ICC TECHNOLOGIES INC, S-2/A, 1996-01-11

ICC TECHNOLOGIES INC
S-2/A, 1996-01-11
AIR-COND & WARM AIR HEATG EQUIP & COMM & INDL REFRIG EQUIP

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 11, 1996

REGISTRATION NO. 33-80223

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------

AMENDMENT NO. 1
TO
FORM S-2

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

ICC TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 23-2368845
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

441 NORTH 5TH STREET, SUITE 102
PHILADELPHIA, PENNSYLVANIA 19123
(215) 625-0700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

------------------------

RICHARD P. JAFFE, ESQUIRE
MESIROV GELMAN JAFFE CRAMER & JAMIESON
1735 MARKET STREET, 38TH FLOOR
PHILADELPHIA, PA 19103-7598
(215) 994-1046
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)

------------------------

Copy to:

RICHARD J. BUSIS, ESQUIRE
COZEN AND O'CONNOR
1900 MARKET STREET
PHILADELPHIA, PENNSYLVANIA 19103

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
------------------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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<PAGE>
CROSS REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY FORM S-2
FILED AS PART OF REGISTRATION STATEMENT

ITEM
NUMBER
IN
FORM S-2 ITEM CAPTION IN FORM S-2 CAPTION IN PROSPECTUS
- --------- -------------------------------------------------- --------------------------------------------------
<S> <C> <C>
1 Forepart of Registration Statement and
Outside Front Cover Page of
Prospectus...................................... Cover Page
2 Inside Front and Outside Back Cover Pages of
Prospectus...................................... Inside Front and Outside Back Cover Pages
3 Summary of Information, Risk Factors and Ratio of
Earnings to Fixed Charges....................... Prospectus Summary; Risk Factors; Inapplicable
4 Use of Proceeds................................... Use of Proceeds
5 Determination of Offering Price................... Cover Page
6 Dilution.......................................... Dilution
7 Selling Security Holders.......................... Inapplicable
8 Plan of Distribution.............................. Underwriting; Notice to Canadian Residents
9 Description of Securities to be Registered........ Description of Capital Stock
10 Interests of Named Experts and Counsel............ Inapplicable
11 Information with Respect to Registrant............ Prospectus Summary; Risk Factors; Price Range of
Common Stock; Dividend Policy; Dilution;
Capitalization; Selected Consolidated Financial
Data of the Company; Management's Discussion and
Analysis of Financial Condition and Results of
Operations; Business; Management; Principal
Stockholders; Certain Transactions; Description
of Capital Stock; Shares Eligible for Future
Sale; Incorporation of Certain Information by
Reference; Financial Statements
12 Incorporation of Certain Information by
Reference....................................... Incorporation of Certain Information by Reference
13 Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities..................................... Indemnification of Directors, Officers and
Controlling Persons
</TABLE>

<PAGE>

Information contained herein is subject to completion or amendment.
A registration statement relating to these securities has been filed
with the Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the time
the registration statement becomes effective. This Prospectus shall
not constitute an offer to sell or the solicitation of an offer to buy
nor shall there be any sale of these securities in any State in which
such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such State.

SUBJECT TO COMPLETION, DATED JANUARY 11, 1996

PROSPECTUS

2,500,000 SHARES

[ICC TECHNOLOGIES, INC. LOGO]

COMMON STOCK
------------------------

All of the 2,500,000 shares of Common Stock of ICC Technologies, Inc. (the
'Company') offered hereby are being sold by the Company. The Common Stock is
traded on the Nasdaq Small Cap Market under the symbol 'ICGN'; however, the
Company has applied for the listing of its Common Stock on the Nasdaq National
Market as of the effective date of this offering. On January 10, 1996, the
reported last sale price of the Common Stock, as reported by Nasdaq, was
$10.75. See 'Price Range of Common Stock.'

------------------------

THE COMMON STOCK OFFERED HEREBY IS SPECULATIVE AND INVOLVES A HIGH DEGREE
OF RISK. THE COMPANY HAS EXPERIENCED LOSSES SINCE INCEPTION. SEE 'RISK FACTORS'
COMMENCING ON PAGE 8 OF THIS PROSPECTUS.

------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share..................................................... $ $ $
Total(3)...................................................... $ $ $
</TABLE>

(1) See 'Underwriting' for a description of certain indemnification and other
arrangements with the several Underwriters.

(2) Before deducting estimated aggregate expenses for the offering of $395,000
payable by the Company.

(3) The Company has granted to the Underwriters an option, exercisable for 45
days from the date of this Prospectus, to purchase up to an additional
375,000 shares of Common Stock solely to cover over-allotments. If this
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ and $ , respectively. See 'Underwriting.'
------------------------

The shares of Common Stock are offered by the several Underwriters named
herein, subject to prior sale, when, as and if delivered to and accepted by them
and subject to certain other conditions, including the Underwriters' right to
reject orders in whole or in part. It is expected that delivery of the
certificates for the shares of Common Stock will be made against payment
therefor at the offices of Janney Montgomery Scott Inc. in Philadelphia,
Pennsylvania on or about , 1996.
------------------------

JANNEY MONTGOMERY SCOTT INC. GERARD KLAUER MATTISON & CO., LLC

The date of this Prospectus is , 1996
<PAGE>

IT'S NOT THE HEAT, IT'S THE HUMIDITY

The most effective way to deal with heat and humidity is to manage them
independently. Conventional refrigerant-based air conditioning equipment removes
moisture primarily as a by-product of the cooling process, sometimes requiring
cooling air below desired levels which wastes energy. Englehard/ICC's systems
employ innovative desiccant and honeycomb rotor technology to control humidity
independently of temperature.

The removal of humidity from outside air is often a significant challenge
for air conditioning systems. The following chart illustrates the number of
hours per month that the outdoor humidity and temperature exceed indoor air
temperature of 75 degrees Fahrenheit and 50 percent relative humidity in six
major cities around the world.

WASHINGTON

[Graph Described in Appendix A, No. 1]
Dehumidification 3854 Hours
Cooling 1974 Hours

NEW YORK

[Graph Described in Appendix A, No. 1]

Dehumidification 2566 Hours
Cooling 1280 Hours

HOUSTON

[Graph Described in Appendix A, No. 1]

Dehumidification 6110 Hours
Cooling 3393 Hours

TAMPA

[Graph Described in Appendix A, No. 1]

Dehumidification 7036 Hours
Cooling 4112 Hours

TAIPEI

[Graph Described in Appendix A, No. 1]

Dehumidification 7483 Hours
Cooling 3924 Hours

TOKYO

[Graph Described in Appendix A, No. 1]

Dehumidification 3496 Hours
Cooling 1333 Hours

Engineering Weather Data, Departments of Airforce Army and Navy -- July 1978

------------------------

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS, IF ANY, MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK ON NASDAQ IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT
OF 1934. SEE 'UNDERWRITING.'
<PAGE>

[PICTURE DESCRIBED IN APPENDIX A, NO. 2]
<PAGE>
DESICCANT COOLING

1. Recirculated or up to 100% fresh air is drawn into the unit by a fan and
pushed through a slowly turning desiccant rotor.

2. The desiccant rotor removes the majority of moisture from the air and in
the process warms the air.

3. The warm, dry air is driven through a heat exchange rotor that cools the
airstream.

4. Post-cooling options to further lower the process air temperature include
an evaporative cooler (which partially rehumidifies the air without using
any refrigerants) or a cooling coil. A hot water coil for winter heat is
standard in the DESI/AIR(Registered) and Desert Cool(Trademark) systems.

5. Outside air or building exhaust air is drawn into the regeneration
airstream.

6. An evaporative cooler saturates the regeneration airstream with water,
significantly lowering its temperature.

7. The cooled air is drawn through the heat exchange rotor, cooling
(regenerating) the heat exchange rotor and warming the regeneration air.

8. The regeneration airstream is further heated by a heating coil and is
drawn through the desiccant rotor to dry (regenerate) it.

9. A fan exhausts the regeneration airstream to the outside atmosphere.

10. Boiler in natural gas models.

<PAGE>

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'), 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, Suite 1400, Chicago, Illinois 60661 and
Seven 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.

This Prospectus constitutes part of a registration statement on Form S-2
(the 'Registration Statement') filed by the Company with the Commission under
the Securities Act of 1933, as amended (the 'Securities Act'). This Prospectus
omits certain of the information contained in the Registration Statement and the
exhibits thereto, in accordance with the rules and regulations of the
Commission. For further information concerning the Company and the Common Stock
offered hereby, reference is made to the Registration Statement and the exhibits
filed therewith, which may be inspected without charge at the office of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and copies of which
may be obtained from the Commission at prescribed rates.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The following documents filed by the Company with the Commission pursuant
to the Exchange Act are incorporated by reference into this Prospectus: (i) the
Company's 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 26, 1995 distributed to the Company's stockholders in connection
with the annual meeting of stockholders held on June 1, 1995; (ii) the Company's
Quarterly Report on Form 10-Q for the Quarter ended March 31, 1995; (iii) the
Company's Quarterly Report on Form 10-Q/A for the Quarter ended March 31, 1995;
(iv) the Company's Quarterly Report on Form 10-Q/A2 for the Quarter ended March
31, 1995; (v) the Company's Quarterly Report on Form 10-Q for the Quarter ended
June 30, 1995; (vi) the Company's Quarterly Report on Form 10-Q for the Quarter
ended September 30, 1995; and (vii) the Company's Current Report on Form 8-K/A
dated January 26, 1995 amending its Current Report on Form 8-K dated December 6,
1994.

Any statement contained in a document 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 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.

3
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and the notes thereto
appearing elsewhere in this Prospectus. Except as otherwise noted herein: (i)
ICC Technologies, Inc., a Delaware corporation, and its wholly-owned subsidiary,
ICC Desiccant Technologies, Inc., a Delaware corporation, are collectively
referred to herein as the 'Company'; and (ii) all information in this Prospectus
gives effect to the Preferred Stock Transactions (as hereinafter defined) and
assumes no exercise of the Underwriters' over-allotment option. Investors should
carefully consider the information set forth under the heading 'Risk Factors.'

THE COMPANY

The Company, 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,
called ETS(Trademark). 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 currently
markets its systems to certain targeted applications within the commercial air
conditioning market in North America and Asia-Pacific. Of the approximately $6
billion market for commercial air conditioning equipment in North America and
Asia-Pacific in 1994, the Company estimates that annual sales to these targeted
applications were approximately $2 billion. The worldwide commercial air
conditioning market is expected to grow to approximately $13 billion by the year
2000, and the Company expects the Partnership's systems to compete in a broader
segment of this market as awareness and acceptance of the Partnership's systems
grow and their initial cost declines.

Desiccant-based systems dehumidify air before cooling, making it easier and
more energy efficient to cool. A desiccant is a material that removes moisture
from air. The Partnership's systems circulate fresh or recirculated air through
a honeycomb rotor treated with ETS(Trademark) which removes much of the moisture
and in the process warms the air. The air then passes through a heat exchange
honeycomb rotor to cool the warm, dry air. The air can be cooled further by
partially rehumidifying it with an evaporative cooler or with a smaller cooling
coil than would be required by conventional air conditioning systems. On the
other side of the unit, recirculated air is used to cool the heat exchange rotor
and remove the moisture captured by the desiccant rotor. The Company believes
that the Partnership's indoor climate control systems provide the following
features and benefits:

o More Effective Control of Humidity -- The Partnership's systems are more
effective at controlling humidity than conventional, refrigerant-based
air conditioning systems which control humidity primarily as a by-product
of the cooling process when moisture condenses on the cooling coil. As a
result, in conditions where significant humidity reduction is desired,
conventional air conditioning systems must often cool air below desired
levels. Drier air is generally more comfortable for a building's
occupants and is more efficient to cool. Humidity control is also
important in a variety of commercial applications, such as supermarkets,
and in certain manufacturing processes.

o Improved Indoor Air Quality -- Ventilation standards recommended by the
American Society of Heating, Refrigeration and Air Conditioning Engineers
('ASHRAE') and incorporated into many state and local building codes
throughout the country for new building construction now require that as
much as 200-300% more fresh air be circulated into buildings compared to
prior ventilation standards to reduce indoor air pollutants associated
with 'Sick Building Syndrome.' The Partnership's climate control systems
are designed to process the humidity introduced by increased ventilation
and, accordingly, enable a building to meet or exceed these

4
<PAGE>

standards. In addition, lower humidity levels reduce airborne bacteria,
mold, mildew and fungi, another major source of indoor air quality
problems.

o Energy Efficient and Cost Effective -- Less humid air requires less
energy to cool than more humid air. By dehumidifying air before cooling,
the Partnership's systems, even with a post-cooling option, consume less
energy and are more cost effective to operate than conventional air
conditioning systems. As a supplement to conventional air conditioning,
by first dehumidifying the air, the Partnership's systems are designed to
improve the efficiency of existing conventional air conditioning.

o Versatile and Reliable -- The Partnership's systems are available in
natural gas, electric, steam or waste heat models and in several sizes
which process from 2,000 to 25,000 cubic feet of air per minute. The
ability to choose from a variety of energy sources allows customers to
select the most cost-effective energy source in their area at the time of
purchase. The systems are also expected to require less maintenance than
conventional equipment because of simplicity of design and fewer moving
parts.

o Environmentally Safer -- Conventional air conditioning systems utilize
refrigerants such as chlorofluorocarbons ('CFCs'),
hydrochlorofluorocarbons ('HCFCs') and hydro- fluorocarbons ('HFCs'),
which damage stratospheric ozone or contribute to global warming. Because
the Partnership's systems dehumidify the air before it is cooled by a
post-cooling option in the system or in conjunction with a conventional
air conditioning system, the cooling coil and compressor included as a
post-cooling option in the non-electric models are smaller, and in the
electric models generally are smaller, than would otherwise be required
in a conventional air conditioning system, thereby utilizing less
refrigerant.

o Year-round Performance -- The Partnership's natural gas systems provide
year-round indoor climate control. In hot, humid weather they supply
cool, dry air. In cool, 'clammy' weather they supply warm, dry air. In
cold weather the natural gas powered systems supply heat. The Partnership
is currently developing heating capability for its electric powered
systems.

The Company believes that the Partnership's climate control systems are
more efficient and economical to operate than other desiccant-based climate
control systems. The Partnership's honeycomb rotor technology, combined with
Engelhard's patented ETS(Trademark), more efficiently removes and then releases
moisture at lower temperatures than other desiccant-based systems.

The Partnership's strategy is to target specific applications within the
commercial air conditioning market in which humidity control, indoor air quality
and energy consumption are important health issues or a significant cost of
business. The Partnership has marketed its systems to supermarket chains,
schools, fast food restaurants, health care facilities, hotels, manufacturers,
department stores, theaters, and federal, state and local governments. To expand
its business in the United States, the Partnership plans to increase its sales
force, seek to acquire an existing air conditioning business, and may establish
joint ventures or license its technology with one or more major air conditioning
companies. Internationally, the Partnership's strategy is to continue to expand
in the rapidly growing and humid countries of Asia-Pacific and other similar
regions of the world where its systems offer the greatest advantages. Chung-Hsin
Electric and Machinery Manufacturing Corporation ('Chung-Hsin') in Taiwan,
Samsung Corporation ('Samsung') in South Korea and Nichimen Engine Sales Company
('Nichimen') in Japan have agreements or relationships with the Partnership to
manufacture or sell the Partnership's components or systems. The Partnership
plans to enter into joint ventures or licensing arrangements with one or more
additional companies internationally.

Through November 30, 1995, the Partnership and, prior to its formation, the
Company have sold 175 systems worldwide, including 93 systems which incorporate
both honeycomb rotors and ETS(Trademark). In the United States, customers
include the Shop Rite, Grand Union and Genuardi's supermarket chains, JCPenney
and Liz Claiborne. Internationally sales have been made in association with
Chung-Hsin in Taiwan, Samsung in South Korea and Nichimen in Japan. The
Partnership's natural gas systems have been awarded the 'Blue Star'
certification for safety and quality by the American Gas Association

5
<PAGE>

Laboratory. The systems are marketed and sold under the names
'DESI/AIR(Registered),' 'Desert Cool(Trademark)' and 'Desert Breeze(Trademark).'
The DESI/AIR(Registered) and Desert Cool(Trademark) systems are available in
natural gas, steam or waste heat models. The Desert Breeze(Trademark) systems
operate on electricity and utilize conventional compressors.

In connection with the formation of the Partnership, the Company granted
Engelhard options to acquire up to all of the Company's interest in the
Partnership, subject to acceleration upon default, at the rate of 25% per year
starting on December 31, 1997, based on 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 executive offices of the Company and the Partnership are located at 441
North Fifth Street, Suite 102, Philadelphia, Pennsylvania 19123. The Company's
telephone number is (215) 625-0700.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company............................... 2,500,000 shares
Common Stock to be outstanding after the offering................. 20,908,699 shares(1)

Use of proceeds................................................... To fund the Company's half of the aggregate
estimated funds needed to finance certain
Partnership activities and for working
capital of the Partnership; to redeem certain
shares of Preferred Stock of the Company and
to pay certain accrued Preferred Stock
dividends; to repay a note to a stockholder;
and the balance to be used for working
capital of the Company. See 'Use of
Proceeds.'

Nasdaq Symbol..................................................... ICGN
</TABLE>

- ------------------

(1) Gives effect to the Preferred Stock Transactions pursuant to which an
aggregate of 3,764,384 shares of Common Stock are to be issued. See 'Preferred
Stock Transactions.' Does not include outstanding options as of November 30,
1995 to purchase 2,901,885 shares of Common Stock pursuant to the Company's
stock option plans and outstanding warrants as of November 30, 1995 to purchase
1,465,000 shares of Common Stock.

