Conformed Copy
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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, 1996, 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.
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(Exact name of registrant as specified in its charter)
DELAWARE 23-2368845
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
441 North 5th Street, Suite 102
Philadelphia, Pennsylvania 19123
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(Address of principal executive offices) (Zip Code)
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
21,254,554 shares outstanding as of August 8, 1996.
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<PAGE>
INDEX TO FORM 10-Q REPORT
PART I. FINANCIAL INFORMATION PAGE NO.
--------
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at June 30, 1996 and
December 31, 1995 3
Consolidated Statements of Operations - Three
months and six months ended June 30, 1996 and 1995 4
Consolidated Condensed Statements of Cash Flows -
Six months ended June 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 9
PART II OTHER INFORMATION
Item 1. Legal proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
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<PAGE>
Item 1. Financial Statements (Unaudited)
ICC TECHNOLOGIES, INC
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 11,840,422 $ 1,573,475
Receivables -
Employees 28,667 28,667
Engelhard/ICC 10,906 160,973
Prepaid expenses and other 30,847 530,131
------------ ------------
Total current assets 11,910,842 2,293,246
RESTRICTED CASH 2,500,000 2,500,000
PROPERTY AND EQUIPMENT, net 2,385 3,180
------------ ------------
Total assets $ 14,413,227 $ 4,796,426
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 85,229 $ 315,449
Current portion of long-term debt 0 150,000
------------ ------------
Total current liabilities 85,229 465,449
------------ ------------
LOSSES OF ENGELHARD/ICC IN EXCESS OF INVESTMENTS 893,153 2,797,165
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value -
Series F, authorized, issued and outstanding
0 shares at June 30, 1996 and 135 shares at
December 31, 1995 (liquidation value $256,270
at December 31, 1995) 0 1
Series G Convertible, authorized, issued and outstanding
0 shares at June 30, 1996 and 135 shares at December 31,
1995 (liquidation value $664,400 at December 31, 1995) 0 4
Series H Convertible, authorized, issued and outstanding
0 shares at June 30, 1996 and 1,500 shares at December 31, 1995 0 15
Series I, authorized, issued and outstanding 0 shares
at June 30, 1996 and 500 shares at December 31, 1995 0 5
Series J, authorized, issued and outstanding 0 shares
at June 30, 1996 and 225 shares at December 31, 1995 0 2
Common stock, $.01 par value, authorized 50,000,000 shares,
issued 21,254,551 shares at June 30, 1996 and 14,692,193
shares at December 31, 1995 212,546 146,923
Additional paid-in capital 50,538,789 35,104,011
Accumulated deficit (37,145,060) (33,545,719)
Less: Treasury common stock, at cost, 66,227 shares (171,430) (171,430)
------------ ------------
Total stockholders' equity 13,434,845 1,533,812
------------ ------------
Total liabilities and stockholders' equity $ 14,413,227 $ 4,796,426
============ ============
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
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<PAGE>
ICC TECHNOLOGIES, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------------------- -------------------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES $ 0 $ 0 $ 0 $ 6,500
COST OF GOODS SOLD 0 0 0 5,961
------------ ------------ ------------ ------------
Gross Profit 0 0 0 539
------------ ------------ ------------ ------------
OPERATING EXPENSES:
General and administrative 440,982 419,237 812,243 683,485
------------ ------------ ------------ ------------
Total operating costs 440,982 419,237 812,243 683,485
------------ ------------ ------------ ------------
Loss from operations (440,982) (419,237) (812,243) (682,946)
INTEREST:
Interest income 225,859 93,707 308,890 203,061
Interest expense on stockholders' loans 0 (4,125) 0 (8,188)
------------ ------------ ------------ ------------
225,859 89,582 308,890 194,873
------------ ------------ ------------ ------------
EQUITY INTEREST IN NET LOSS OF ENGELHARD/ICC (1,498,334) (1,073,505) (3,095,988) (2,073,488)
------------ ------------ ------------ ------------
NET LOSS (1,713,457) (1,403,160) (3,599,341) (2,561,561)
CUMULATIVE PREFERRED STOCK
DIVIDEND REQUIREMENTS 0 (456,774) (49,655) (508,649)
------------ ------------ ------------ ------------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $ (1,713,457) $ (1,859,934) $ (3,648,996) $ (3,070,210)
============ ============ ============ ============
NET LOSS PER COMMON SHARE $ (0.08) $ (0.15) $ (0.19) $ (0.24)
============ ============ ============ ============
WEIGHTED AVERAGE COMMON SHARES 21,021,933 12,749,218 19,445,297 12,540,386
