The proceeds of which were
utilized to repay a portion of the bridge financing provided by the general
partners and provide for improvements and capital equipment at the Miami
facility. In May 1995, the Company guaranteed 50% of the Partnership's
indebtedness associated with the industrial development revenue bonds; as a
result, the continued losses of the Partnership have resulted in the Investment
being shown as a liability on the balance sheet. The Company has established an
irrevocable letter of credit for $2.5 million to support its portion of the
guarantee. The Company's letter of credit is collaterialized by a certificate
of deposit of $2.5 million.
On March 31, 1995, pursuant to a private placement, the Company issued 300,000
shares of Common Stock for gross proceeds of $3,300,000. At closing cash of
$1,100,000 was received along with a $2,200,000 promissory note. The promissory
note is payable on the earlier of one year or forty-five days after the date on
which a registration statement covering the 300,000 shares goes effective. The
promissory note is collateralized by the pledge of 200,000 shares of the Common
Stock purchased in such transaction. The Company granted warrants to purchase
375,000 shares of Common Stock at $9 per share to the placement agents in
connection with the private placement.
The Company received proceeds of approximately $308,000 from the exercise of
stock options to purchase approximately 130,000 shares of Common Stock granted
under its option plans for the three month period ended June 30, 1995. The
Company received proceeds of approximately $750,000 from the exercise of stock
options to purchase approximately 318,000 shares of Common Stock granted under
its option plans for the six month period ended June 30, 1995.
The Company had negative cash flow from operating activities of $662,267 for
the six months ended June 30, 1995. The reason for the operating deficit was
primarily from the increase in advances to the Partnership and continued
administrative costs.
12
<PAGE> 13
Review of Working Capital
As of June 30, 1995, ICC had $1,559,348 in total current assets and $307,665
in current liabilities, resulting in working capital of $1,251,683. The
Company's cash position at June 30, 1995 was $1,179,618. The Company's expenses
will most likely continue to be higher than any revenues from limited
operations for 1995 and perhaps beyond. The Company believes that the equity
capital raised described above, together with limited negative cash flow from
operations, will be sufficient to meet its working capital requirements for the
immediate foreseeable future.
ICC has not declared any dividends and does not expect to declare 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
ICC's earnings, capital requirements and financial condition. In general,
payment of dividends to holders of Common Stock is restricted by requirements
that all accumulated dividends due to all series of Preferred Stock be fully
paid prior to the distribution of any dividends to the holders of Common Stock.
13
<PAGE> 14
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
No legal proceedings by, or against, the Company were
initiated in the quarter ended March 31, 1995.
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
The last Annual Meeting of Stockholders of ICC was held June
1, 1995. The record date for the meeting was April 3, 1995.
At such meeting, the holders of Common Stock, voting as a
single class, elected a Board of Directors for the Company
consisting of the following six persons: Irwin L. Gross; Mark
S Hauser; Stephen Schachman; William A. Wilson; Andrew L.
Shapiro and Albert Resnick. These individuals will serve on
the Board of Directors until the next annual meeting of
stockholders or until their respective successors have been
duly elected and qualified.
The votes were cast as follows for the election of Directors:
<TABLE>
<CAPTION>
NAME FOR WITHHELD
---- --- --------
<S> <C> <C>
Irwin L. Gross 15,603,445 189,779
Mark S. Hauser 15,607,255 185,969
Albert Resnick 15,603,505 189,719
Stephen Schachman 15,590,475 202,749
Andrew L. Shapiro 15,605,975 187,249
William A. Wilson 15,607,505 185,719
</TABLE>
The stockholders also ratified the selection of the firm of
Coopers & Lybrand LLP to be the Company's auditors for 1995.
There were 15,652,429 votes in favor of the selection, 46,865
votes against, and 93,930 in abstention.
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: August 11, 1995 BY: /s/ Irwin L. Gross
-------------------- ------------------------
Irwin L. Gross, Chairman
and President
DATE: August 11, 1995 BY: /s/Manfred Hanuschek
---------------------- --------------------
Manfred Hanuschek
Chief Financial Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,179,618
<SECURITIES> 0
<RECEIVABLES> 353,438
<ALLOWANCES> 0
<INVENTORY> 11,000
<CURRENT-ASSETS> 1,559,348
<PP&E> 4,770
<DEPRECIATION> 413
<TOTAL-ASSETS> 4,063,705
<CURRENT-LIABILITIES> 307,665
<BONDS> 0
<COMMON> 129,267
0
95
<OTHER-SE> 1,042,137
<TOTAL-LIABILITY-AND-EQUITY> 4,063,705
<SALES> 6,500
<TOTAL-REVENUES> 6,500
<CGS> 5,961
<TOTAL-COSTS> 5,961
<OTHER-EXPENSES> 683,485
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,188
<INCOME-PRETAX> (488,073)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,073,488)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,561,561)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> (.24)
</TABLE>