6
<PAGE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
-------------------- -------------------------------
ICC TECHNOLOGIES, INC. (the Company) 1995 1994 1994 1993 1992
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................................ $ 7 $ 88 $ 88 $ 1,201 $ 957
Cost of goods sold...................................... 6 80 80 1,177 939
--------- --------- --------- --------- ---------
Gross profit............................................ 1 8 8 24 18
Operating expenses...................................... (1,027) (1,239) (1,735) (4,072) (2,563)
Other income (expenses)................................. 263 60 148 (10) (22)
Equity interest in net loss of Partnership(1)........... (3,394) -- (2,812) -- --
--------- --------- --------- --------- ---------
Net loss................................................ (4,157) (1,171) (4,391) (4,058) (2,567)
Preferred stock dividend requirements................... (215) (176) (228) (261) (242)
--------- --------- --------- --------- ---------
Net loss applicable to common stockholders.............. $ (4,372) $ (1,347) $ (4,619) $ (4,319) $ (2,809)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net loss per common share............................... $ (0.34) $ (0.12) $ (0.41) $ (0.51) $ (0.47)
Weighted average common shares.......................... 12,955 11,082 11,391 8,551 5,979
</TABLE>

SEPTEMBER 30, 1995
------------------------
PRO FORMA
AS
ACTUAL ADJUSTED(2)
--------- -------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash.................................................... $ 3,855 $ 27,606
Working capital......................................... 3,901 27,802
Total assets............................................ 6,738 30,489
Total debt.............................................. 150 --
Losses in Partnership in excess of investment........... 2,905 2,905
Stockholders' equity.................................... 3,503 27,404
</TABLE>

- ------------------

(1) The Company had no obligation or commitment to provide additional financing
to the Partnership during the period ended September 30, 1994 and the
Company's share of losses was not recognized.

(2) Adjusted to reflect the sale by the Company of 2,500,000 shares of Common
Stock offered hereby at an assumed offering price of $11 per share and the
application of the net proceeds therefrom, and pro forma adjustments to
reflect the Preferred Stock Transactions and the repayment of a note payable
to a stockholder.

PERIOD FROM PERIOD FROM
FEB. 7, 1994 FEB. 7, 1994
NINE MONTHS (DATE OF (DATE OF
ENDED FORMATION) FORMATION)
SEPT. 30, TO SEPT. 30, TO DEC. 31,
ENGELHARD/ICC (the Partnership) 1995 1994 1994
- ------------------------------------------------------------ ----------- --------------- ---------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................... $ 7,171 $ 997 $ 1,620
Cost of goods sold...................................... 7,175 877 1,592
----------- --------------- ---------------
Gross profit (loss)..................................... (4) 120 28
Operating expenses...................................... (6,201) (3,664) (5,728)
Other income (expenses)................................. (582) 102 75
----------- --------------- ---------------
Net loss................................................ $ (6,787) $ (3,442) $ (5,625)
----------- --------------- ---------------
----------- --------------- ---------------
</TABLE>

SEPT. 30,
1995
-----------
<S> <C>
BALANCE SHEET DATA:
Cash.................................................... $ 41
Working capital......................................... 1,518
Total assets............................................ 16,786
Total debt.............................................. 11,465
Partners' capital....................................... 3,693
</TABLE>

7
<PAGE>
RISK FACTORS

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 risk factors, in addition to the other
information set forth elsewhere in, and incorporated by reference into, this
Prospectus.

Management and Control of the Partnership. The Company and Engelhard each
own a 50% interest in the Partnership. The Partnership is managed by a
management committee ('Management Committee') comprised of two members, one
selected by each of the Company and Engelhard. Currently, the Management
Committee is comprised of Irwin L. Gross, Chairman and President of the Company,
and Robert J. Schaffhauser, Vice President-Technology and Corporate Development
of Engelhard. Accordingly, the Company does not control the Partnership and its
affairs and there is no assurance that the Company and Engelhard will agree on
the business strategy, operations or financing of the Partnership, which could
have an adverse effect on the Partnership's business. In addition, there is no
assurance that the net proceeds received by the Company from the sale of the
Common Stock offered hereby will be expended in the manner set forth under 'Use
of Proceeds.' Moreover, if Engelhard exercises a sufficient portion of its
option to acquire the Company's interest in the Partnership, or otherwise
increases its ownership, such that it owns more than 70% of the Partnership,
Engelhard will have the right to expand the Management Committee to three
members and to designate the third member of the Management Committee, thereby
effectively controlling the business of the Partnership. See 'Business -- The
Partnership.'

Mr. Gross may encounter conflicts of interest in connection with his
responsibilities as Chief Executive Officer and a member of the Management
Committee of the Partnership and as Chairman and President of the Company. It is
expected that Mr. Gross will attempt to resolve any such conflict of interest in
a manner consistent with his fiduciary duties to both the Partnership and the
Company.

History of Losses. Since its inception, the Company has suffered recurring
losses accumulating to approximately $31.4 million through September 30, 1995,
including the Company's reported share of losses sustained by the Partnership
through that date. From its formation through September 30, 1995, the
Partnership has incurred losses totalling approximately $12.4 million. While the
Company believes that the business strategy adopted by the Company and 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 operate
profitability in the near future, if ever. The reports of the independent
accountants on the Company's and Partnership's financial statements for the
fiscal year ended December 31, 1994 include explanatory paragraphs which refer
to conditions that raise substantial doubt about the Company's and Partnership's
ability to continue as a going concern. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations' and the financial
statements of the Company and the Partnership and notes thereto included
elsewhere herein.

Working Capital and Other Financing Requirements. At present, the Company
has no operations or source of funds other than borrowings or proceeds from the
issuance of equity securities. To date, the Partnership has incurred losses and,
therefore, not only has the Partnership been unable to generate sufficient cash
from operations to fund the Company's working capital requirements but it also
has required capital investments by the Company. If the Partnership were to
become profitable, the Company expects that all of such cash would be retained
to support and grow the Partnership's business for the foreseeable future. The
Company historically has met its financing needs primarily through the sale of
its capital stock. While the Company believes that it currently has sufficient
resources to support its operations for the foreseeable future, no assurance can
be given that it will not be required to obtain additional financing in the
future. If such additional financing were required, there can be no assurance
that additional financing will be available on acceptable terms or at all. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations.'

To date, the Partnership has incurred losses and has been unable to
generate sufficient cash from operations to fund its operations or expand its
business. Consequently, the Partnership has relied on the

8
<PAGE>

Company and Engelhard to fund its operations and expand its business. While the
Company believes that the net proceeds from the sale of the Common Stock offered
hereby will be sufficient to fund the Company's 50% share of the working capital
and capital investment requirements of the Partnership for the twelve-month
period following the date of the offering, no assurance can be given in that
regard, particularly if the Partnership were to acquire an air conditioning
company. Further, even if the net proceeds from this offering are sufficient for
such activities, it is anticipated that the Partnership will require additional
financing in the future, and there is no assurance that such additional
financing will be available to the Partnership on acceptable terms or that the
Company or Engelhard would be willing or able to provide such financing. While
neither the Company nor Engelhard is required to provide additional financing to
the Partnership under the terms of the Partnership Agreement, in the event
additional financing is required by the Partnership and the Company is unwilling
or unable to provide its share of such additional financing, additional funding
by Engelhard might have a dilutive effect on the Company's percentage ownership
of the Partnership. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations.'

Market Acceptance of the Partnership's Products. While the Company
believes there is a significant market for the Partnership's desiccant-based
climate control systems, through November 30, 1995, the Partnership had sold
only 93 units which incorporate the Partnership's honeycomb rotors and
Engelhard's ETS(Trademark) desiccant. The Partnership's systems are an emerging
technology in the air conditioning business, with uncertain demand and market
acceptance. The Company believes that the Partnership's systems are innovative,
efficient, cost effective supplements or alternatives to conventional air
conditioning systems in many applications and that no other desiccant cooling
systems operate as effectively or economically. Nevertheless, the Partnership
has only recently begun significant marketing activities relating to the
commercialization of its climate control systems and will need to expend
considerable efforts and resources to create awareness and acceptance of such
systems. There can be no assurance that the Partnership will be able to create
sufficient market acceptance or that the Partnership's products can be sold at
the prices anticipated. See 'Business -- Strategy.'

Partnership Buy-Out Option. In connection with the formation of the
Partnership, the Company granted Engelhard options to acquire up to all of the
Company's interest in the Partnership at the rate of 25% of such interest per
year starting on December 31, 1997, with each option exercisable based upon 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. Upon the
occurrence of an event of default by the Company under the Partnership Agreement
(including bankruptcy of the Company or violation of or failure by the Company
to comply with any material term or condition of the Partnership Agreement which
is not cured within a 45-day period), Engelhard's options can be accelerated.
There can be no assurance whether Engelhard will or will not exercise any or all
of its options to purchase the Company's interest in the Partnership or that the
valuation assigned the Company's interest will be sufficient to generate an
acceptable return to investors. See 'Business -- The Partnership.'

Dependence on Proprietary Technology. The Partnership's ability to compete
effectively with other manufacturers of climate control systems is dependent
upon, among other factors, a combination of (i) the Partnership's proprietary
desiccant system designs, (ii) Engelhard's patented desiccant ETS(Trademark),
which is sold to the Partnership pursuant to a Supply Agreement (the 'Engelhard
Supply Agreement') and is exclusively licensed to the Partnership for use in
climate control applications pursuant to a Technology License Agreement (the
'Engelhard License Agreement'), and (iii) the proprietary process used to
manufacture the small cell, honeycomb substrate material for the Partnership's
rotors, as to which the Partnership has a perpetual license from Ciba-Geigy
Corporation ('Ciba-Geigy'). The Partnership has three United States patents
covering certain aspects of its desiccant technology and has filed additional
United States and foreign patent applications. In addition to its patent rights,
the Partnership generally enters into confidentiality agreements and licensing
agreements with its partners, employees, distributors and customers and attempts
to limit access to proprietary information and equipment. There can be no
assurance that the steps taken by the Partnership in this regard will be
adequate to deter misappropriation of its proprietary technology and
manufacturing processes or that independent development of similar technology or
processes will not occur. Further, patents are

9
<PAGE>

presumed valid, but the validity of any patent may be challenged and there is no
way to accurately predict the outcome of litigation challenging the validity of
a patent. In addition, although the Company believes that the Partnership's
owned and licensed technology and manufacturing processes do not infringe any
existing patents or other proprietary rights, there can be no assurance that
other parties will not assert infringement claims against the Partnership or the
licensors of its licensed technology. The failure to receive additional patents,
to defend its existing patents or licensed technology or to defend against
infringement claims asserted by others, or the independent development of
similar or competing proprietary technology and processes would likely have a
material adverse effect on the Partnership's, and therefore the Company's,
results of operations and financial condition. See 'Business -- Patents and
Proprietary Information.'

Management of Growth. The Partnership has experienced, and expects to
continue to experience, rapid growth that has placed, and will continue to
place, a significant strain on its management, operational and financial
resources. The Partnership's ability to manage its growth effectively will
require it to expand and continue to improve its operations and information
systems, and to attract, train, motivate and manage its employees effectively.
In particular, the Partnership plans to expand its manufacturing facilities to
meet the anticipated demand for its products and to enter new markets in
Asia-Pacific and other similar regions of the world. The Partnership's success
will depend on the Partnership's ability to expand its operations, enter new
markets and retain and motivate its employees and there can be no assurance that
the Partnership will implement such changes successfully. The Partnership's
failure to manage such growth effectively would have a material adverse effect
on the Partnership's and the Company's businesses and results of operations. See
'Use of Proceeds'; 'Business -- Strategy'; and 'Business -- Manufacturing.'

Need for Additional Production Capacity. Although the Partnership's
facilities are adequate to meet its current level of sales, the Company expects
that by the end of the first half of 1996 the Partnership will have to increase
its capacity to meet anticipated demand. There can be no assurance that the
Partnership will be able to increase its production capacity in a timely or
cost-effective manner. Failure to do so would have a material adverse effect on
the Partnership's and the Company's businesses and results of operations. See
'Business -- Properties.'

Unproven Reliability of Products. To date, all of the systems sold by the
Partnership which incorporate the Partnership's honeycomb rotors and Engelhard's
ETS(Trademark) desiccant, have been in service for less than 24 months. While
the Company believes that product reliability to date has been commercially
acceptable and provides a reasonable basis for estimating future reliability,
there can be no assurance that the reliability of the Partnership's products
will remain satisfactory in the future. See 'Business -- Products.'

Acquisition and Alliance Strategy. The Company believes that acquiring, or
entering into alliances with, other businesses will be an important element of
the Partnership's strategy for achieving growth. There can be no assurance that
suitable acquisition or alliance candidates will be identified, or if
identified, that they will enter into joint venture, license or merger
arrangements acceptable to the Partnership and the Company. Furthermore, there
can be no assurance that financing for any such transactions will be available
on satisfactory terms or at all, or that the Partnership will be able to
accomplish its strategic objectives as a result of any such transaction. See
'Business -- Strategy.'

Dependence on Key Personnel. The Company is highly dependent on the
Company's Chairman and President, Irwin L. Gross. Mr. Gross has an employment
agreement with the Partnership, but does not have an employment agreement with
the Company. The loss of Mr. Gross could have a material adverse effect on the
Partnership's and the Company's businesses. Neither the Company nor the
Partnership has key-man life insurance on Mr. Gross. See 'Management.'

Competition. There are a number of other companies in the air conditioning
industry that have significantly greater resources and experience than the
Partnership in designing, manufacturing and marketing air conditioning
equipment. While the Company believes that the Partnership has developed
proprietary products and has established limited market acceptance for its
products, there can be no assurance that other companies do not currently market
or will not develop competing products that

10
<PAGE>
have advantages over the Partnership's products in either price or performance.
See 'Business -- Competition.'

Dilution. The purchasers of the shares of Common Stock offered hereby will
experience immediate and substantial dilution of $9.69 in pro forma book value
per share of Common Stock after the offering at an assumed public offering price
of $11.00 per share. See 'Dilution.'

No Cash Dividends. The Company has not declared any cash dividends on its
Common Stock and does not expect to declare any cash dividends in the
foreseeable future. Payment of future dividends will be at the discretion of the
Board of Directors and will depend, among other things, on the earnings, capital
requirements and financial condition of the Company and the Partnership. 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,
future borrowings or issuances of Preferred Stock may prohibit or restrict the
Company's ability to pay or declare dividends. The Company currently has a note
payable to a stockholder and Preferred Stock outstanding which prohibit or
restrict the Company's ability to pay dividends; however, upon completion of
this offering, the note is to be repaid and pursuant to the Preferred Stock
Transactions, the Preferred Stock is to be redeemed or converted into shares of
Common Stock. See 'Dividend Policy' and 'Preferred Stock Transactions.'

Control by Principal Stockholders. As of November 30, 1995, all officers
and directors of the Company as a group owned outstanding shares of Common Stock
and Preferred Stock which, on a pro forma basis after giving effect to the
Preferred Stock Transactions and as adjusted to give effect to the sale of the
Common Stock offered hereby, would equal 4,454,657 shares of Common Stock,
representing 21.3% of the Common Stock to be outstanding after the offering. In
addition, such officers and directors as a group held options and warrants to
purchase an aggregate of 3,101,611 shares of Common Stock. Assuming all such
options and warrants were exercised, and no other options or warrants were
exercised, as of November 30, 1995, all officers and directors of the Company as
a group on a pro forma basis after giving effect to the Preferred Stock
Transactions and as adjusted to give effect to the sale of the Common Stock
offered hereby, would own 31.5% of the Common Stock, including approximately
15.2% by Irwin L. Gross, the Company's Chairman and President. Consequently, Mr.
Gross and the other officers and directors can and will be able to continue to
exercise significant influence over the Company and its affairs. See 'Principal
Stockholders.'

Shares Eligible for Future Sale. As of November 30, 1995, after giving
effect to the Preferred Stock Transactions, there would have been 4,371,682
shares of Common Stock outstanding which constituted 'restricted securities,' as
that term is defined under Rule 144 promulgated under the Securities Act,
substantially all of which may be sold at any time, subject to the restrictions
of Rule 144. In addition, as of November 30, 1995, there were outstanding
options to purchase 2,901,885 shares of Common Stock under its stock option
plans, of which options to purchase 1,262,085 shares of Common Stock were
currently exercisable. An additional 1,910,942 shares of Common Stock were
reserved for issuance under such plans. All of the shares underlying options
under such plans are covered by effective registration statements. As of such
date, the Company also had outstanding warrants to purchase 1,465,000 shares of
Common Stock, of which warrants to purchase 540,000 shares of Common Stock were
currently exercisable. Of the outstanding warrants, 450,000 underlying shares of
Common Stock are registered pursuant to an effective registration statement and
the balance of 1,015,000 shares of Common Stock have certain registration
rights. Possible or actual sales made under Rule 144, or pursuant to
registration or other exemptions from registration under the Securities Act, of
the aforementioned shares of Common Stock may have an adverse effect upon the
market price of the Common Stock. Of the shares of the Common Stock referred to
above, an aggregate of 7,931,268 shares of Common Stock held, after giving
effect to the Preferred Stock Transactions, or which may be acquired upon
exercise of outstanding options and warrants by the officers, directors and
certain stockholders of the Company, are subject to 'lock-up' agreements for a
period of 180 days from the date of this Prospectus. See 'Shares Eligible for
Future Sale.'

11
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the Common Stock offered
hereby are estimated (assuming a public offering price of $11.00 per share) to
be approximately $25.2 million ($29.0 million if the Underwriters'
over-allotment option is exercised in full) after deduction of underwriting
discounts and commissions and estimated offering expenses. The Company plans to
use the net proceeds from the offering (i) to fund its half of the estimated
total financing requirements of the Partnership, as follows (the following
amounts represent the Company's share of the expenditures): (a) approximately
$6.0 million to finance the expansion of the Partnership's rotor manufacturing
capacity; (b) approximately $3.0 million to finance a new manufacturing facility
to replace the Partnership's Philadelphia facility; (c) approximately $5.0
million to fund the Partnership's joint venture and other licensing activities
internationally; and (d) to finance a possible acquisition of an existing air
conditioning company by the Partnership and to fund the working capital
requirements of the Partnership, (ii) to redeem certain of its Preferred Stock
for approximately $1,328,000, which includes payment (as of November 30, 1995)
of approximately $347,000 of accrued dividends, and to pay a $150,000 note plus
accrued interest payable to a stockholder, and (iii) the balance to fund the
Company's working capital requirements. Pending the use of the net proceeds from
the sale of the Common Stock offered hereby, the Company will invest such
proceeds in short-term government securities or money market funds. Although the
Company and Engelhard have agreed in principle for the Partnership to make the
expenditures referred to above, as of the date hereof, the Management Committee
which governs the Partnership has not authorized formally any of the foregoing
expenditures, and there is no assurance that the proceeds will be expended in
the manner set forth above. Moreover, although the Partnership has engaged in
discussions with possible acquisition candidates, as of the date hereof no
agreements have been reached and no assurance can be given that any such
acquisition will occur. However, in the event the Partnership were to acquire an
air conditioning company, the Company would probably use a substantial portion
of the net proceeds of this offering to finance such an acquisition by the
Partnership. The use of the net proceeds by the Company is subject to certain
restrictions described under 'Management -- Expansion of Board; Approval of
Certain Transactions.' See also 'Risk Factors'; 'Preferred Stock Transactions';
and 'Business.'