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
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<PAGE>
ICC TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months ended June 30,
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (3,599,341) $ (2,561,561)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 795 413
Equity interest in net loss of Engelhard/ICC 3,095,988 2,073,488
(Increase) decrease in:
Receivables 150,067 (200,676)
Inventories 0 5,960
Prepaid expenses and other 107,223 49,918
Increase (decrease) in:
Accounts payable and accrued expenses (230,220) (29,809)
------------ ------------
Net cash used in operating activities (475,488) (662,267)
------------ ------------
Cash Flows from Investing Activities:
Capital contributions to Engelhard/ICC (5,000,000) 0
Purchase of restricted certificate of deposit 0 (2,500,000)
Repayments of loans from Engelhard/ICC 0 1,500,000
Purchases of property and equipment, net 0 (4,770)
------------ ------------
Net cash used in investing activities (5,000,000) (1,004,770)
------------ ------------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock and warrants, net 16,287,045 1,732,320
Cash dividend on Preferred Stock (394,610) 0
Repayments of borrowings from stockholder (150,000) 0
------------ ------------
Net cash provided by financing activities 15,742,435 1,732,320
------------ ------------
Net increase in cash and cash equivalents 10,266,947 65,283
Cash and Cash Equivalents, Beginning of Period 1,573,475 1,114,335
------------ ------------
Cash and Cash Equivalents, End of Period $ 11,840,422 $ 1,179,618
============ ============
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
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<PAGE>
ICC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 1996
(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, 1995 included in the Company's
Annual Report on Form 10-K for the year then ended. Results of operations
for the three and six months ended June 30, 1996 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.
ICC through its joint venture Engelhard/ICC ("the Partnership") with
Engelhard Corporation ("Engelhard"), designs, manufactures and markets
innovative climate control systems to supplement or replace conventional
air conditioning systems. The Partnership's climate control systems are
based on proprietary desiccant technology initially developed by the
Company, licensed honeycomb rotor technology and Engelhard's patented
titanium silicate desiccant, ETS(TM). The Partnership's climate control
systems are designed to address indoor air quality, energy and
environmental concerns and regulations currently affecting the air
conditioning market.
The Partnership was formed on February 7, 1994 pursuant to the terms and
conditions under the Joint Venture Asset Transfer Agreement ("Transfer
Agreement") whereby the Partnership succeeded to the desiccant air
conditioning business conducted by ICC prior to the formation of the
Partnership. Since the formation of the Partnership, the Company has
become principally a holding company whose activities have related
primarily to its participation in the management of the Partnership in
which it owns a 50% interest. The Company is not permitted to engage
directly or indirectly in any activities which would conflict with the
Partnership's business as long as the Partnership is in effect, but the
Company is not precluded from engaging in other activities. The Company
currently does not have any plans to engage in other activities and,
therefore, is not expected to generate any significant revenues, although
it will continue to incur general and administrative expenses.
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 the Partnership have been
insufficient to cover costs of operations for the three and six months
ended June 30, 1996. The Company has incurred cumulative losses since
inception of $37,145,060 and $33,545,719 through June 30, 1996 and
December 31, 1995, respectively. In order to continue operations, the
Company has had to raise additional capital to offset cash utilized 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
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<PAGE>
flows from its 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.
The cash utilized in the Company's operating and investing activities
during the three and six months ended June 30, 1996 was financed primarily
through proceeds from the issuance of Common Stock and exercise of stock
options and warrants. Management believes the Partnership will require
additional capital contributions during 1996. To the extent the Company
requires additional funds to continue its operations or the Partnership
requires capital contributions in excess of existing available funds, the
Company would expect to satisfy such 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
would be able to obtain equity financing in the future.
(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 Six months
June 30, June 30, ended June 30, ended June 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Results of operations:
Revenues $ 2,720,649 $ 3,373,964 $ 4,796,748 $ 5,161,966
Cost of goods sold 3,326,514 3,212,368 6,230,247 4,892,311
----------- ----------- ----------- -----------
Gross profit (loss) (605,865) 161,596 (1,433,499) 269,655
Operating expenses:
Marketing 842,477 834,449 1,716,198 1,661,617
Engineering 304,991 200,397 583,846 414,277
Research and development 242,940 274,167 539,925 640,579
General and administrative 890,435 756,811 1,704,399 1,236,607
----------- ----------- ----------- -----------
Loss from operations 2,886,708 1,904,228 5,977,867 3,683,425
Interest expense 109,960 242,783 214,109 463,551
----------- ----------- ----------- -----------
Net loss $ 2,996,668 $ 2,147,011 $ 6,191,976 $ 4,146,976
=========== =========== =========== ===========
</TABLE>
As of As of
Balance sheet information: June 30, 1996 December 31, 1995
------------- -----------------
Cash $ 1,740,989 $ 346,480
Receivables 3,293,791 2,057,420
Inventory 4,562,316 3,385,125
Other current assets 156,293 158,939
Property, plant and equipment 8,149,320 8,263,642
Cash held in escrow 746,040 865,744
Other noncurrent assets 1,825,003 1,802,155
----------- -----------
Total assets $20,473,752 $16,879,505
=========== ===========
Current liabilities $ 1,331,457 $ 1,519,394
Revolving credit line 2,750,000 2,750,000
Long term debt 8,675,915 8,701,755
Partners' capital 7,716,380 3,908,356
----------- -----------
Total liabilities and capital $20,473,752 $16,879,505
=========== ===========
-7-
<PAGE>
The Company's investment in the Partnership is owned by a wholly-owned
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. The Company's proportionate share
of losses in the Partnership are $1,498,334 and $1,073,505 for the three
months ended June 30, 1996 and 1995, respectively and $3,095,988 and
$2,073,488 for the six months ended June 30, 1996 and 1995, respectively.
The Partnership has incurred cumulative losses of approximately $22.4
million since inception through June 30, 1996. The Company's share of the
cumulative losses have resulted in the recognition of losses in excess of
the Company's investment in the amount of $893,153 and $2,797,165 as of
June 30, 1996 and December 31, 1995, respectively. The Company and
Engelhard each made additional capital contributions of $3 million to the
Partnership during the three months ended June 30, 1996; aggregating to $5
million of capital contributions made by each of the Company and Engelhard
during the six months ended June 30, 1996.
Receivables from the Partnership were $10,906 and $160,973 at June 30,
1996 and December 31, 1995, respectively. The Company and Engelhard are
guarantors of the Partnership's long term debt which totals approximately
$8.7 million as of June 30, 1996.
(4) STOCK TRANSACTIONS:
Equity Investments
In February 1996, the Company issued 2,500,000 shares of Common Stock in a
secondary offering at $7 per share less underwriting discounts and
commissions of $.49 per share. Proceeds of $16,275,000 were offset by
costs of approximately $750,000 incurred in the offering. In connection
with the offering, all outstanding Preferred Stock was converted into
3,609,696 shares of Common Stock or redeemed in cash for $981,270. In
addition, accrued dividends on the Preferred Stock amounting to
approximately $1,044,000 were declared and paid in cash, except for
$649,396 of such dividends associated with the Series G Preferred Stock
which were paid in the form of 162,349 shares of Common Stock in
accordance with the original terms of such series. As a result of such
conversion and redemption of Preferred Stock, there are currently no
shares of Preferred Stock outstanding. The Company plans to use the
remaining net proceeds from the offering to: (i) fund its half of the
estimated future financing requirements of the Partnership and (ii) to
fund the Company's working capital requirements. In April 1996, the
underwriters of the secondary offering exercised their overallotment
option and purchased 186,813 shares of Common Stock for proceeds of
approximately $1.2 million after underwriting discounts and commissions.