12
<PAGE>
PRICE RANGE OF COMMON STOCK

The Company has applied for the listing of its Common Stock on the Nasdaq
National Market under the symbol ICGN as of the effective date of this offering.
Prior to this offering, the Common Stock has traded on the Nasdaq Small Cap
Market. Based on reports provided by Nasdaq, the price range of high and low bid
prices for the Common Stock for the periods indicated are as follows:

HIGH LOW
--------- ---------
<S> <C> <C>
1994
First Quarter................................................................ $ 5.31 $ 3.38
Second Quarter............................................................... 5.31 3.13
Third Quarter................................................................ 10.00 4.94
Fourth Quarter............................................................... 10.38 6.94

1995
First Quarter................................................................ 13.63 7.81
Second Quarter............................................................... 15.50 11.50
Third Quarter................................................................ 18.38 13.88
Fourth Quarter............................................................... 15.38 10.25
</TABLE>

The above quotations reported by Nasdaq represent prices between dealers
and do not include retail mark-ups, mark-downs or commissions, and may not
necessarily represent actual transactions. On January 10, 1996, the last
reported sale price for the Common Stock, as reported by Nasdaq, was $10.75
per share. On January 10, 1996, there were 1,388 holders of record of the Common
Stock.

13
<PAGE>

DIVIDEND POLICY

Other than an in-kind warrant dividend declared by the Board of Directors
in June 1990, the Company has never paid a dividend on the Common Stock and it
is unlikely that any dividends will be paid in the foreseeable future. The
payment of cash dividends on the Common Stock will depend on, among other
things, the earnings, capital requirements and financial condition of the
Company and the Partnership, and general business conditions. In addition,
future borrowings or issuances of Preferred Stock may prohibit or restrict the
Company's ability to pay or declare dividends. The Company currently has a note
payable to a stockholder and Preferred Stock outstanding which prohibit or
restrict the Company's ability to pay dividends; however, upon completion of the
offering, the note is to be repaid and pursuant to the Preferred Stock
Transactions, the Preferred Stock is to be redeemed or converted into shares of
Common Stock.

PREFERRED STOCK TRANSACTIONS

The Company currently has five classes of Preferred Stock outstanding. Upon
consummation of the sale of the shares offered hereby, the Series G and H
Convertible Preferred Stock will be automatically converted into 2,859,696 and
750,000 shares of Common Stock, respectively. In addition, upon such conversion,
the Company will pay accrued dividends on the Series G Convertible Preferred
Stock in cash ($59,467 as of November 30, 1995), and the accrued dividends on
the Series H Convertible Preferred Stock are payable, at the option of the
holder, in Common Stock at the rate of $4.00 per share. Accordingly, pursuant to
the holder's request, the Company will issue approximately 154,688 shares of
Common Stock with respect to the accrued dividends on the Series H Convertible
Preferred Stock ($618,750 at November 30, 1995). Moreover, upon the consummation
of the offering, the holders of Series I Preferred Stock will require the
Company to redeem the Series I Preferred Stock for $500,000, plus accrued
dividends ($185,833 as of November 30, 1995). In addition, upon consummation of
the offering, the Company will redeem the Series F Preferred Stock for $256,270
plus accrued dividends ($22,937 as of November 30, 1995) and its Series J
Preferred Stock for $225,000 plus accrued dividends ($78,563 as of November 30,
1995). These transactions will be completed upon the consummation of the
offering and are referred to as the 'Preferred Stock Transactions.'

14
<PAGE>

DILUTION

As of September 30, 1995, the net tangible book value of the Company was
$3,503,000 or $.24 per share of Common Stock. Net tangible book value per share
represents total tangible assets, less total liabilities, divided by the number
of shares of Common Stock outstanding. After the pro forma adjustments to give
effect to the Preferred Stock Transactions and as adjusted to give effect to the
receipt by the Company of the estimated proceeds from the sale of the 2,500,000
shares of Common Stock offered hereby, at an assumed public offering price of
$11.00 per share and after deducting the estimated underwriting discounts and
commissions and estimated offering expenses, the pro forma as adjusted net
tangible book value of the Company as of September 30, 1995 would have been
$27,404,000 or $1.31 per share. This represents an immediate increase in net
tangible book value of $1.07 per share to the existing stockholders of the
Company and an immediate dilution of $9.69 per share to new stockholders
purchasing the shares of Common Stock offered hereby. The following table
illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed public offering price per share.................................................. $ 11.00

Net tangible book value per share as of September 30, 1995............................... $ .24

Increase per share attributable to new stockholders...................................... 1.07
---------

Pro forma, as adjusted net tangible book value per share after the offering.............. 1.31
-----------

Dilution to new stockholders............................................................. $ 9.69
===========

</TABLE>

15
<PAGE>
CAPITALIZATION

The following table reflects the capitalization of the Company as of
September 30, 1995, and the pro forma as adjusted capitalization to give effect
to the Preferred Stock Transactions as of such date and sale of the 2,500,000
shares of Common Stock offered hereby at an assumed public offering price of
$11.00 per share and the application of the estimated net proceeds therefrom.
See 'Use of Proceeds' and 'Preferred Stock Transactions.'

SEPTEMBER 30, 1995
--------------------------------
PRO FORMA
ACTUAL AS ADJUSTED
---------------- --------------
<S> <C> <C>
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value:

Series F, authorized, issued and outstanding
135 shares and 0 shares, pro forma as adjusted.......................... $ 1 $ --

Series G Convertible, authorized, issued and outstanding
350 shares and 0 shares, pro forma as adjusted.......................... 4 --

Series H Convertible, authorized, issued and outstanding
1,500 shares and 0 shares, pro forma as adjusted........................ 15 --

Series I, authorized, issued and outstanding
500 shares and 0 shares, pro forma as adjusted.......................... 5 --

Series J, authorized, issued and outstanding
225 shares and 0 shares, pro forma as adjusted.......................... 2 --

Common stock, $.01 par value, authorized
50,000,000 shares, issued and outstanding 14,592,540 shares and 20,851,299
shares, pro forma as adjusted.............................................. 145,925 208,513

Additional paid-in capital................................................... 34,907,976 58,746,626

Accumulated deficit.......................................................... (31,379,232) (31,379,232)

Less: Treasury common stock, at cost, 66,227 shares.......................... (171,430) (171,430)
---------------- --------------

Total stockholders' equity................................................... $ 3,503,266 $ 27,404,477
---------------- --------------
---------------- --------------
</TABLE>

16
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY

The following selected consolidated financial data of the Company at and
for the years ended December 31, 1994, 1993, 1992, 1991 and 1990 have been
derived from the Company's financial statements, which have been audited by
Coopers & Lybrand L.L.P. (whose reports thereon include an explanatory paragraph
which refer to conditions that raise substantial doubt about the Company's
ability to continue as a going concern). The selected consolidated financial
data for the nine month periods ended September 30, 1995 and 1994 and as of
September 30, 1995 have been derived from the unaudited consolidated financial
statements of the Company. The unaudited interim financial data include all
adjustments, consisting of normal recurring accruals, which the Company
considers necessary for a fair presentation of the results of operations for
those periods. The data should be read in conjunction with the Company's
consolidated financial statements and the notes thereto and with 'Management's
Discussion and Analysis of Financial Condition and Results of Operations'
included elsewhere in this Prospectus.

NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------------ -----------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
--------- ------------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.............................. $ 7 $ 88 $ 88 $ 1,201 $ 957 $ 1,354 $ 2,370
Cost of goods sold.................... 6 80 80 1,177 939 1,641 1,957
--------- ------------- --------- --------- --------- --------- ---------
Gross profit (loss)................... 1 8 8 24 18 (287) 413
Operating expenses.................... (1,027) (1,239) (1,735) (4,072) (2,563) (2,586) (2,166)
Net interest income (expense)......... 263 60 148 (10) (22) (20) (157)
Equity interest in net loss of
Partnership(1)...................... (3,394) -- (2,812) -- -- -- --
--------- ------------- --------- --------- --------- --------- ---------
Net loss.............................. (4,157) (1,171) (4,391) (4,058) (2,567) (2,893) (1,910)
Preferred stock dividend
requirements........................ (215) (176) (228) (261) (242) (124) --
--------- ------------- --------- --------- --------- --------- ---------
Net loss applicable to common
stockholders........................ $ (4,372) $ (1,347) $ (4,619) $ (4,319) $ (2,809) $ (3,017) $ (1,910)
--------- ------------- --------- --------- --------- --------- ---------
--------- ------------- --------- --------- --------- --------- ---------

Loss per common share................. $ (0.34) $ (0.12) $ (0.41) $ (0.51) $ (0.47) $ (0.57) $ (0.50)
Weighted average common shares........ 12,955 11,082 11,391 8,551 5,979 5,292 3,819
</TABLE>

SEPTEMBER 30, 1995
------------------------
PRO FORMA DECEMBER 31,
AS -----------------------------------------------------
ACTUAL ADJUSTED(2) 1994 1993 1992 1991 1990
--------- ------------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash................................... $ 3,855 $ 27,606 $ 1,114 $ 1,143 $ 34 $ 182 $ 161
Working capital (deficit).............. 3,901 27,802 1,072 1,207 (416) 494 (131)
Investment in Partnership.............. -- -- 1,048 -- -- -- --
Total assets........................... 6,738 30,489 2,398 2,564 998 1,990 2,583
Losses of Partnership in excess of
investment........................... 2,905 2,905 -- -- -- -- --
Total debt............................. 150 -- 150 800 360 326 974
Total liabilities...................... 3,235 3,085 427 1,521 1,459 1,398 3,196
Stockholders' equity (deficit)......... $ 3,503 $ 27,404 $ 1,971 $ 1,044 $ (461) $ 592 $ (613)
</TABLE>

- ------------------
(1) The Company had no obligation or commitment to provide additional financing
to the Partnership during the period ended September 30, 1994 and the
Company's share of losses was not recognized.

(2) Adjusted to reflect the sale by the Company of 2,500,000 shares of Common
Stock offered hereby at an assumed offering price of $11 per share and the
application of the net proceeds therefrom and pro forma adjustments to
reflect the Preferred Stock Transactions and the repayment of a note payable
to a stockholder. See 'Use of Proceeds' and 'Preferred Stock Transactions.'

17
<PAGE>

SELECTED FINANCIAL DATA OF THE PARTNERSHIP

The following selected financial data of the Partnership at and for the
period ended December 31, 1994 have been derived from the Partnership's
financial statements, which have been audited by Coopers & Lybrand L.L.P. (whose
report thereon includes an explanatory paragraph which refers to conditions that
raise substantial doubt about the Partnership's ability to continue as a going
concern). The selected financial data for the periods ended September 30, 1995
and 1994 and as of September 30, 1995 have been derived from the unaudited
financial statements of the Partnership. The unaudited interim financial data
include all adjustments, consisting of normal recurring accruals, which the
Partnership considers necessary for a fair presentation of the results of
operations for those periods. The data should be read in conjunction with the
Partnership's financial statements and the notes thereto and with 'Management's
Discussion and Analysis of Financial Condition and Results of Operations'
included elsewhere in this Prospectus.

PERIOD FEBRUARY 7 PERIOD FEBRUARY 7
(DATE OF (DATE OF
NINE MONTHS ENDED FORMATION) TO FORMATION) TO
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
1995 1994 1994
------------------- ----------------- -----------------

(IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.............................................. $ 7,171 $ 997 $ 1,620
Cost of goods sold.................................... 7,175 877 1,592
-------- -------- --------
Gross profit (loss)................................... (4) 120 28
Marketing expenses.................................... (2,524) (1,373) (2,061)
Research, development and engineering expenses........ (1,593) (1,291) (2,128)
General and administrative............................ (2,084) (1,000) (1,539)
Net interest income (expense)......................... (582) 102 75
-------- -------- --------
Net loss.............................................. $ (6,787) $ (3,442) $ (5,625)
======== ======== ========
</TABLE>

SEPTEMBER 30, DECEMBER 31,
1995 1994
------------------- -----------------
(IN THOUSANDS)

<S> <C> <C>
BALANCE SHEET DATA:
Cash.................................................. $ 41 $ 648
Working capital (deficit)............................. 1,518 (5,931)
Total assets.......................................... 16,786 13,386
Total debt............................................ 11,465 8,175
Total liabilities..................................... 13,093 9,906
Partners' capital..................................... $ 3,693 $ 3,481
</TABLE>

<PAGE>

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(Trademark).

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 the Engelhard
Supply Agreement to sell ETS(Trademark) to the Partnership and entered into the
Engelhard License Agreement granting the Partnership an exclusive royalty-free
license to use ETS(Trademark) 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 sole activities have
related to its participation in the management of the Partnership and the sale
of the Company's remaining cogeneration assets. 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 50% interest in the Partnership under the
equity method of accounting for investments. At February 7, 1994, the date of
formation of the Partnership ('Formation'), the Company's investment in the
Partnership was approximately $0. The Company had no obligation or commitment to
provide additional financing to the Partnership and losses of the Partnership
were not recognized through the period ended September 30, 1994. During the
fourth quarter of 1994, the Company and Engelhard each loaned the Partnership
$4,000,000 to acquire a manufacturing facility in Miami, Florida. As a result,
and because the Company expects to continue to fund the Partnership's
activities, the Company has and will continue to recognize its share of the
losses of the Partnership.

RECENT DEVELOPMENTS

The Partnership's revenues for the three month period ended December 31,
1995 are expected to be approximately $1,700,000, compared to revenues of
approximately $2,000,000 for the three month period ended September 30, 1995.
The decrease in revenues is attributable to a reduction in substrate sales to
Ciba-Geigy, primarily as a result of a temporary work stoppage at a large
customer of Ciba-Geigy. The decrease was partially offset by increased revenues
attributable to climate control equipment sales. It is anticipated that the
Partnership's net loss for the three month period ended December 31, 1995 could
be larger than its net loss for the three month period ended September 30, 1995,
pending the final closing of the Partnership's books which is expected to occur
on or about January 31, 1996. The Company will recognize 50% of the
Partnership's net loss as its equity interest in net loss of the Partnership.

19
<PAGE>
RESULTS OF OPERATIONS

Three Months Ended September 30, 1995 and 1994.

The Partnership's revenue for the three months ended September 30, 1995
increased $1,630,000 to $2,010,000 from $380,000 for the same period in 1994.
The increase in revenue is primarily attributable to revenue of $1,504,000 from
the fabrication of substrate for Ciba-Geigy pursuant to a supply agreement and
an increase of $127,000 in equipment sales. The Partnership recorded a gross
loss of $274,000 for the three months ended September 30, 1995 compared to a
gross profit of $52,000 for the same period in 1994 due primarily to increases
in manufacturing costs of equipment in anticipation of future growth without a
corresponding increase in equipment sales.

The Partnership's operating expenses increased $599,000 to $2,248,000 for
the three months ended September 30, 1995 compared to $1,649,000 for the same
period in 1994 due to higher marketing and general and administrative costs.
Marketing expenses increased $203,000 as a result of increased marketing efforts
and increased sales and marketing personnel. General and administrative expenses
increased $381,000 primarily due to the addition of general and administrative
personnel and the amortization of intangibles incurred in connection with the
acquisition of the Miami plant from Ciba-Geigy in December 1994. As a result of
the gross loss and increased operating expenses, the loss from operations
increased $925,000 to $2,522,000 for the three months ended September 30, 1995.

The Partnership's net loss increased $1,069,000 to $2,641,000 for the three
months ended September 30, 1995 from $1,572,000 for the prior period due to the
loss from operations and an increase in net interest expense of $144,000 from
additional short-term borrowings for the three months ended September 30, 1995.

The Company did not generate any revenues from its cogeneration business
for the three months ended September 30, 1995 and 1994. The Company's revenues
have been limited to sales of cogeneration spare parts since the formation of
the Partnership.

The Company's general and administrative expenses decreased $103,000 to
$343,000 for the three month period ended September 30, 1995 compared to
$446,000 for the same period in 1994 primarily as a result of a decrease in
professional fees. The three month period ended September 30, 1995 includes
consulting expenses of $25,000 in connection with a consulting arrangement with
the placement agent in the private placement of 300,000 shares of Common Stock
in March 1995.

The Company's net loss for the three months ended September 30, 1995
increased $1,200,000 to $1,595,000 compared to a net loss of $395,000 for the
same period in 1994. This increase in loss was attributable to the Company's 50%
share of the Partnership's loss of $1,320,000 for the three months ended
September 30, 1995 as compared to none recognized for the same period in 1994.
Net loss per share of Common Stock increased to $.12 for the three month periods
ended September 30, 1995 from $.04 for the same period in 1994.

Nine Months Ended September 30, 1995 and 1994.

The Partnership's revenue for the nine months ended September 30, 1995
increased $6,175,000 to $7,172,000 from $997,000 for the period from Formation
to September 30, 1994 due to the fabrication of substrate for Ciba-Geigy
pursuant to a supply agreement, increased equipment sales and licensing fees.
The increase was attributable to revenue of $4,797,000 from the fabrication of
substrate of Ciba-Geigy and the increase of $875,000 in equipment sales and
$500,000 in licensing fees. The Partnership recorded a gross loss of $4,000 for
the nine months ended September 30, 1995 compared to a gross profit of $120,000
for the period from Formation to September 30, 1994. The gross loss was due
primarily to increases in manufacturing costs of equipment in anticipation of
future growth without a corresponding increase in equipment sales, which was
partially offset by the licensing fees.