On March 31, 1995, pursuant to a private placement, the Company sold
300,000 shares of Common Stock for net proceeds of approximately
$3,000,000. 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 $126,000 and $308,000 from
the exercise of stock options and warrants to purchase approximately
67,000 and 130,000 shares of Common Stock in the three month period ended
June 30, 1996 and 1995, respectively. The Company received proceeds of
approximately $190,000 and $750,000 from the exercise of stock options and
warrants to purchase approximately 103,500 and 318,000 shares of Common
Stock in the six month period ended June 30, 1996 and 1995, respectively.
-8-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
The Company, through the Partnership, designs, manufactures and markets
innovative climate control systems to supplement or replace conventional air
conditioning systems. The Partnership's climate control systems are based on
proprietary desiccant technology initially developed by the Company, a licensed
honeycomb rotor technology and Engelhard's patented titanium silicate desiccant,
ETS(TM).
Pursuant to the formation of the Partnership on February 7, 1994, the Company
transferred its assets related to its desiccant climate control business,
subject to certain liabilities, to the Partnership in exchange for a 50%
interest in the Partnership through its wholly-owned subsidiary, ICC Desiccant
Technologies, Inc. Engelhard, in exchange for a 50% interest in the Partnership,
contributed capital to the Partnership, entered into a supply agreement to sell
ETS(TM) to the Partnership and entered into a license agreement granting the
Partnership an exclusive royalty-free license to use ETS(TM) in the
Partnership's business, including heating, ventilation and air conditioning. The
desiccant climate control business conducted by the Company prior to the
formation of the Partnership is now being conducted by the Partnership, and the
Company has become principally a holding company. Further, substantially all of
the employees of the Company have become employees of the Partnership and the
leases for the space occupied by, and certain other obligations of, the Company
have been assumed by the Partnership.
Since the formation of the Partnership, the Company's activities have related
primarily to its participation in the management of the Partnership in which it
owns a 50% interest. The Company is not permitted to engage directly or
indirectly in any activities which would conflict with the Partnership's
business as long as the Partnership is in effect, but the Company is not
precluded from engaging in other activities. The Company currently does not have
any plans to engage in other activities and, therefore, is not expected to
generate any significant revenues, although it will continue to incur general
and administrative expenses.
The Company accounts for its interest in the Partnership under the equity method
of accounting for investments. Although the Company has no obligation to
provide additional financing to the Partnership, because the Company has, and
expects to continue to fund its share of the Partnership's activities, the
Company recognizes its share of the losses of the Partnership.
Results of Operations
As described above, since the formation of the Partnership, the Company's sole
activities have related to its participation in the management of the
Partnership. During the six months ended June 30, 1996, the Company did not
engage in any other activities nor did it generate any revenues, compared to
$6,500 of revenues for the same period in 1995 from the sale of spare parts
related to cogeneration equipment. The Company did have continuous expenses
during the six month period ended June 30, 1996. The Company's general and
administrative expenses increased $21,745 to $440,982 for the three month period
ended June 30, 1996, compared to $419,237 for the same period in 1995, and
increased $128,758 to $812,243 for the six month period ended June 30, 1996,
compared to $683,485 for the same period in 1995. Such increase was primarily
the result of increased payroll and insurance costs.
The Company's net loss for the three months ended June 30, 1996 increased
$310,297 to $1,713,457, compared with the net loss of $1,403,160 for the same
period in 1995, and the Company's net loss for the six months ended June 30,
1996 increased $1,037,780 to $3,599,341, compared with the net loss of
$2,561,561 for the same period in 1995. This increase in the net loss is
primarily attributable to the Company's 50% share of the Partnership's increase
in loss of $849,657 and $2,045,000 for the three and six months ended June 30,
1996, as compared to the same periods in 1995. Net loss per share of Common
Stock decreased to $.08 for the three month period ended June 30, 1996, compared
with $.15 per share for the same period of 1995, and net loss per share of
Common Stock decreased to $.19 for the six month period ended June 30, 1996,
compared with $.24 per share for the same period of 1995. Such decrease was
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<PAGE>
primarily the result of the issuance of additional shares of Common Stock and
elimination of preferred stock dividend requirements in the six months ended
June 30, 1996.
The Partnership's revenue for the three and six months ended June 30, 1996 was
$2,720,649 and $4,796,748, respectively compared to $3,373,964 and $5,161,966,
respectively, for the same periods in 1995. The decrease in revenue was
attributable to a reduction in sales of substrate from the Miami plant to Ciba
Geigy pursuant to a supply contract and the receipt of a non-recurring licensing
fee of $500,000 from Chung-Hsin in 1995, the effects of which more than offset
the increase in equipment sales. Equipment sales for the six months ended June
30, 1996 were greater than equipment sales for the year ended December 31, 1995.
Equipment sales increased to approximately $1.4 and $2.6 million for the three
and six months ended June 30, 1996, respectively, compared to approximately $1
and $1.4 million for the three and six months ended June 30, 1995, respectively.
Sales of substrate decreased to approximately $1.3 and $2.2 million for the
three and six months ended June 30, 1996, respectively, compared to
approximately $1.8 and $3.3 million for the three and six months ended June 30,
1995, respectively. The Partnership recorded a gross loss of approximately
$606,000 and $1,433,000 for the three and six months ended June 30, 1996,
respectively, compared to a gross profit of approximately $162,000 and $270,000
for the same periods in 1995, respectively, due primarily to increases in
manufacturing costs of equipment, without a corresponding increase in equipment
sales.
The Partnership's operating expenses increased to $2,280,843 and $4,544,368 for
the three and six months ended June 30, 1996, respectively, compared to
$2,065,824 and $3,953,080 for the same periods in 1995, respectively, due
primarily to higher general and administrative and engineering costs. General
and administrative and engineering expenses have increased primarily as a result
of increased staff and related payroll costs. As a result of the gross loss and
increased operating expenses, the loss from operations increased to $2,886,708
and $5,977,867 for the three and six months ended June 30, 1996, respectively,
as compared to $1,904,228 and $3,683,425 for the same periods in 1995,
respectively.
The Partnership's net loss increased to $2,996,668 and $6,191,976 for the three
and six months ended June 30, 1996, respectively, compared to $2,147,011 and
$4,146,976 for the same period in 1995, respectively, due to the increase in the
loss from operations offset by a decrease in net interest expense due to reduced
borrowings.
The Partnership's backlog for equipment amounted to approximately $3 million at
July 26, 1996.
Liquidity and Capital Resources
The Company's cash and cash equivalents increased $10,266,947 to $11,840,422 as
of June 30, 1996, as compared to $1,573,475 as of December 31, 1995. The
increase in cash and cash equivalents is primarily due to the public sale of
2,500,000 shares of Common Stock. In February 1996, the Company issued 2,500,000
shares in a secondary offering at $7 per share less underwriting discounts and
commissions of $.49 per share. Proceeds of $16,275,000 were offset by costs of
approximately $750,000 incurred in connection with the offering. In connection
with the offering, all outstanding Preferred Stock was converted into 3,609,696
shares of Common Stock or redeemed in cash for $981,270. In addition, accrued
dividends on the Preferred Stock amounting to approximately $1,044,000 were
declared and paid in cash, except for $649,396 of such dividends associated with
the Series G Preferred Stock which were paid in the form of 162,349 shares of
Common Stock in accordance with the original terms of such series. As a result
of such conversion and redemption of Preferred Stock, there are currently no
shares of Preferred Stock outstanding. The Company plans to use the remaining
net proceeds from the offering to: (i) fund its half of the estimated future
financing requirements of the Partnership and (ii) to fund the Company's working
capital requirements. In April 1996, the underwriters of the secondary offering
exercised their overallotment option and purchased 186,813 of Common Stock for
proceeds of approximately $1.2 million after underwriting discounts and
commissions.