The Partnership's operating expenses increased $2,536,000 to $6,201,000 in
the nine months ended September 30, 1995 compared to $3,665,000 for the period
from Formation to September 30, 1994 due to higher marketing, research and
development, and general and administrative costs. Marketing expenses increased
$1,151,000 as a result of increased marketing efforts and increased sales

20
<PAGE>

and marketing personnel. Research and development expenses increased $357,000
due to an increase in the number of research personnel and increased testing of
equipment by independent laboratories. Engineering costs decreased $56,000 in
this period. General and administrative expenses increased $1,084,000 primarily
due to the addition of general and administrative personnel and amortization of
intangibles incurred in connection with the Miami plant acquired in December
1994. The loss from operations for the nine months ended September 30, 1995
increased $2,660,000 to $6,205,000 compared to $3,545,000 for the period from
Formation to September 30, 1994.

The Partnership's net loss increased $3,345,000 to $6,787,000 for the nine
months ended September 30, 1995 from $3,442,000 due to the loss from operations
and an increase in net interest expense of $684,000 from additional borrowings.

The Company generated nominal revenues of $7,000 for the nine months ended
September 30, 1995 which were attributable to the sale of cogeneration spare
parts compared to revenues of $88,000 for the same period in 1994 which were
attributable to sales of desiccant climate control systems prior to the
formation of the Partnership on February 7, 1994.

The Company's expenses relating to marketing, engineering and development
decreased or were 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. The Company's general and administrative expenses increased $94,000 to
$1,027,000 for the nine months ended September 30, 1995 compared to $933,000 for
the same period in 1994 as a result of increased payroll expenses and other
administrative costs offset by a reduction in professional fees. The Company
accrued an expense of $30,000 for the nine months ended September 30, 1995 for
services rendered in 1993 by an investor relations firm. Pursuant to an
agreement with such firm, the obligation was satisfied by the issuance of 20,000
shares of Common Stock. Consulting expenses of $25,000 were recognized in the
nine months ended September 30, 1995 related to the March 1995 private placement
of 300,000 shares of Common Stock.

The Company's net loss for the nine months ended September 30, 1995
increased $2,986,000 to $4,157,000 from $1,171,000 for the same period in 1994.
This increase in loss was attributable to the Company's 50% interest in the
Partnership's loss of $3,394,000 for the nine months ended September 30, 1995 as
compared to none recognized for the same period in 1994. Net loss per share of
Common Stock increased $.22 to $.34 for the nine month period ended September
30, 1995 from $.12 for the same period in 1994.

Years Ended December 31, 1994 and 1993.

On February 7, 1994, the Company transferred its desiccant climate control
business in exchange for a 50% interest in the Partnership. The Company
transferred substantially all of its assets, subject to certain liabilities, and
employees to the Partnership, which also agreed to assume certain obligations of
the Company. As a result, the Company ceased to generate revenues and expenses
from its desiccant climate control business. The Partnership generated revenues
of $1,620,000 for the period from Formation to December 31, 1994 primarily from
sales or desiccant climate control systems and reported a gross profit of
$29,000 for the same period. The Partnership incurred marketing, engineering,
research and development, and general and administrative expenses of $2,061,000,
$1,233,000, $895,000 and $1,539,000, respectively, for the period from Formation
to December 31, 1994, and, as a result, reported an operating loss of $5,700,000
and a net loss of $5,625,000.

The Company's revenues declined $1,113,000 to $88,000 for the year ended
December 31, 1994 and cost of goods sold decreased $1,097,000 to $80,000 due to
the transfer of its desiccant climate control business to the Partnership. Total
operating costs, consisting of marketing, engineering and development costs, and
general and administrative expenses, decreased $2,338,000 to $1,734,000 and the
loss from operations decreased $2,321,000 to $1,726,000 for the year ended
December 31, 1994 also as a result of the Company having transferred its
desiccant climate control business to the Partnership.

The Company's net loss increased $333,000 to $4,391,000 for the year ended
December 31, 1994, compared to $4,058,000 for the prior year. In the fourth
quarter of 1994, the Company loaned the Partnership $4,000,000 to acquire the
honeycomb substrate manufacturing facility from Ciba-Geigy and expected to
further fund the Partnership's present operations and future expansion.
Consequently,

21
<PAGE>

in the fourth quarter of 1994, the Company recognized its 50% share, or
$2,812,000, of the $5,625,000 net loss incurred by the Partnership for the
period from Formation to December 31, 1994. Net loss per share of Common Stock
decreased $.10 to $.41 for the year ended December 31, 1994 compared to $.51 for
the prior year due to the increase in the number of shares of Common Stock
outstanding.

Years Ended December 31, 1993 and 1992.

The Company's revenues for the year ended December 31, 1993 were $1,201,000
as compared with $957,000 for the same period of 1992. The revenue increase of
$244,000 was due to higher equipment sales of $324,000 in 1993 which was
partially offset by a reduction of $80,000 in revenue from energy and
maintenance services. Gross profit increased nominally in 1993 compared to 1992.

The Company's operating expenses for the year ended December 31, 1993
increased $1,509,000 to $4,072,000 from $2,563,000 for the year ended December
31, 1992. Marketing expenses increased $225,000 due to the Company's efforts to
increase sales. The Company hired additional sales and marketing personnel,
expanded advertising, and attended additional trade shows. Engineering expenses
increased by $578,000 due primarily to the Company's obligation to fund
$1,000,000 of the joint development program with Engelhard, to further develop a
desiccant-based climate control system prior to the formation of the
Partnership. General and administrative expenses increased by $706,000 primarily
from start-up costs of $166,000 related to a new manufacturing facility, a
one-time charge of $70,000 for severance expense related to an employment
contract with a former officer of the Company, a one-time charge of $215,000
accrued for compensation expense in connection with the issuance of stock for
services and increased legal, accounting and corporate expenses of $111,000.

The Company's loss from operations for the year ended December 31, 1993
increased $1,502,000 to $4,047,000 from $2,545,000 for the same period in 1992.
The increase in the loss from operations resulted primarily from higher
engineering expenses in connection with the joint development program with
Engelhard and increased marketing and administrative expenses.

The Company's net loss increased $1,491,000 to $4,058,000 for the year
ended December 31, 1993 compared to $2,567,000 for the prior year as a result of
the loss from operations. Net loss per share of Common Stock increased $.04 to
$.51 for the year ended December 31, 1993 compared to $.47 for the year ended
December 31, 1992 due to the increase in net loss.

The Company's and the Partnership's operations have not been significantly
affected by inflation.

LIQUIDITY AND CAPITAL RESOURCES

The Partnership's cash and cash equivalents decreased to $41,000 at
September 30, 1995 from $648,000 at December 31, 1994 and $8,633,000 contributed
from Engelhard at Formation. The decreases were due to the Partnership's net
losses, working capital requirements and capital investments incurred in
connection with the expansion of the Partnership's business since Formation,
which were partially financed by loans and capital contributions from the
Company and Engelhard. The Partnership is expected to require additional
financing to support anticipated growth and will be dependent on the Company and
Engelhard to provide additional financing to support its current operations and
future expansion. There can be no assurance that the Company or Engelhard will
be willing, or able, to provide such additional financing.

Net cash used in operating activities by the Partnership was $8,819,000 for
the nine months ended September 30, 1995 due to the net loss, before
depreciation and amortization, of $5,992,000 and net working capital needs of
$2,827,000 primarily to continue to build inventory and for accounts receivable
which increased with sales. Capital expenditures of $801,000 were incurred
primarily for machinery and equipment. Net cash used in operating activities and
capital expenditures were financed with net borrowings of $7,013,000 and capital
contributions aggregating $2,000,000 from the Company and Engelhard.

In April 1995, the Partnership obtained financing from the issuance of $8.5
million in industrial development revenue bonds. The proceeds of these bonds
were utilized to repay a portion of the loan provided by the general partners
and to fund improvements and capital expenditures at the Miami facility. The
Company guaranteed 50% of the Partnership's indebtedness associated with the
industrial

22
<PAGE>

development revenue bonds and established an irrevocable letter of credit for
$2,500,000 to support its portion of the guarantee, which is collateralized by a
$2,500,000 certificate of deposit. In May 1995, each general partner was repaid
$1,500,000 of the $8,000,000 aggregate loan from the Company and Engelhard made
in December 1994, of which the remaining amount, $2,500,000 for each general
partner, was converted into an investment in the Partnership. In August 1995, a
capital contribution of $1,000,000 to the Partnership was made by each partner.
In addition, the Partnership borrowed $2,750,000 from a bank through a
short-term loan. Subsequently, another $1,000,000 capital contribution for the
general working capital requirements of the Partnership was made by each partner
in October 1995 and again in December 1995.

In August 1995, the Partnership entered into a joint development agreement
with AB Air Technologies, Ltd. ('AB Air') in Israel for the development of a
residential desiccant-based, all electric climate control system. The
Partnership has agreed to share equally in the cost of the development program
which is initially estimated to be approximately $250,000. The Company has
agreed to finance 60% of AB Air's portion of the program costs pursuant to an
interest-bearing loan. As of November 30, 1995, no funds had been loaned to AB
Air.

Net cash used in operating activities by the Partnership was $6,571,000 for
the period from Formation to December 31, 1994 as a result of the net loss,
before depreciation and amortization, of $5,376,000 and net working capital
needs of $1,195,000 primarily to build inventory and for accounts receivable
which increased with sales. Capital expenditures were $9,361,000 for the period
from Formation to December 31, 1994, primarily due to the acquisition of a
manufacturing facility for $8,000,000 in December 1994 and capital expenditures
of $980,000. The Company and Engelhard financed the Partnership's operating and
investing activities in 1994 with the initial capital contribution of $8,633,000
from Engelhard upon the formation of the Partnership and loans of $4,000,000
from each of the Company and Engelhard in December 1994 to acquire the
Ciba-Geigy manufacturing facility.

The Company's cash and cash equivalents amounted to $3,855,000, $1,114,000,
$1,142,000 and $34,000 at September 30, 1995 and December 31, 1994, 1993 and
1992, respectively. The cash utilized in the Company's operating and investing
activities 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, and the
Company plans to use the net proceeds from the offering as set forth under 'Use
of Proceeds' in this Prospectus. To the extent Partnership capital contributions
in excess of the proceeds of this offering are required, or 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.

Net cash used in operating activities by the Company was $890,000 for the
nine months ended September 30, 1995 due to the net loss, before non-cash
charges and the Company's 50% share of the net loss of the Partnership, of
$728,000 and net working capital needs of $162,000 since the Company transferred
its desiccant climate control business to the Partnership in February 1994. The
Company was repaid $1,500,000 (and converted $2,500,000 to a capital
contribution to the Partnership) of the $4,000,000 loan extended to the
Partnership to acquire the Ciba-Geigy manufacturing facility in May 1995. The
Company made an additional capital contribution of $1,000,000 to the Partnership
in August 1995 and supported a portion of its guarantee of the $8,500,000
industrial development revenue bonds issued by the Partnership with a $2,500,000
irrevocable letter of credit collateralized with a certificate of deposit for a
like amount. Net cash used in operating activities and for investments in the
Partnership were financed by issuing Common Stock and warrants for net proceeds
$5,639,000 for the nine months ended September 30, 1995.

In March 1995, the Company raised net proceeds of $3,010,000 in a private
placement of 300,000 shares of Common Stock at $11 per share. The Company
granted warrants to purchase 375,000 shares of Common Stock at $9 per share to
the finder in connection with the private placement. During the nine months
ended September 30, 1995, the Company received proceeds of approximately
$2,629,000

23
<PAGE>
from the exercise of stock options and warrants to purchase approximately
1,059,000 shares of Common Stock.

Net cash used in operating activities by the Company was $1,373,000 for the
year ended December 31, 1994 due to the net loss, before non-cash charges and
the Company's 50% share of the net loss of the Partnership, of $1,239,000 and
net working capital needs of $134,000 since the Company transferred its
desiccant climate control business to the Partnership in February 1994. The
Company and Engelhard each extended a $4,000,000 loan to the Partnership to
acquire the Ciba-Geigy in December 1994. Net cash used in operating activities
and for investments in the Partnership were financed by issuing Common Stock and
warrants for net proceeds of $5,139,000 and from borrowings of $400,000 from
Engelhard.

In June 1994, the Company sold 1,100,000 shares of Common Stock at $3.56
per share for net proceeds of $3,489,000, and two directors each sold 150,000
shares of Common Stock at the same price for aggregate cash proceeds to each of
$534,000. Pursuant to an agreement between the Company and the two directors,
the Company agreed to pay all commissions and expenses incurred in connection
with the offering. For financial advisory services related to the offering, the
Company granted to an individual, who subsequently became a director, warrants
to purchase 215,000 shares of Common Stock, which have exercise prices ranging
from of $3.25 to $4.75 per share and expire in 1999. During 1994, the Company
received $1,543,000 in cash for 732,000 shares of Common Stock upon the exercise
of stock options. Also during 1994, the Company received net proceeds of
$286,000 upon the exercise of warrants to acquire 187,000 shares of Common Stock
granted to placement agents in connection with the March and April 1993 private
placements referred to below.

Net cash used in operating activities by the Company was $3,675,000 for the
year ended December 31, 1993 due to the net loss, before non-cash charges, of
$3,575,000 and net working capital needs of $100,000. Capital expenditures for
the year were $300,000 for equipment. Net cash used in operating activities and
for capital expenditures were financed by issuing Common Stock and warrants for
net proceeds of $4,643,000 and from borrowings of $500,000 from Engelhard.

In March and April 1993, the Company sold 374,000 shares of Common Stock at
$1.50 per share for net proceeds of approximately $459,000. In July 1993, the
Company registered under the Securities Act, 1,060,000 shares of Common Stock of
which 950,000 shares were issued upon the exercise of outstanding warrants and
100,000 shares were issued to an equipment vendor in settlement of approximately
$388,000 in accounts payable and 10,000 shares to a former officer of the
Company as severance pay. As of December 31, 1993, the Company had received net
proceeds of $2,088,000 for 950,000 shares of Common Stock purchased upon the
exercise of outstanding warrants.

Net cash used in operating activities by the Company was $1,427,000 for the
year ended December 31, 1992 due to the net loss, before non-cash charges, of
$2,199,000, which was offset by a reduction in net working capital requirements
of $772,000. Capital expenditures for the year were not material. Net cash used
in operating activities and for capital expenditures were financed by issuing
Common Stock and warrants and preferred stock for net proceeds of $1,276,000 and
from borrowings of $60,000 from certain stockholders.

In March 1992, the Company sold to the Company's Chairman and two other
board members 500 shares of the Series I Preferred Stock for $500,000. The
investors also received nonqualified stock options to purchase 400,000 shares of
Common Stock for $4.813 per share, exercisable beginning in March 1993. The
exercise price of these options was subsequently reduced to $2.25 per share by
the Board of Directors in December, 1992. In June 1992, the Company sold to an
investor group led by the Company's Chairman, 225 shares of Series J Preferred
Stock for $225,000. The investors also received nonqualified stock options to
purchase 128,574 shares of Common Stock at $1.75 per share, exercisable
beginning in June 1993. Also in June 1992, the Company sold to two private
investors 228,572 shares of Common Stock for total purchase price of $400,000.

The independent accountants' report on the audit of the Company's 1994
financial statements includes an explanatory paragraph regarding substantial
doubt 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

24
<PAGE>
business. The Company has incurred cumulative losses since inception amounting
to approximately $31 million through September 30, 1995. In order to continue
operations, the Company has had to raise additional capital to offset cash
consumed in operations and support of the Partnership. 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. The independent accountants' report on the audit
of the Partnership's 1994 financial statements also includes an explanatory
paragraph regarding substantial doubt 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.

NEW ACCOUNTING STANDARD

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation. SFAS No. 123 establishes a fair value based method of accounting
for stock-based compensation plans. It encourages entities to adopt that method
in place of the intrinsic value method currently in place under the provisions
of Opinion No. 25 of the Accounting Principles Board (APB). Under the fair value
method accounting, all arrangements under which employees receive shares of
stock or other equity instruments or under which employers incur liabilities to
employees in amounts based on the price of its stock result in the measurement
of compensation cost at the grant date of the award which is recognized over the
service period, usually the vesting period. Under the intrinsic value method,
compensation cost is measured by the excess of the quoted market price of the
stock, if any, over the amount the employee must pay to acquire the stock. For
example, granting immediately exercisable stock options to an employee at an
exercise price equal to the quoted market price of the stock results in the
recognition of compensation expense at the date of grant under the fair value
method of SFAS No. 123; under the intrinsic value method of APB No. 25, no
compensation expense is recognized. However, SFAS No. 123 allows the Company to
elect to continue its current method of accounting under APB No. 25 for employee
stock-based compensation arrangements. The Company expects to continue its
current method of accounting under APB No. 25 for employee stock-based
compensation arrangements. If the Company continues its current method of
accounting, pro forma disclosures of net income and earnings per share must be
disclosed, as if the Company had adopted the recognition provisions of SFAS No.
123.

Although the Company is permitted to continue accounting for employee
stock-based compensation arrangements under APB No. 25, SFAS No. 123 requires
the Company to utilize the fair value method of accounting for transactions
involving stock options or other equity instruments issued to nonemployees as
consideration for goods or services. Presently, those transactions are accounted
for by the Company under the intrinsic value principles of APB No. 25. The use
of intrinsic value versus fair value did not have a material effect on any
period presented.

The accounting and disclosure requirements of SFAS No. 123 are effective
for the Company in 1996. The Company has not yet determined the impact of SFAS
No. 123.

25
<PAGE>

BUSINESS

INTRODUCTION

The Company, through the Partnership with 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(Trademark). 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
currently markets its systems to certain targeted applications within the
commercial air conditioning market in North America and Asia-Pacific. The
Company estimates that these targeted applications had annual sales of
approximately $2 billion of the approximately $6 billion combined North-American
and Asian-Pacific commercial air conditioning markets in 1994.

The Company believes that the Partnership's climate control systems more
effectively control humidity, improve indoor air quality, reduce energy
consumption, address certain environmental concerns and provide customers a
choice from a variety of energy sources such as natural gas, steam, waste heat
or electricity. Through November 30, 1995, the Partnership and, prior to
formation of the Partnership, the Company have sold 175 systems worldwide,
including 93 systems which incorporate both honeycomb rotors and ETS(Trademark),
to customers in the United States such as the Shop Rite, Grand Union and
Genuardi's supermarket chains, JCPenney and Liz Claiborne, and internationally,
through Chung-Hsin in Taiwan, Samsung in South Korea and Nichimen in Japan.

The Company was incorporated in 1984 under the name 'International
Cogeneration Corporation.' Initially, the Company designed, manufactured and
sold cogeneration equipment. The Partnership's proprietary desiccant cooling
design was initially developed by the Company as an extension of its
cogeneration business. In 1990, the Company changed its strategy and began to
design, manufacture and market climate control equipment based upon desiccant
technology, at which time the Company also changed its name to 'ICC
Technologies, Inc.' The Company has since discontinued its cogeneration
business.

In May 1992, the Company entered into a joint development agreement with
Engelhard in order to design a desiccant-based climate control system utilizing
ETS(Trademark). The Company and Engelhard formed the Partnership in February
1994, which replaced the joint development agreement and succeeded to the
desiccant-based climate control business which had been conducted by the
Company. In connection with the formation of the Partnership, the Company
granted Engelhard an option to acquire the Company's interest in the Partnership
in installments commencing on December 31, 1997. See 'Business -- The
Partnership.'

Since December 1994, the Partnership has (i) acquired from Ciba-Geigy the
honeycomb substrate manufacturing facility in Miami, Florida, (ii) entered into
a five year license agreement with Chung-Hsin, Taiwan's largest air conditioning
manufacturer, for Chung-Hsin to manufacture and sell the Partnership's climate
control systems on an exclusive basis in Taiwan and on a non-exclusive basis in
mainland China, (iii) received the 'Blue Star' certification for safety and
quality for its natural gas operated systems from The American Gas Association
Laboratory and (iv) hired a Vice President of Operations, Vice President of
Marketing and North American Sales and Vice President of Market Development, and
a new Chief Operating Officer. In addition, in 1995 the Partnership entered into
a field demonstration agreement with Carrier Corporation ('Carrier'), pursuant
to which Carrier is testing and collecting data from multiple units throughout
the United States.

MARKET OVERVIEW

The worldwide annual market for residential and commercial air conditioning
systems was approximately $26 billion in 1994 and is expected to grow to
approximately $39 billion by the year 2000, according to a recent study by
DRI/McGraw-Hill (the 'DRI Study'). The Partnership has specifically targeted
certain applications within the commercial air conditioning market in North

26
<PAGE>

America and Asia-Pacific. Of the approximately $6 billion market for
commercial air conditioning equipment in North America and Asia-Pacific in 1994,
the Company estimates that the market for these targeted applications was
approximately $2 billion. According to the DRI Study, the worldwide commercial
air conditioning market is expected to grow to approximately $13 billion by the
year 2000, and the Company expects the Partnership's desiccant-based systems to
compete in a broader segment of this market as awareness and acceptance of the
Partnership's systems grow and their initial cost declines. The Partnership has
also entered into two international joint ventures to develop desiccant-based
residential climate control systems, but no such system has yet been developed
and the Partnership cannot reasonably predict if and when any such system will
be developed. See 'Business -- Sales and Marketing.'

According to the DRI Study, the Asian-Pacific commercial air conditioning
market was approximately $3.5 billion in 1994 and is expected to increase to
approximately $5.7 billion by the year 2000. Many of the Asian-Pacific countries
are located in humid climates where the Partnership's climate control systems
are most effective. The Asian-Pacific market is dominated by Japan, which
predominantly utilizes natural gas powered air conditioning systems. As in
Japan, many countries throughout Asia-Pacific are experiencing shortages of
electricity, creating a demand for air conditioning systems powered by
alternative energy sources.

The North American commercial air conditioning market was approximately
$2.8 billion in 1994, according to the DRI Study, and is expected to increase to
approximately $3.7 billion by the year 2000. Air conditioning systems in North
America predominately utilize electric powered systems. The Partnership's
strategy is to continue to target commercial applications in which humidity
control, indoor air quality and energy consumption are important health issues
or a significant cost of business. Indoor air quality has become an important
issue currently affecting the air conditioning industry in the United States.
Fungal and microbial growth in damp duct work and the build-up of pollutants
from furniture, appliances and other equipment in recirculated air can lead to
unhealthy indoor environments sometimes identified as 'Sick Building Syndrome.'
To combat this problem, in 1989, ASHRAE issued standards to increase the amount
of fresh air brought into buildings by as much as 200 to 300% as compared to
prior ventilation standards. These standards have been incorporated into many
state and local building codes throughout the United States for new
construction. See 'Business -- Government Regulation.'

International accords which address various energy and environmental
concerns are also having an impact on air conditioning markets throughout the
world. Under the 1987 Montreal Protocol, as amended, approximately 130 signatory
countries have agreed to halt all production of ozone-destroying CFCs commencing
in 1996. As a result, the Company believes there is an increased demand for new
equipment to replace CFC-based air conditioning equipment. See 'Business --
Government Regulation.'

DESICCANT TECHNOLOGY

Comfort is directly affected by both temperature and humidity. People are
generally more comfortable in less humid environments. Lower humidity allows
water to evaporate from the skin, causing a cooling effect. Conventional air
conditioning systems reduce indoor temperature and humidity by cooling air.
Humidity control is principally a by-product of the cooling process when
moisture condenses on the cooling coil. In conditions where significant humidity
reduction is desired, conventional air conditioning systems must often cool
indoor air below desired levels, thereby consuming additional energy. Desiccant
systems, however, remove humidity independently of cooling without overcooling
the air, thereby generally consuming less energy than conventional air
conditioning.

Systems which utilize desiccant technology have been in existence for more
than 50 years. A desiccant is a generic term for any drying agent that removes
moisture from the air. Prior desiccant-based equipment met limited success and
market acceptance outside of industrial drying applications because of less
effective desiccants and rotors, higher maintenance costs, inefficient designs,
and high

27
<PAGE>

initial and operating costs. The Company believes that the Partnership's
climate control system design, which incorporates Engelhard's ETS(Trademark)
desiccant and a small cell, honeycomb substrate material used in the manufacture
of the Partnership's desiccant and heat exchange rotors, has principally
overcome these problems and in many applications is an energy efficient and
environmentally safer supplement or alternative to conventional air conditioning
systems.

ETS(Trademark) is a white crystalline powder, classified as a molecular
sieve. Molecular sieves are capable of differentiating chemicals on a
molecule-by-molecule basis and, therefore, can be designed to remove single
compounds, such as water, from liquids and gases. ETS(Trademark) is unique in
its capabilities to release moisture at lower regeneration temperatures, thereby
requiring less energy than other desiccants. The heat necessary to remove the
moisture can be provided by almost any source of heat capable of generating
temperatures of at least 140degreesF. As a result, the Partnership's systems can
use a wider variety of heat sources, including waste heat, than other
desiccant-based systems.

The Partnership's systems utilize two wheel-shaped rotors with honeycomb
passages. The honeycomb substrate material used to make the rotors is
manufactured through a variation in Ciba-Geigy's proprietary process for
manufacturing lightweight structural honeycomb core utilized in aircraft
construction. This substrate material offers lighter weight, superior airflow
and more efficient heat and moisture transfer than the corrugated rotors used by
the Partnership's competitors. The Company believes that the Partnership's
honeycomb rotors are unique and would be difficult and costly for competitors to
duplicate.

The first rotor in the Partnership's two rotor systems is coated with
ETS(Trademark) and the second serves as a heat exchange rotor. Recirculated air,
or up to 100% fresh air, is first dehumidified by passing it through a slowly
rotating rotor treated with ETS(Trademark) that adsorbs airborne moisture, and
thereby raises the temperature in proportion to the reduction in humidity. As
the desiccant rotor rotates to the other side of the unit, heated air is blown
through the desiccant rotor which releases the moisture from the ETS(Trademark),
regenerating the desiccant rotor for further dehumidification. The warm,
dehumidified air is next cooled by passing it through a similar rotor which has
not been coated with ETS(Trademark). Depending upon climatic conditions, the
temperature of the process air is generally reduced to a temperature up to 10%
lower than outside air temperature. The heat exchange rotor is cooled by an
evaporative cooler on the other side of the unit. The moderate temperature, dry
air can be cooled further by partially rehumidifying the air through an
evaporative cooler, which does not use any refrigerants, or a smaller cooling
coil than would be required by a conventional air conditioning system. The
process air is then delivered to the building by the normal system of fans and
ducts. To date, approximately 25% of the units sold by the Partnership have
included cooling coils and three units have been sold with evaporative coolers
as post-cooling options.

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<PAGE>

The basic operation of the Partnership's gas or waste heat powered climate
control systems is depicted below:

[ GRAPHIC DESCRIBED IN APPENDIX A, NO. 3 ]

BUILDING SUPPLY AIRSTREAM

A - Recirculated or up to 100% fresh air is drawn into the unit by a fan
and pushed through a slowly turning desiccant rotor.

B - The desiccant rotor removes the majority of moisture from the air and
in the process warms the air.

C - The warm, dry air is driven through a heat exchange rotor that cools
the airstream.

D - Post-cooling options to further lower the process air temperature
include an evaporative cooler (which partially rehumidifies the air
without using any refrigerants) or a cooling coil. A hot water coil
for winter heat is standard in the DESI/AIR(Registered) and Desert
Cool(Trademark) systems.

REGENERATION AIRSTREAM

E - Outside air or building exhaust air is drawn into the regeneration
airstream.

F - An evaporative cooler saturates the regeneration airstream with water,
significantly lowering its temperature.

G - The cooled air is drawn through the heat exchange rotor, cooling
(regenerating) the heat exchange rotor and warming the regeneration
air.

H - The regeneration airstream is further heated by a heating coil and is
drawn through the desiccant rotor to dry (regenerate) it.

I - A fan exhausts the regeneration airstream to the outside atmosphere.

29
<PAGE>
The Company believes that the Partnership's systems provide the following
features and benefits:

o More Effective Control of Humidity -- The Partnership's systems are more
effective at controlling humidity than conventional, refrigerant-based
air conditioning systems which control humidity primarily as a
by-product of the cooling process when moisture condenses on the cooling
coil. As a result, in conditions where significant humidity reduction is
desired, conventional air conditioning systems must often cool air below
desired levels. Drier air is generally more comfortable for a building's
occupants and is more efficient to cool. Humidity control is also
important in a variety of commercial applications, such as supermarkets,
and in certain manufacturing processes.

o Improved Indoor Air Quality -- Ventilation standards recommended by
ASHRAE and incorporated into many state and local building codes
throughout the country for new building construction now require that as
much as 200 - 300% more fresh air be circulated into buildings compared
to prior ventilation standards to reduce indoor air pollutants
associated with 'Sick Building Syndrome.' The Partnership's climate
control systems are designed to process the humidity introduced by
increased ventilation and, accordingly, enable a building to meet or
exceed these standards. In addition, lower humidity levels reduce
airborne bacteria, mold, mildew and fungi, another major source of
indoor air quality problems.

o Energy Efficient and Cost Effective -- Less humid air requires less
energy to cool than more humid air. By dehumidifying air before cooling,
the Partnership's systems, even with a post-cooling option, consume less
energy and are more cost effective to operate than conventional air
conditioning systems. As a supplement to conventional air conditioning,
by first dehumidifying the air, the Partnership's systems are designed
to improve the efficiency of existing conventional air conditioning.

o Versatile and Reliable -- The Partnership's systems are available in
natural gas, electric, steam or waste heat models and in several sizes
which process from 2,000 to 25,000 cubic feet of air per minute. The
ability to choose from a variety of energy sources allows customers to
select the most cost-effective energy source in their area at the time
of purchase. The systems are also expected to require less maintenance
than conventional equipment because of simplicity of design and fewer
moving parts.

o Environmentally Safer -- Conventional air conditioning systems utilize
refrigerants, such as CFCs, HCFCs and HFCs, which damage stratospheric
ozone or contribute to global warming. Because the Partnership's systems
dehumidify the air before it is cooled by a post-cooling option in the
system or in conjunction with a conventional air conditioning system,
the cooling coil and compressor included as a post-cooling option in the
non-electric models are smaller, and in the electric models generally
are smaller, than would otherwise be required in a conventional air
conditioning system, thereby utilizing less refrigerant.

o Year-round Performance -- The Partnership's natural gas systems provide
year-round indoor climate control. In hot, humid weather they supply
cool, dry air. In cool, 'clammy' weather they supply warm, dry air. In
cold weather the natural gas powered systems supply heat. The
Partnership is currently developing heating capability for its electric
powered systems.

BUSINESS STRATEGY

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<PAGE>
residential unit to offer for sale. The Company believes that market awareness
and acceptance for the Partnership's systems may develop more rapidly in the
Asian-Pacific market and other similar regions of the world with high humidity
and where the demand for energy is increasing faster than supply. More
specifically, the Partnership is pursuing the following strategies:

o Establish Strategic Relationships with Domestic and International
Manufacturers and Distributors of Air Conditioning Equipment -- The
Partnership has developed strategic relationships with three major
corporations in Asia-Pacific and is in discussions with a number of
domestic and international manufacturers and distributors of air
conditioning equipment. The Partnership plans to enter into additional
licenses or joint venture arrangements. Taiwan's largest air
conditioning manufacturer, Chung Hsin, has licensed the Partnership's
desiccant-based technology and is attempting to develop a residential
unit. The Partnership has strategic marketing relationships with Samsung
in South Korea and Nichimen in Japan. Japan and South Korea are the
first and sixth largest air conditioning markets, respectively. The
Partnership is also working with AB Air in Israel to develop a
residential unit, and to establish local manufacturing and distribution
for the Partnership's current systems. In addition, Carrier is in the
process of field-testing a number of the Partnership's systems in the
United States. The Partnership believes that the reputation and
resources of its licensees and joint venture partners will accelerate
market acceptance and awareness for its products.

o Acquisition of an Air Conditioning Manufacturer -- The Company believes
that the acquisition of an air conditioning manufacturer is important to
the Partnership's overall strategy of developing market awareness of its
products, increasing production and distribution capabilities and
offering its customers a more complete solution to their climate control
needs. Currently, there are no firm commitments or agreements to acquire
an air conditioning manufacturer and there can be no assurance that any
agreements will be executed or any acquisition will be consummated.

o Reduction of Manufacturing Costs -- The Partnership significantly
reduced the cost of its rotors, a major cost component of its systems,
when it acquired Ciba-Geigy's Miami manufacturing facility and expects
to further reduce manufacturing and material costs through production
line innovations and substitute materials.

o Target Specific Commercial Applications -- The Partnership's strategy is
to continue to market its climate control systems to users in which
humidity control, indoor air quality and energy consumption are
important health issues or a significant cost of business. The primary
applications targeted by the Partnership and the benefits that its
systems can provide include:

31
<PAGE>

<TABLE>
<CAPTION>
Segment Benefits
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Supermarkets Reduces frost and condensation on refrigerated goods, which improves appearance and
extends shelf life as a result of fewer defrost cycles. Also, improves comfort in
refrigerated aisles and increases efficiency of refrigerated cases.
- ------------------------------------------------------------------------------------------------------------------
Schools Reduces bacteria and fungus in the building and its heating, ventilation and air
conditioning ('HVAC') system.
- ------------------------------------------------------------------------------------------------------------------
Restaurants Provides building pressurization to compensate for concentration of kitchen exhaust and
reduces cooking odors.
- ------------------------------------------------------------------------------------------------------------------
Health Care Reduces bacteria and fungus in the building and its HVAC system. Allows for warmer
temperatures at lower humidity for greater comfort of patients, doctors and other health
care workers.
- ------------------------------------------------------------------------------------------------------------------
Hotels Reduces mold and mildew.
- ------------------------------------------------------------------------------------------------------------------
Manufacturing Reduces concentration of volatile organic compounds generated in the manufacturing
process and improves comfort for workers. May be particularly important to
humidity-sensitive manufacturing processes.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

PRODUCTS

The Partnership currently manufactures and sells three types of
desiccant-based climate control systems, the 'DESI/AIR(Registered),' 'Desert
Cool(Trademark)' and 'Desert Breeze(Trademark),' which differ based upon
function and energy source. All of the systems now incorporate the Partnership's
proprietary honeycomb rotors and Engelhard's ETS(Trademark). The Partnership's
systems are currently being marketed as energy efficient supplements to enhance
the performance of, or partially replace, existing conventional air conditioning
systems. The DESI/AIR(Registered) and Desert Cool(Trademark) systems typically
operate on natural gas, but are also available in steam or waste heat operated
models, and also have gas heating capabilities. Consistent with general industry
practices, the Partnership warrants its systems for one year from the date of
installation and warrants its desiccant and heat exchange rotors for an
additional four years. No significant warranty claims have been experienced by
the Partnership or the Company to date.

The DESI/AIR(Registered) system is larger, customized and more heavy duty
than the Partnership's other systems. These units can displace from 25 to 250
tons of conventional cooling with the flexibility of utilizing any combination
of circulated or fresh air. The DESI/AIR(Registered) system was first sold in
June 1989, and has received general acceptance in the supermarket industry. The
Partnership and, prior to the Partnership's formation, the Company have sold 108
DESI/AIR(Registered) units through November 30, 1995. The list price for a
DESI/AIR(Registered) system varies from approximately $73,000 for the
Partnership's smallest unit that can displace up to 25 to 40 tons of
conventional cooling, to $159,000 for the largest unit which displaces up to 250
tons of conventional cooling, with the number of units required for each
application depending on the size and configuration of the building.

The Desert Cool(Trademark) system is designed to cool small commercial
applications with the flexibility of utilizing any combination of circulated or
fresh air and can displace as much as 25 tons of conventional cooling. The
Desert Cool(Trademark) system was successfully field-demonstrated by the
Partnership in 1994 in conjunction with certain members of the natural gas
industry and was introduced commercially in January 1995. Through November 30,
1995, 61 Desert Cool(Trademark) units have been sold. The list price for a
Desert Cool(Trademark) unit that displaces up to 25 tons of conventional cooling
is approximately $16,000. The Desert Cool(Trademark) line will be expanded in
1996 to include a unit which can displace as much as 50 tons of conventional air
conditioning at a list price of approximately $39,000.