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<PAGE>
Net cash used in operating activities by the Company was $475,488 for the six
months ended June 30, 1996 due to the net loss (before non-cash charges and the
Company's 50% share of the net loss of the Partnership) of $502,558 and net
working capital provided of $27,070. The Company and Engelhard each made
additional capital contributions of $5,000,000 to the Partnership in the six
months ended June 30, 1996. Net cash used in operating activities and for
investments in the Partnership by the Company were financed by proceeds from the
issuance of Common Stock and exercise of stock options and warrants.
The Partnership's cash and cash equivalents increased to $1,740,989 at June 30,
1996 from $346,480 at December 31, 1995. The increase was due primarily to
capital contributions of $5 million by each the Company and Engelhard, offset by
cash used in operating activities of approximately $3 million (resulting from
the Partnership's net losses and working capital requirements) and cash used in
investing activities of approximately $600,000. The Partnership is expected to
require additional financing to support current operations and anticipated
future expansion, and will be dependent on the Company and Engelhard to provide
such additional financing. There can be no assurance that the Company or
Engelhard will be willing, or able, to provide such additional financing.
Management believes the Partnership will continue to require additional capital
contributions during 1996 and the Company plans to use the net proceeds from the
offering of 2.5 million shares completed in February 1996 to fund its portion of
such required capital contributions. To the extent Partnership capital
contributions in excess of the net proceeds from such offering are required or
if the Company requires additional funds to continue its operations, the Company
would expect to satisfy such 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 April 1995, the Partnership obtained financing from the issuance of $8.5
million in industrial development revenue bonds. The Company guaranteed 50% of
the Partnership's indebtedness associated with the industrial development bonds
and established an irrevocable letter of credit for $2.5 million to support its
portion of the guarantee, which is collateralized by a $2.5 million certificate
of deposit.
The Company received proceeds of approximately $126,000 and $308,000 from the
exercise of stock options and warrants to purchase approximately 67,000 and
130,000 shares of Common Stock in the three month period ended June 30, 1996 and
1995, respectively. The Company received proceeds of approximately $190,000 and
$750,000 from the exercise of stock options and warrants to purchase
approximately 103,500 and 318,000 shares of Common Stock in the six month period
ended June 30, 1996 and 1995, respectively.
ICC has not declared any dividends on Common Stock 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.
The independent accountants report on the audit of the Company's 1995 financial
statements includes an explanatory paragraph regarding substantial doubts about
the Company's ability to continue as a going concern. The Company's 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 the Partnership have been insufficient to cover costs of
operations for the six months ended June 30, 1996. The Company has suffered
recurring losses accumulating to approximately $37 million as of June 30, 1996.
In order to continue operations, the Company has had to raise additional capital
to offset cash utilized in operating and investing activities. 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 as may be required and (iii) ultimately, attain profitable
operations and positive cash flow from its 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.
-11-
<PAGE>
The independent accountants report on the audit of the Partnership's 1995
financial statements also includes an explanatory paragraph regarding
substantial doubts about the Partnership's ability to continue as a going
concern. The Partnership has incurred cumulative losses of approximately $22
million since inception through June 30, 1996. 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.
-12-
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
No legal proceedings by, or against, the Company were initiated in
the quarter ended June 30, 1996.
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 6, 1996.
The record date for the meeting was April 9, 1996. 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:
Charles Condy; 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:
Name For Withheld
---- --- --------
Charles Condy 19,960,088 208,120
Irwin L. Gross 19,960,746 207,462
Mark S. Hauser 19,959,688 208,520
Albert Resnick 19,960,988 207,220
Stephen Schachman 19,960,788 207,420
Andrew L. Shapiro 19,957,788 210,420
William A. Wilson 19,959,488 208,720
The stockholders also ratified the selection of the firm of Coopers &
Lybrand LLP to be the Company's auditors for 1996. There were
19,969,947 votes in favor of the selection, 73,452 votes against, and
124,809 in abstention.
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: 27 Financial Data Schedule
(b) The following reports have been filed with the Securities and Exchange
Commission.
None
-13-
<PAGE>
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 8, 1996 BY: /s/ Irwin L. Gross
------------------------
Irwin L. Gross, Chairman
and President
DATE: August 8, 1996 BY: /s/ Manfred Hanuschek
------------------------
Manfred Hanuschek
Chief Financial Officer
-14-
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