The Desert Breeze(Trademark) system, the first all-electric desiccant-based
climate control system, was first shipped in July 1995. The Partnership has sold
six Desert Breeze(Trademark) units through November 30, 1995. An all-electric
model is important to compete in those markets where electricity is the only or
most practical source of energy. Currently, the majority of air conditioning
systems worldwide are electric

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<PAGE>

powered. The Desert Breeze(Trademark) system is designed to cool small
commercial applications with the flexibility of utilizing either circulated or
fresh air. The list price for a Desert Breeze(Trademark) unit that can displace
up to 25 tons of conventional cooling is approximately $15,000. The Desert
Breeze(Trademark) line will be expanded in 1996 to include a unit that can
displace as much as 35 tons of conventional air conditioning at a list price of
approximately $20,000. Unlike the Partnership's natural gas systems, the
electric units combine desiccant technology with conventional coils and
compressors which provide heat to regenerate the desiccant rotors and partially
cool the process air. An additional conventional coil may be added to provide
further post-cooling as in the natural gas units. The system can use smaller
compressors with HCFC refrigerant than conventional air conditioning equipment,
reducing the amount of refrigerant required and power usage and peak kilowatt
demand. The system is also currently designed to allow for use of HFC
refrigerant, which is a less efficient alternative to HCFC refrigerant. The
Partnership is currently developing heating capability in the Desert
Breeze(Trademark) system.

SALES AND MARKETING

Currently, the Partnership markets its systems to specific applications in
the commercial air conditioning market in which its systems offer the greatest
advantages compared to conventional air conditioning systems. To date, the
Partnership has marketed its systems primarily as a supplement to, or partial
replacement of, conventional air conditioning systems. Since the Partnership's
products utilize an emerging technology, potential customers carefully evaluate
and, in most cases, purchase the Partnership's systems for testing before
committing to further purchases. The Partnership sells its systems principally
to end users either directly or through independent manufacturers
representatives who purchase units at a discount or receive a commission. The
Partnership has developed separate plans and departments for domestic and
international sales and marketing.

United States. The Partnership employs a direct sales staff of five sales
people and approximately 36 independent manufacturers representatives to market
its systems in the United States. The direct sales staff markets the systems to
supermarket chains and national retailers, and oversees the manufacturers
representatives. The Partnership's manufacturers representatives market to
regional customers and to national accounts which are not assigned to the direct
sales staff. At present, a majority of the manufacturers representatives are
located in the southern and eastern regions of the country. The Partnership
plans to increase its sales staff and manufacturers representative network
throughout the country.

In September 1995, the Partnership entered into a field demonstration
agreement with Carrier pursuant to which Carrier is monitoring and evaluating
the performance of eleven Desert Cool(Trademark) and Desert Breeze(Registered)
units in commercial use throughout the United States. All monitoring equipment
costs which are not paid for by third parties such as local utility companies or
the U.S. Department of Energy, will be shared equally by the Partnership and
Carrier. Carrier has not committed to purchase or distribute any of the
Partnership's systems.

Gas and electric utilities have supported the Partnership's efforts to
create market awareness and acceptance for the Partnership's systems. The Gas
Research Institute has funded and endorsed independent testing to validate the
performance of ETS(Trademark) in the Partnership's natural gas systems and is
currently funding the testing of the Partnership's rotors used in such systems
for validation. In addition, gas utilities sponsored the initial test sites for
the Desert Cool(Trademark) system, and have formed a consortium, under the
auspices of the American Gas Cooling Center to promote the Partnership's natural
gas systems. The consortium, with 77 utilities currently participating, provides
financial incentives and sponsors training programs for engineers and building
owners. In 1995, the Desert Cool(Trademark) system became the first
desiccant-based unit ever to receive the 'Blue Star' certification for safety
and quality from the American Gas Association.

Similarly, several electric companies and research organizations are
promoting the Desert Breeze(Trademark) system. Southern Company, a major
electric company in the southeastern United States, assisted in the development
of the Desert Breeze(Trademark) system, and five electric utilities are
participating in various projects that promote the Desert Breeze(Trademark)
system. The Company has also received financial

33
<PAGE>
support from the Electric Power Research Institute for field testing, and
marketing support from the Edison Electric Institute, two electric industry
sponsored organizations.

As part of the federal government's program to evaluate two-wheel
desiccant-based air conditioning systems for possible inclusion in future
federal government building specifications, the federal government has purchased
two units to test and evaluate in field demonstrations, including an initial
unit in 1994 at a government-owned Burger King in Aberdeen, Maryland and a
follow-up unit in 1995 in an operating suite in a government-owned hospital in
Tampa, Florida. The Company anticipates that the federal government will
purchase additional units for testing in 1996.

International. International sales and marketing efforts have focused on
the high humidity, rapidly developing regions of the Asian-Pacific market. In
this region, manufacturing and industrial companies are generally interested in
the Partnership's systems to improve workers' comfort by lowering humidity. As
of November 30, 1995, the Partnership has manufactured and sold a total of 34
units assembled in the Partnership's Philadelphia manufacturing facility to
customers in Japan, South Korea and Taiwan through its licensing and
distribution agreements or relationships described below. The Partnership plans
to continue to market, sell and, in certain situations, assemble its climate
control systems through licensing arrangements or joint ventures with other
major companies in Asia-Pacific.

In March 1995, the Partnership entered into a license agreement with
Chung-Hsin, Taiwan's largest air conditioning manufacturer, pursuant to which
Chung-Hsin has been granted an exclusive license to manufacture and sell the
Partnership's gas and electric systems in Taiwan for a period of up to five
years based on achieving certain sales targets, and a non-exclusive license to
manufacture and sell such systems in mainland China. In consideration for such
license, Chung-Hsin paid the Partnership an initial fee of $500,000 and is
required to pay a royalty of 2.5% of Chung-Hsin's sales of all desiccant-based
climate control systems utilizing the Partnership's technology which are
manufactured and sold by Chung-Hsin. Chung-Hsin and the Partnership are also
currently attempting to develop a desiccant-based residential window unit.
Pursuant to a supply agreement, Chung-Hsin is required to purchase its desiccant
and heat-exchange rotors from the Partnership at 105% of their base price. The
Partnership also has the option to purchase systems manufactured by Chung-Hsin
for resale in other Asian-Pacific countries.

Nichimen, a Japanese trading company with $58 billion in annual sales in
1994, has been appointed a non-exclusive distributor of the Partnership's
systems in Japan. Nichimen has established relationships with Osaka Gas, Tokyo
Gas and Toho Gas and is in the process of establishing a national distribution
network for the Partnership's systems. Through November 30, 1995, 15 units have
been sold through Nichimen. In August 1995, Osaka Gas of Japan completed its
initial evaluation and testing of the Partnership's Desert Cool(Trademark) and
DESI/AIR(Registered) systems. In November 1995, Osaka Gas began marketing the
Partnership's natural gas systems and will monitor the performance of installed
systems during 1996. As of December 15, 1995, one Desert Cool(Trademark) unit
had been sold through Osaka Gas. No assurance can be given as to whether any
additional natural gas systems will be sold through Osaka Gas. Osaka Gas is the
second largest seller of natural gas in Japan and as part of its marketing
program promotes and sells natural gas operated equipment to promote the use of
natural gas.

In July 1995, the Partnership entered into a memorandum of understanding
with Samsung to sell its systems in South Korea which terminated on December 15,
1995. Through November 30, 1995, 15 units have been sold through Samsung in
South Korea. The Partnership is presently negotiating a formal distribution
agreement with Samsung for the sale of the Partnership's systems in South Korea.
There can be no assurance that a formal distribution agreement will be executed.

In August 1995, the Partnership entered into a joint development agreement
with AB Air in Israel for the development of a residential desiccant-based, all
electric climate control system. The Partnership has agreed to share equally in
the cost of the development program which is initially estimated to be
approximately $250,000. The Company has agreed to finance 60% of AB Air's
portion of the program costs pursuant to an interest-bearing loan. In addition,
AB Air has been granted the exclusive right to manufacture and sell
desiccant-based climate control systems incorporating the Partnership's
technology in Israel, Turkey, Greece, Cyprus and Egypt. In lieu of a royalty for
such

34
<PAGE>

license, AB Air has agreed to pay to the Partnership a mark-up of 10% over
the base price of the desiccant and heat-exchange rotors which the Partnership
is supplying to AB Air. Through November 30, 1995, six of the Partnership's
rotors have been incorporated into systems manufactured and sold by AB Air.

Backlog. As of November 30, 1995, the Partnership's backlog of firm
purchase orders for climate control equipment was approximately $1,600,000
compared to a backlog of $450,000 as of November 30, 1994. The Partnership
typically ships its systems within 8-10 weeks of receiving an order.

MANUFACTURING

At its Miami facility, the Partnership manufactures all of its proprietary
honeycomb desiccant and heat-exchange rotors and coats the desiccant rotors with
ETS(Trademark). The Partnership also manufactures certain other parts and
assembles, tests and ships completed systems from its leased manufacturing
facility in Philadelphia, Pennsylvania. The Partnership plans to expand the
capacity of its rotor manufacturing facility and move to a larger facility in
Philadelphia to support anticipated growth. See 'Business -- Properties.'

In December 1994, the Partnership acquired for $8 million in cash, the real
property and substantially all of the assets of Ciba-Geigy's manufacturing
facility in Miami, from which the Partnership had been purchasing the honeycomb
substrate currently used in producing the Partnership's desiccant and
heat-exchange rotors. The Partnership sought to manufacture its own substrate
and rotors to lower production costs, further improve the rotors and expand
production capacity to meet potential market demand. In addition, the
acquisition gives the Partnership more control of a critical technology and
manufacturing process for its current products. The Partnership acquired a
perpetual, exclusive technology license for the proprietary process to
manufacture such small cell, honeycomb substrate for use in air cooling,
conditioning and dehumidification applications, and certain other fluid
applications. The Partnership also assumed the lease of a 24,000 square foot
storage space and a parking lot adjacent to the Miami manufacturing facility. In
connection with the acquisition of the Miami facility, the Partnership entered
into a five-year requirements contract to continue to supply Ciba-Geigy with the
honeycomb substrate material for the aerospace industry. The Partnership is
required to make available to Ciba-Geigy in each year of the contract certain
percentages of the Miami facility's production capacity, ranging from 85% in
1995 to 30% in 2000. The contract is subject to early termination by Ciba-Geigy
at any time after 18 months, upon six months' notice.

As described above, the Partnership has entered into several licensing
arrangements with respect to manufacturing or marketing its products. The
Partnership may also license, or otherwise permit, other companies in the United
States or internationally to manufacture its systems but the Partnership expects
to continue to remain the exclusive manufacturer of the desiccant and heat
exchange rotors for such licensees.

SUPPLIES AND MATERIALS

Except as described below, the Partnership generally uses standard parts
and components in the manufacture of its systems and obtains such parts and
components from various independent suppliers. The Company believes the
Partnership is not highly dependent on any specific supplier and could obtain
similar components from other suppliers, except for the substrate material used
in its rotors and ETS(Trademark).

The Partnership purchases a proprietary strong, lightweight material from a
single supplier which is used as the base material in manufacturing the
honeycomb substrate for the Partnership's desiccant
and heat-exchange rotors. While this material is critical in the manufacture of
the rotors and the Partnership does not have a contractual agreement with such
supplier, the Company believes that the Partnership can obtain all of its
requirements for such material from such supplier for the foreseeable future.

35
<PAGE>

ETS(Trademark) is a patented desiccant material manufactured exclusively by
Engelhard. Pursuant to the Engelhard Supply Agreement, the Partnership has
agreed to purchase exclusively from Engelhard all of the ETS(Trademark) or any
improved desiccant material developed by Engelhard that the Partnership may
require in connection with the conduct of the Partnership's business. In turn,
Engelhard has agreed to sell to the Partnership its total requirements for
ETS(Trademark) or any improved desiccant material developed by Engelhard. The
price for ETS(Trademark) is adjusted as of January 1 of each year during the
term of the Engelhard Supply Agreement, which initially expires December 31,
1997, but may be extended by either party for additional two-year periods up to
December 31, 2003. The Engelhard Supply Agreement does not include specific
purchase prices but does contain a 'competitive offer' provision, whereby the
Partnership is able to purchase from third parties similar desiccant products
that are equal to or better than the products sold by Engelhard should they
become available, at a price that is lower than the price established for
ETS(Trademark) or any improved desiccant material sold by Engelhard under the
Engelhard Supply Agreement, provided, however, that (i) Engelhard has the right
to meet such 'competitive offer' in all material respects and (ii) any such
third party offer must be able to meet the Partnership's requirements for such
desiccants in all material respects in order to be considered a 'competitive
offer.'

THE PARTNERSHIP

The Company and Engelhard formed the Partnership in February 1994 to pursue
the desiccant air conditioning business which previously had been conducted by
the Company. In exchange for a 50% interest in the Partnership, the Company
transferred to the Partnership substantially all of its assets relating to its
desiccant-based air conditioning business, subject to certain liabilities.
Engelhard, in exchange for a 50% interest in the Partnership, (i) contributed
$8,600,000 in capital to the Partnership, (ii) entered into the Engelhard Supply
Agreement and the Engelhard License Agreement for ETS(Trademark) and (iii)
agreed to provide 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.

Pursuant to the Partnership Agreement, the Partnership is managed by a
Management Committee comprised of two members, one selected by each of the
Company and Engelhard. At present, such committee is comprised of Irwin L.
Gross, Chairman and President of the Company, and Robert J. Schaffhauser, Vice
President-Technology and Corporate Development of Engelhard. Mr. Gross is also
the Chief Executive Officer of the Partnership and has an employment agreement
with the Partnership that expires in 1999.

In accordance with the Partnership Agreement, the Company has granted
Engelhard options to acquire up to all of the Company's interest in the
Partnership at the rate of 25% of such interest per year, with each such 25%
option exercisable on December 31 of each year commencing in 1997 and extending
through and including 2000 (each an 'Exercise Date'), based on a price equal to
95% of the fair market value of the Partnership as of the Exercise Date in each
year in which an option is exercisable, determined by an investment banking firm
selected by the Company and Engelhard. Each 25% option is exercisable for a
limited period of time after the respective Exercise Date. Upon the occurrence
of an event of default by the Company under the Partnership Agreement (including
bankruptcy of the Company or failure by the Company to comply with, or a
violation of, any material term or condition of the Partnership Agreement which
is not cured within a 45-day period), Engelhard may accelerate the option. In
addition, Engelhard's purchase options are cumulative and any option unexercised
as of the end of the Exercise Period may be exercised as of any future Exercise
Period, provided that all previously unexercised options must be exercised and
all options automatically expire if Engelhard does not elect to exercise both of
its first two options. There can be no assurances as to whether Engelhard will
or will not exercise any or all of its options to purchase the Company's
interest in the Partnership. In the event that Engelhard's interest in the
Partnership increases to more than 70%, Engelhard will be entitled to designate
an additional member to the Management Committee and thereby will control the
management of the Partnership.

The Partnership entered into a Royalty Agreement as of February 7, 1994
with James Coellner and Dean Calton, engineers and employees of the Partnership
and former employees of the Company.

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<PAGE>

Pursuant to the Royalty Agreement, in exchange for their patents and trade
secrets, Messrs. Coellner and Calton are each entitled to receive royalty
payments from the Partnership equal to 0.5% of the Partnership's net revenues
received from sales of separate components, royalties and one-time payments for
licensed technology and sales of desiccant cooling and air treatment systems to
the extent such revenues result from the utilization of technology developed by
such individual. The royalty payments do not commence until the first year in
which the net revenues of the Partnership exceed $15 million. The maximum amount
of combined royalty payments to be made under the Royalty Agreement shall not
exceed $5 million in the aggregate and $300,000 for any one year. No royalty is
payable for any year in which the Partnership had no net income (or would have
had no net income after giving effect to such payments) or if, after giving
effect to such royalty payments, the Partnership had no net income on a
cumulative basis since its inception; provided that to the extent any royalty
payments otherwise payable are not required to be made due to such restrictions,
such payments shall be carried forward and made with respect to the next
subsequent year or years in which the aforementioned restrictions are satisfied.
The Royalty Agreement terminates on December 31, 2010 or, with respect to either
employee, the termination of employment of such individual, voluntarily or for
cause, prior to February 7, 1999.

PATENTS AND PROPRIETARY INFORMATION

The Partnership's ability to compete effectively with other manufacturers
of climate control equipment is dependent upon, among other things, a
combination of (i) the Partnership's proprietary desiccant system design, (ii)
Engelhard's patented ETS(Trademark) and (iii) Ciba-Geigy's proprietary process
licensed to the Partnership and utilized in manufacturing the small cell,
honeycomb substrate material used to make the Partnership's rotors. The
Partnership has been issued three United States patents covering certain of its
desiccant technology. Several U.S. and foreign patent applications are pending
which are directed to the products manufactured and sold by the Partnership and
additional patent filings are expected to be made in the future. See 'Risk
Factors -- Dependence on Proprietary Technology.'

The Company was granted a U.S. patent expiring in 2010, which it assigned
to the Partnership, related to using a microprocessor to control the desiccant
cooling systems in order to increase the energy efficiency or effectiveness of
the desiccant cooling process. Similar patents have also been issued to the
Partnership in several European countries.

The Partnership was granted a U.S. patent expiring in 2013, related to the
use of an electric heat pump in conjunction with a desiccant climate control
system which can use recirculated air for dehumidification, dehumidification
with cooling and heating.

The Partnership was also granted a U.S. patent which expires in 2013
directed to creating humidity gradients within a supermarket. A low humidity,
relatively warm temperature area is created in the frozen food section of the
supermarket, and a higher humidity, warm temperature area is created near the
produce section of the supermarket. This is accomplished by combining a
conventional air conditioning system with a desiccant unit. Creating a low
humidity area in the frozen food section of the supermarket significantly
improves the efficiency of refrigerated cases and a higher humidity area in the
produce section helps to preserve the fresh produce.

Under the Engelhard License Agreement, Engelhard granted the Partnership an
exclusive, royalty-free license during the existence of the Partnership to use
Engelhard's proprietary technology relating to ETS(Trademark) for use in the
Partnership's business, including heating, ventilation and air conditioning
applications. The license also includes any new technology conceived by
Engelhard's employees or representatives after execution of the Engelhard
License Agreement, which is developed for use by the Partnership in connection
with the Partnership's business. In turn, the Partnership has
agreed not to license or grant any rights in technology owned by the Partnership
to any person or entity, except that the Partnership will grant Engelhard or the
Company, upon request, a non-exclusive license to make, utilize and sell
Partnership technology in any business other than the Partnership's business at
a

37
<PAGE>

reasonable royalty rate to be negotiated at the time of the grant of such
license. See 'Business -- Supplies and Materials.'

In connection with the acquisition of Ciba-Geigy's manufacturing facility
in Miami, the Partnership acquired an exclusive, perpetual technology license to
use Ciba-Geigy's proprietary process in air cooling, conditioning and
dehumidifying applications, which is currently necessary to manufacture the
small cell, honeycomb substrate material used in manufacturing the Partnership's
proprietary desiccant and heat exchange rotors. See 'Business -- Manufacturing.'

The Partnership owns the registered trademark for 'DESI/AIR(Registered)'
and has filed trademark applications for 'Desert Cool(Trademark)' and 'Desert
Breeze(Trademark)' in the United States for heating, ventilation and air
conditioning systems. Several foreign trademark applications for
'DESI/AIR(Registered)' and 'Desert Breeze(Trademark)' are pending.

ENGINEERING, RESEARCH AND DEVELOPMENT

The Partnership's engineering, research and development activities focus on
designing systems for specific applications such as supermarkets, as well as
improving the performance and efficiency and lowering the costs of its climate
control systems. As of November 30, 1995, the Partnership had 17 employees
engaged in engineering, research and development. The Partnership's engineering,
research and development expenses for 1994 and the nine months ended September
30, 1995 were approximately $2,100,000 and $1,600,000, respectively.

COMPETITION

The Partnership competes against other manufacturers of conventional and
desiccant-based air conditioning systems primarily on the basis of capabilities,
performance, reliability, price and operating efficiencies. The Partnership
competes with numerous other manufacturers in the conventional heating,
ventilation and air conditioning equipment industry, including Trane Company,
York International Corporation, Carrier and others that have significantly more
resources and experience in designing, manufacturing and marketing of air
conditioning systems than does the Partnership. The Company believes the
Partnership's systems provide the following advantages over conventional air
conditioning systems: more effectively control humidity; improve indoor air
quality; reduce energy consumption; offer energy versatility; and reduce the
amount of refrigerants required. The Partnership also competes with several
companies selling desiccant-based climate control systems, including Munters
Corporation and Semco Incorporated. However, the Company believes its systems
perform better and are more economical to operate than competing desiccant-based
systems due to its honeycomb rotors and Engelhard's ETS(Trademark).

EMPLOYEES

Effective February 7, 1994, substantially all of the employees of the
Company became employees of the Partnership. The Company employed five full-time
persons and the Partnership employed 176 full-time persons as of November 30,
1995, none of whom are represented by unions.

GOVERNMENT REGULATION

In recent years, increasing concern about damage to the earth's ozone layer
caused by ozone depleting substances has resulted in significant legislation
governing the production of products containing CFCs. Under the Montreal
Protocol on Substances that Deplete the Ozone Layer, as amended in 1992 (the
'Montreal Protocol'), the approximately 130 signatory countries have agreed to
cease all production and consumption of CFCs, some of which are utilized in air
conditioning and refrigeration equipment, by the end of 1995. The Montreal
Protocol has been implemented in the United States through the Clean Air Act and
the regulations promulgated thereunder by the
Environmental Protection Agency (the 'EPA'). The production and use of
refrigerants containing CFCs are subject to extensive and changing federal and
state laws and substantial regulation under these laws by federal, state and
local government agencies. In addition to the United States, Japan,

38
<PAGE>

mainland China, Israel and Thailand are among the signatories to the
Montreal Protocol. The manner in which other countries implement the Montreal
Protocol could differ from the approach taken in the United States.

As a result of the regulation of CFCs, the air conditioning and
refrigeration industries are turning to substitute substances such as HCFCs,
HFCs and light hydrocarbons. HCFCs have 1 to 10% of the ozone-depleting
potential of CFCs. However, the production of HCFCs for use in new equipment is
currently scheduled to be phased out as of the year 2020 and the production of
HCFCs for the servicing of existing equipment is currently scheduled to be
phased out as of the year 2030 in the United States and other signatory
countries pursuant to the Montreal Protocol. As discussed below, pursuant to the
1992 Rio Accord, reduction of the use of HFCs is also being considered because
of their substantial global warming potential.

The Framework Convention on Climate Change (the '1992 Rio Accord') and
related conferences and agreements focused on the link between economic
development and environmental protection. Under the Rio Accord, approximately
180 signatory countries have agreed to establish a process by which they can
monitor and control the emission of 'greenhouse gases,' defined as gaseous
constituents of the atmosphere that absorb and re-emit infrared radiation, which
include HFCs. Parties to the 1992 Rio Accord must provide national inventories
of 'sources' (which release greenhouse gases, aerosols or precursors thereof
into the atmosphere) and 'sinks' (which remove greenhouse gases, aerosols or
precursors thereof from the atmosphere), and regular reports on policies and
measures which limit the emissions by sources and enhance the removal by sinks
of gases not controlled by the Montreal Protocol. No given level or specific
date for the control of greenhouse gas emissions have been explicitly provided,
although the United States government submitted a plan to the Rio Standing
Committee on its proposal for achieving this goal by the year 2000 and Articles
2(a) and (b) of the 1992 Rio Accord indicated there was an initial goal of
returning to 1990 levels of greenhouse gas emissions by the year 2000.

The Clean Air Act now requires the recycling and recovery of all
refrigerants used in residential and commercial air conditioning and
refrigeration systems. As a result, there are increasing costs involved in the
manufacturing, handling and servicing of refrigerant-based equipment. In the
Partnership's systems, the cooling coils and compressors included as a
post-cooling option in non-electric models are smaller, and in electric models
generally are smaller, than would otherwise be required in a conventional air
conditioning system, and therefore require less refrigerants.

The indoor air quality standards in the United States, as set forth by
ASHRAE Standard 62-1989 Ventilation for Acceptable Indoor Air Quality, now
require that up to 200-300% more fresh air be introduced into buildings as
compared to prior regulations. The purpose of such standards is to specify
minimum ventilation levels and indoor air quality levels in order to minimize
the potential for adverse health effects typically associated with 'Sick
Building Syndrome.' According to a recent study by the National Conference of
States on Building Codes and Standards, Inc. (the 'NCSBCS Study'), there are 30
states which have incorporated the ASHRAE 62-1989 ventilation standards in one
form or another as mandatory building code requirements into their respective
building codes (including energy and mechanical codes) for new construction of
certain and, in some cases, all types of buildings. Of such states, 18 states
require mandatory compliance with ASHRAE 62-1989 by all local jurisdictions and
an additional seven states require all local jurisdictions which elect to adopt
a building code to comply, at a minimum, with ASHRAE 62-1989. According to the
NCSBCS Study, there are ten other states which, while not adopting ASHRAE
62-1989 into their building codes, have referenced ASHRAE 62-1989 as a
recognized industry standard. Of the remaining 10 states, five states have
adopted building codes with ventilation requirements similar to those of ASHRAE
62-1989 and several major cities in the remaining five states either reference
ASHRAE 62-1989 as an industry standard or set similar ventilation requirements
according to the NCSBCS Study. In addition, the Company believes that due to
liability concerns and customer demands, it is an increasingly standard
engineering practice throughout the country to incorporate the ASHRAE
ventilation standards in new commercial building construction even when not
required by applicable building codes, and the Company believes

39
<PAGE>

that the Partnership's business prospects are enhanced because the
Partnership's climate control systems currently enable buildings to meet or
exceed such standards.

PROPERTIES

The principal executive offices of both the Company and the Partnership are
located at 441 North 5th Street, Suite 102, Philadelphia, Pennsylvania 19123.
The Partnership currently has approximately 15,000 square feet of office space
under a month-to-month lease at this location. The Company occupies office space
within the Partnership's offices and is charged for such space proportionately.
The Partnership's lease requires a monthly rental payment of approximately
$10,000 plus utility and tax costs, of which the Company's share is
approximately $1,000 per month, plus its proportionate share of utility and tax
costs.

The Partnership assembles its systems at a 55,000 square foot manufacturing
facility located in Philadelphia, Pennsylvania leased by the Partnership through
March 31, 1998. Additionally, the Partnership rents various storage facilities
under short-term leases to serve as depots for parts and supplies.

The Partnership currently produces the small cell, honeycomb substrate
material and the desiccant and heat-exchange rotors in its 75,000 square feet
manufacturing facility in Miami, Florida and leases a 24,000 square foot storage
facility and parking lot adjacent to the manufacturing facility.

Although the Partnership's facilities are adequate to meet its current
level of sales, the Company expects that by the end of the first half of 1996
the Partnership will have to increase its capacity to meet anticipated demand.
The Company expects that a portion of the proceeds of this offering will be used
to increase the Partnership's production capacity. See 'Risk Factors -- Need for
Additional Production Capacity' and 'Use of Proceeds.'

LEGAL PROCEEDINGS

Neither the Company nor the Partnership is a party to any material
lawsuits.

40
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information concerning the executive
officers and directors of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ----- --- -------------------------
<S> <C> <C>
Irwin L. Gross (1)(2) 52 Chairman of the Board and President
William A. Wilson 62 Vice Chairman of the Board
Albert Resnick (1) 65 Secretary and Director
Stephen Schachman (3)(4)(5) 51 Director
Andrew L. Shapiro (1)(2)(3)(5) 40 Director
Mark S. Hauser (3)(4) 38 Director
Manfred Hanuschek 34 Chief Financial Officer and Treasurer
</TABLE>

- ------------------
(1) Member of Equity Plan Committee

(2) Member of Nominating Committee
(3) Member of Compensation Committee
(4) Member of Audit Committee
(5) Member of Stock Option Committee

The executive officers of the Company are elected by, and serve at the
discretion of, the Board of Directors. The following information with respect to
the directors and executive officers of the Company has been furnished by such
persons.

Irwin L. Gross is a founder of the Company and has been the Chairman of the
Company and a director since the Company's inception in May 1984. Mr. Gross has
served as the President of the Company since February 1994 and also held such
position from the Company's inception through July 1991. In addition, Mr. Gross
has served as the Chief Executive Officer of the Partnership since its formation
in February 1994 and is one of two members of the Management Committee of the
Partnership. Mr. Gross also serves as the Chairman of the Board of Directors of
EA Industries, Inc. (formerly called Electronic Associates, Inc.), a
publicly-held company engaged in the contract manufacturing of electronic
products and systems. Mr. Gross has a Bachelor of Science degree in Accounting
from Temple University and a Juris Doctor degree from Villanova University.

William A. Wilson has been the Vice Chairman of the Company since February
1994 and a director of the Company since July 1991, and served as Treasurer of
the Company from February 1994 to December 1994. Mr. Wilson also served as
President and Chief Executive Officer of the Company from July 1991 to February
1994 when he retired from such positions. Prior to joining the Company, Mr.
Wilson held a series of senior management positions with United Technologies
Corporation from 1980 to 1991, including most recently as Senior Vice President
of its Commercial/Industrial Group and prior thereto as President and Chief
Executive Officer of Carrier, President of European Operations for Otis Elevator
Company, President of Latin American Operations for Otis Elevator Company, and
Vice President of Otis Elevator Company responsible for manufacturing planning.
Mr. Wilson has a Bachelor of Science degree in Mechanical Engineering from
Drexel University.

Albert Resnick has been a director of the Company since July 1991 and was
appointed the Secretary of the Company in February 1994. From 1953 until his
retirement in July 1991, Mr. Resnick was a Vice President of G.B. Goldman Paper
Company, a paper distribution company located in Philadelphia, Pennsylvania. At
G.B. Goldman, he was responsible for purchasing, marketing and advertising. Mr.
Resnick has a Bachelor of Science degree in Economics from the Wharton School of
the University of Pennsylvania.

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<PAGE>

Stephen Schachman has served as a director of the Company since August
1984. Mr. Schachman has been a Managing Director and a member of the Board of
Directors of Public Affairs Management, Inc., a consulting company in political
affairs, since April 1993. Mr. Schachman served as President and Chief Executive
Officer of Enercom, Ltd., a consulting company in the energy and communications
fields, from April 1991 to January 1993. From January 1992 to February 1995, Mr.
Schachman served in various capacities at Penn Fuel Inc., having served most
recently as Executive Vice President. From September 1988 to April 1991, Mr.
Schachman practiced law with the law firm of Dilworth, Paxson, Kalish and
Kauffman. Mr. Schachman has also served as President of Philadelphia Gas Works
and was a director of the American Gas Association. Mr. Schachman currently
serves on the Board of Elizabethtown Gas Company. Mr. Schachman has a Bachelor
of Science degree in Economics from the Wharton School of the University of
Pennsylvania and a Juris Doctor degree from Georgetown University Law Center.

Andrew L. Shapiro has served as a director of the Company since May 1990.
He has been President of Andy's Janitorial Service Co., Inc. since 1973 and
Afford-A-Maid, Inc. since 1988. Mr. Shapiro has also been President of Shapiro
Communications, Inc., a provider of special mobile radio services in the Boston
area, since 1987. Mr. Shapiro also serves as a director of Associated Builders
and Contractors, a national trade association of builders. Mr. Shapiro has a
Bachelor of Arts degree in Education from Glassboro State College.

Mark S. Hauser has served as a director of the Company since December 1994.
He is a founder and has been a Managing Director of Hauser, Richards & Co. since
March 1991 and of Tamarix Capital Corporation since June 1994, investment and
merchant banking firms. Prior to founding Hauser, Richards & Co. in March 1991,
Mr. Hauser was a Managing Director at Ocean Capital Corporation, a private
international investment banking firm from January 1986 to March 1991. Mr.
Hauser has been an Advisory Director of Direct Language Communications since
November 1993 and Vice Chairman of the Board of Directors of The Holmes
Protection Group, Inc. since September 1994. Mr. Hauser also serves as a
director of EA Industries, Inc., a publicly-held company engaged in the contract
manufacturing of electronic products and systems. Mr. Hauser has economics and
law degrees from Sydney University and a Master of Law degree from the London
School of Economics and Political Science.

Manfred Hanuschek has been the Chief Financial Officer of the Company since
October 1994 and Treasurer since December 1994. From 1983 to October 1994, he
was employed by Coopers & Lybrand, certified public accountants, most recently
as Senior Audit Manager. Mr. Hanuschek is a Certificated Public Accountant,
licensed in the Commonwealth of Pennsylvania. Mr. Hanuschek has a Bachelor of
Science degree in Accounting from Pennsylvania State University and is a member
of the American and Pennsylvania Institutes of Certified Public Accountants.

EXPANSION OF BOARD; APPROVAL OF CERTAIN TRANSACTIONS

The Company has undertaken that within 60 days of the date of this
Prospectus, it will appoint two additional nonemployee members to the Board of
Directors who are reasonably satisfactory to the Representatives (as hereinafter
defined). In addition, the Company has undertaken that for a period of three
years from the date of this Prospectus, the Company will use its best efforts to
nominate and recommend to the Company's stockholders for approval such directors
or two other directors who are reasonably satisfactory to the Representatives
(the 'Independent Directors'). Moreover, the Company has undertaken that it will
amend its Bylaws to provide that for a period of three years from the date of
this Prospectus, any use of the proceeds of this offering other than as set
forth under 'Use of Proceeds' shall be approved by a majority of the nonemployee
directors of the Company, including at least one of the Independent Directors.
In addition, during such three-year period, the Company will obtain similar
approval before it (i) raises any capital pursuant to the issuance of equity
securities or securities convertible into or exchangeable for equity securities
of the Company for any purpose other than to make a contribution to the
Partnership substantially similar to investments to be made by Engelhard (other
than with respect to stock options covered by plans which have been approved by
the Company's stockholders) or (ii) raises any capital for any purpose through
the issuance to any officer,

<PAGE>

director or 5% or greater stockholder of the Company of equity securities
or other securities convertible into or exchangeable for equity securities of
the Company (other than with respect to stock options covered by plans which
have been approved by the Company's stockholders). During such three-year
period, at least one of the Independent Directors will be a member of the
Compensation, Audit and Stock Option Committees of the Board of Directors.

EXECUTIVE COMPENSATION

As a condition to the formation of the Partnership pursuant to the joint
venture asset transfer agreement, Mr. Gross entered into a five year employment
agreement with the Partnership, dated February 7, 1994, pursuant to which Mr.
Gross is employed as the Chief Executive Officer of the Partnership and is
required to devote a majority of his business time to the business of the
Partnership, at an annual salary of $155,000, subject to certain adjustments.
Mr. Gross also received an annual salary in 1994 of $105,735 from the Company
for his services as its Chairman of the Board and President, although he does
not have a written employment agreement with the Company. In June 1995, the
Company increased Mr. Gross's salary to $150,000 per annum.

Prior to the formation of the Partnership, the Company entered into an
employment agreement with William A. Wilson, the former President and Chief
Executive Officer and a director of the Company, that was to expire on December
31, 1996. Under the terms of the agreement, Mr. Wilson received an annual salary
of $150,000 and options vesting over five years to purchase 500,000 shares of
Common Stock at an exercise price of $2.60 per share. The agreement also
stipulated that Mr. Wilson would receive one year of salary plus benefits if he
were terminated from employment without cause during the term of the agreement.
Effective February 28, 1994, Mr. Wilson resigned as President and Chief
Executive Officer of the Company, was appointed Vice Chairman of the Board and

43
<PAGE>
Treasurer, and he became a part-time employee of the Company. Under the terms of
the amended employment agreement, Mr. Wilson receives an annual salary of
$50,000 and the options to purchase 200,000 shares of Common Stock which had not
yet vested, vest over a four year period commencing in February 1994, subject to
his continued employment with the Company and subject to acceleration upon the
occurrence of certain extraordinary corporate events, such as a merger, sale or
change in control of the Company.

STOCK OPTION PLANS

The Company has adopted an Incentive Stock Option Plan ('ISOP') and a
Nonqualified Stock Option Plan ('NQSOP') for directors, officers and key
employees of the Company and others. Under these plans, options may be granted
for the purchase of up to an aggregate of 6,850,000 shares of Common Stock. The
number of options to be granted and the exercise prices are determined by the
Stock Option Committee of the Board of Directors in accordance with the terms of
the plans. Under the ISOP, the option price cannot be less than 100% of the fair
market value of the Common Stock on the date of the grant. Options under the
ISOP generally are exercisable for three to five years based on a vesting
schedule from the grant date. Under the NQSOP, the option price as determined by
the Stock Option Committee may be greater or less than the fair market value of
the Common Stock as of the date of the grant, and the options are generally
exercisable for three to five years subsequent to the grant date. At November
30, 1995, options to purchase an additional 1,560,942 shares of Common Stock may
be granted under the plans.

During 1994, the Company adopted an Equity Plan for Directors (the 'Formula
Plan') pursuant to which nonemployee Eligible Directors (defined below) receive
automatic option grants whose vesting are dependent on the market price of the
Common Stock. The Company does not intend to issue options to its nonemployee
directors other than pursuant to the Formula Plan. Under the Formula Plan, each
director who was an Eligible Director on adoption of the Plan was automatically
granted an option to purchase 50,000 shares of Common Stock and, thereafter,
each person who becomes an Eligible Director is automatically granted an option
to purchase 50,000 shares of Common Stock on the date such person first becomes
an Eligible Director. Each Eligible Director is automatically granted an option
to purchase an additional 50,000 shares of Common Stock on each fifth
anniversary of the initial grant for such director. An 'Eligible Director' is a
director who is not, and has not been during the twelve months preceding a grant
date, an officer or employee of the Company. The exercise price for the options
granted under the Formula Plan is the fair market value of a share of Common
Stock on date of the grant. Options to purchase 500,000 shares of Common Stock
may be granted under the Formula Plan. As of November 30, 1995, options to
purchase 350,000 additional shares of Common Stock were available for grant
under the Formula Plan.

Grants under the Formula Plan provide for vesting in five equal annual
installments commencing on the first anniversary of the date of grant, have a
term of ten years (subject to earlier termination under specified conditions)
and provide for accelerated vesting in the event of death or a change in control
of the Company. A 'change in control' means the consummation of any merger or
consolidation involving the Company, any sale of substantially all of the
Company's assets or other transaction or related transactions as a result of
which a single person or several persons acting in concert own a majority of the
Common Stock (except for certain transactions that do not involve a change in
the holders of a majority of the outstanding Common Stock).

During 1994, the Company granted nonqualified stock options under the NQSOP
to the following officers and directors: (i) on July 1, 1994, the Company
granted options to purchase 500,000 shares of Common Stock to Mr. Gross and
options to purchase 50,000 shares to each of Messrs. Resnick and Wilson, in each
case at an exercise price of $5.60 per share; (ii) on July 7, 1994, the Company
granted to Messrs. Gross and Resnick options to purchase 175,000 shares and
200,000 shares of Common Stock, respectively, at an exercise price of $5.50 per
share; and (iii) on October 4, 1994, the Company granted to Mr. Hanuschek
options to purchase 50,000 shares of Common Stock, at an exercise price of
$9.125 per share. The vesting of the options referred to in clause (i) of this
paragraph and all options granted under the Formula Plan are contingent upon the
satisfaction of certain performance criteria

44
<PAGE>
relating to the future market price (higher than the market price on the date of
grant) of the Common Stock.

Under the ISOP, the Company has granted to certain employees who were
neither officers nor directors options to purchase 406,200 shares of Common
Stock through November 30, 1995, of which options to purchase 226,400 shares of
Common Stock are currently exercisable.

Under the Formula Plan, Messrs. Schachman and Shapiro were granted on July
1, 1994 options to purchase 50,000 shares of Common Stock at an exercise price
of $5.60 per share, and Mr. Hauser was granted on December 15, 1994 an option to
purchase 50,000 shares of Common Stock at an exercise price of $8.125 per share.

COMPENSATION OF DIRECTORS

Commencing June 1, 1995, each non-employee director receives an annual
retainer of $7,500 plus $500 for each Board meeting and each committee meeting
attended, together with reimbursement for expenses incurred in connection with
such meetings.

45
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth certain information, as of November 30,
1995, regarding the beneficial ownership of the Common Stock by (i) each person
who is known to the Company to be the beneficial owner of 5% or more of the
Common Stock, (ii) each director and executive officer of the Company, and (iii)
all executive officers and directors as a group. Unless otherwise indicated, the
stockholders listed possess sole voting and investment power with respect to the
shares indicated as owned by them.

<TABLE>
<CAPTION>
PERCENTAGE OWNED
SHARES --------------------------
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS(1) OWNED OFFERING OFFERING(2)
- ---------------------------------------------------------------------------- ----------- ----------- -------------
<S> <C> <C> <C>
Irwin L. Gross (3).......................................................... 2,650,046 15.8% 12.4%
Albert Resnick (4).......................................................... 1,601,620 9.9% 8.3%(5)
Andrew L. Shapiro (6)....................................................... 969,914 6.3% 4.6%
Stephen Schachman (7)....................................................... 60,000 * *
William A. Wilson (8)....................................................... 35,000 * *
Mark S. Hauser (9).......................................................... 165,000 1.1% *
Manfred Hanuschek (8)....................................................... 10,000 * *
All Executive Officers and Directors
as a group (7 persons) (10)............................................... 5,491,580 28.2% 25.5%(5)
</TABLE>

- ------------------
* Less than 1%.
(1) Addresses are included for beneficial owners of 5% or more of the Common
Stock. Beneficial ownership has been determined pursuant to Rule 13d-3 of
the Exchange Act. Mr. Shapiro's business address is 1273 North Church Road,
Suite 107, Moorestown, New Jersey 08057. The business address for each of
the other 5% stockholders is the address of the Company at 441 North 5th
Street, Philadelphia, PA 19123.
(2) Amounts indicated reflect the Preferred Stock Transactions, including the
conversion of the Series G and H Convertible Preferred Stock and the
issuance of Common Stock as payment for the accrued dividends on the Series
H Convertible Preferred Stock, and the issuance of 2,500,000 shares of
Common Stock in connection with this offering.

(3) Includes 478,181 shares of Common Stock and 108 shares (30.9%) of Series G
Convertible Preferred Stock currently convertible into 882,420 shares of
Common Stock, currently exercisable options to purchase 217,753 shares of
Common Stock, and currently exercisable warrants to purchase 300,000 shares
of Common Stock. Also includes 20,000 shares of Common Stock and 92 shares
(26.3%) of Series G Convertible Preferred Stock, currently convertible into
751,692 shares of Common Stock, held of record by a trust for the benefit
of the children of Mr. Gross, with respect to which Mr. Gross exercises
shared voting and investment power.

(4) Includes 27,828 shares of Common Stock, 75 shares (21.4%) of Series G
Convertible Preferred Stock currently convertible into 612,792 shares of
Common Stock, 1,500 shares (100%) of Series H Convertible Preferred Stock
currently convertible into 750,000 shares of Common Stock, and currently
exercisable options to purchase 211,000 shares of Common Stock.

(5) Includes 154,688 shares of Common Stock issued as payment for the accrued
dividends on the Series H Convertible Preferred Stock, so that after giving
effect to the Preferred Stock Transactions, Mr. Resnick would have
beneficially owned 1,756,308 shares of Common Stock as of September 30,
1995.

(6) Includes 154,264 shares of Common Stock, 75 shares (21.4%) of Series G
Convertible Preferred Stock currently convertible into 612,792 shares of
Common Stock, and currently exercisable options to purchase 202,858 shares
of Common Stock.
(7) Includes 10,000 shares of Common Stock and currently exercisable options to
purchase 50,000 shares of Common Stock.
(8) Consists of shares of Common Stock which may be acquired pursuant to
currently exercisable options.
(9) Consists of currently exercisable options and warrants to purchase Common
Stock.

(10) Includes (i) 690,273 shares of Common Stock, (ii) 350 shares of Series G
Convertible Preferred Stock currently convertible into 2,859,696 shares of
Common Stock, (iii) 1,500 shares of Series H Convertible Preferred Stock
currently convertible into 750,000 shares of Common Stock, and (iv)
currently exercisable options and warrants to purchase 1,191,611 shares of
Common Stock.

46
<PAGE>
CERTAIN TRANSACTIONS

In April 1993, the Company loaned Irwin L. Gross, Chairman and President,
$70,000 pursuant to a promissory note which provides that such amount is payable
on demand together with interest at an annual rate of 10%. As of September 30,
1995, the unpaid balance of the loan was $28,667. The loan was reduced to the
present balance by the offsetting of deferred salary on December 31, 1993.

On June 17, 1994, the Company, Mr. Gross and Albert Resnick, a director of
the Company, completed a private placement of a total of 1,400,000 shares of
Common Stock, of which 1,100,000 shares were sold by the Company and 150,000
shares were sold by each of Messrs. Gross and Resnick. Pursuant to an agreement
between the Company and Messrs. Gross and Resnick, the Company paid all expenses
incurred in connection with the offering, including placement agent selling
commissions of $64,732 with respect to the shares sold by Messrs. Gross and
Resnick.

During 1993 and 1994, the Company paid fees to companies affiliated with
Mark S. Hauser, a director of the Company, for financial advisory services, and
reimbursed such companies for certain expenses. The fees paid consisted of
approximately $125,000 in cash and the granting of immediately exercisable
warrants to purchase 340,000 shares of Common Stock at exercise prices of $3.25
for 50,000 shares, $3.56 for 90,000 shares and $4.75 for 200,000 shares,
exercisable until May 23, 1999.

Concurrent with the completion of the offering as part of the Preferred
Stock Transactions: (i) the 350 shares outstanding of Series G Convertible
Preferred Stock, beneficially owned by Messrs. Gross, Resnick and Shapiro will
be converted into 2,859,696 shares of Common Stock and the accrued dividends of
approximately $59,000 as of November 30, 1995 will be paid; (ii) the 1,500
shares outstanding of the Series H Convertible Preferred Stock owned by Mr.
Resnick will be converted into 750,000 shares of Common Stock; (iii) the accrued
Series H Convertible Preferred Stock dividends of approximately $619,000 as of
November 30, 1995 will be paid in the form of Common Stock at the rate of $4.00
per share; (iv) the 135 shares outstanding of the Series F Preferred Stock owned
by Mr. Gross and Resnick will be redeemed for approximately $256,000 and the
accrued dividends of approximately $23,000 as of November 30, 1995 will be paid;
(v) the 500 shares outstanding of the Series I Preferred Stock owned by Messrs.
Gross, Resnick and Shapiro will be redeemed for $500,000 and the accrued
dividends of approximately $186,000 as of November 30, 1995 will be paid; and
(vi) the 225 shares outstanding of the Series J Preferred Stock owned by Messrs.
Gross, Resnick and Shapiro will be redeemed for $225,000, and the accrued
dividends of approximately $79,000 as of November 30, 1995 will be paid.

DESCRIPTION OF CAPITAL STOCK

The Company is authorized to issue 50,000,000 shares of Common Stock, par
value $.01 per share, and 10,000,000 shares of Preferred Stock, par value $.01
per share. As of November 30, 1995, there were outstanding 14,710,540 shares of
Common Stock, 135 shares of Series F Preferred Stock, 350 shares of Series G
Convertible Preferred Stock (which are currently convertible into 2,859,696
shares of Common Stock), 1,500 shares of Series H Convertible Preferred Stock
(which are currently convertible into 750,000 shares of Common Stock), 500
shares of Series I Preferred Stock and 225 shares of Series J Preferred Stock.
In addition, as of such date there were outstanding warrants to purchase
1,465,000 shares of Common Stock and options to purchase 2,901,885 shares of
Common Stock, plus an additional 1,910,942 shares of Common Stock reserved for
issuance under the Company's stock option plans.

Upon completion of the offering pursuant to the Preferred Stock
Transactions, all the outstanding series of Preferred Stock will be converted or
redeemed for 3,609,696 shares of Common Stock and approximately $981,000 in
cash. In addition, accrued and unpaid dividends will be declared and paid in
cash, except with respect to the Series H Convertible Preferred Stock. The
unpaid dividends on the Series H Convertible Preferred Stock will be paid in
shares of Common Stock. Accordingly, after the sale of the shares offered hereby
and the Preferred Stock Transactions, there will be 20,974,926 shares of Common
Stock outstanding and no shares of Preferred Stock outstanding.

47
<PAGE>
COMMON STOCK. Each share of Common Stock is entitled to one vote on each
matter submitted to the stockholders without cumulative voting rights in the
election of directors. The shares of Common Stock have no preemptive rights. In
the event of a liquidation, dissolution or winding up of the Company, the
holders of Common Stock are entitled to share ratably in all assets remaining
after payment of liabilities, subject to prior distribution rights of any
Preferred Stock then outstanding. Subject to preferences that may be applicable
to any outstanding Preferred Stock, the holders of Common Stock are entitled to
receive ratably such dividends, if any, as may be declared from time to time by
the Board of Directors out of funds legally available therefor. Except for an
in-kind warrant dividend paid in June 1990, the Company has not declared any
dividends on the Common Stock and does not expect to declare dividends in the
foreseeable future on the Common Stock. Payment of future dividends rests with
the discretion of the Board of Directors and will depend, among other things, on
the earnings, capital requirements and financial condition of the Company and
the Partnership. See 'Dividend Policy.' All outstanding shares of Common Stock
are fully paid and non-assessable, and the shares of Common Stock offered
hereby, when issued, will be fully paid and non-assessable.

PREFERRED STOCK. The Company's Certificate of Incorporation authorizes the
Board of Directors to designate and issue from time to time one or more classes
or series of Preferred Stock, without approval of the stockholders. The Board of
Directors may fix and determine the relative designations, powers, preferences,
rights and dividends of any class or series of Preferred Stock. The issuance of
Preferred Stock, while providing flexibility in connection with possible
financings, acquisitions and other corporate transactions, could, among other
things, adversely affect the voting power of the holders of Common Stock and,
under certain circumstances, make it more difficult for a third party to gain
control of the Company.

TRANSFER AGENT. The transfer agent for the Common Stock of the Company is
American Stock Transfer & Trust Company, 40 Wall Street, New York, NY 10005.

SHARES ELIGIBLE FOR FUTURE SALE

As of November 30, 1995, there were 14,644,315 shares of Common Stock
outstanding. The 2,500,000 shares of Common Stock offered hereby and 14,037,017
of the shares of Common Stock currently outstanding are freely transferrable
without restriction or further registration under the Securities Act, except
that any such shares owned by 'affiliates' of the Company, as that term is
defined in Rule 144 under the Securities Act, may generally only be sold in
compliance with Rule 144 as described below, but without regard to the holding
period. The remaining shares of Common Stock are 'restricted securities' within
the meaning of Rule 144 and may not be sold in the absence of a registration
under the Securities Act unless an exemption from registration is available,
including an exemption contained in Rule 144. The Company, its executive
officers and directors and certain stockholders of the Company (holding, as of
November 30, 1995 and after giving effect to the Preferred Stock Transactions,
an aggregate of 4,454,657 shares of Common Stock, together with options and
warrants to purchase 3,476,611 shares of Common Stock) have agreed with the
Underwriters not to sell or otherwise dispose of any shares of Common Stock or
any securities convertible into or exercisable for any shares of Common Stock
for a period of 180 days after the date of this Prospectus without the prior
written consent of the Representatives of the Underwriters.

In addition, as of November 30, 1995, there were outstanding warrants to
purchase 1,465,000 shares of Common Stock, of which warrants to purchase 540,000
shares are currently exercisable, and options to purchase 2,901,885 shares of
Common Stock, of which options to purchase 1,262,085 shares are currently
exercisable. Of the outstanding warrants, 450,000 underlying shares of Common
Stock are registered pursuant to an effective registration statement and the
balance of 1,015,000 shares of Common Stock have certain registration rights.
Under the Company's stock option plans, options to purchase an additional
1,910,942 shares of Common Stock may be granted. All of the shares underlying
the options are covered by effective Registration Statements. In addition, there
are outstanding shares of Preferred Stock that are currently convertible into an
aggregate of 3,609,696 shares of Common Stock. All of such shares are eligible
for sale under Rule 144. An additional

48
<PAGE>

154,688 shares to be issued in lieu of dividends on certain shares of Preferred
Stock will be subject to the Rule 144 holding period requirements.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) including an officer, director or controlling
stockholder ('affiliate'), who has beneficially owned shares for at least two
years (including, in the case of a non-affiliate holder, any period of ownership
of preceding non-affiliate holders) is entitled to sell, within any three-month
period a number of shares that does not exceed the greater of (i) 1% of the then
outstanding shares of Common Stock or (ii) the average weekly trading volume in
the Common Stock during the four calendar weeks preceding such sale, subject to
the filing of a Form 144 with respect to such sale and certain other limitations
and restrictions. In addition, a person who is not deemed to have been an
affiliate of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least three
years, would be entitled to sell such shares under Rule 144(k) without regard to
the requirements described above.

The Company is unable to estimate the amount, timing or nature of future
sales of outstanding shares of Common Stock. Sales of substantial amounts of the
Common Stock in the public market or the availability of shares for sale may
have an adverse effect on the market price thereof.

49
<PAGE>
UNDERWRITING

The Underwriters named below, acting through their representatives, Janney
Montgomery Scott Inc. and Gerard Klauer Mattison & Co., LLC (the
'Representatives'), have severally agreed, subject to the terms and conditions
of the Underwriting Agreement by and among the Company and the Underwriters (the
'Underwriting Agreement'), to purchase from the Company and the Company has
agreed to sell to the Underwriters, the number of shares of Common Stock set
forth opposite their respective names below, at the public offering price less
the underwriting discounts and commissions set forth on the cover page of this
Prospectus.

NUMBER OF
UNDERWRITER SHARES
- ----------- ---------
Janney Montgomery Scott Inc......................................

Gerard Klauer Mattison & Co., LLC................................

TOTAL........................................................ 2,500,000
=========

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, and that the
Underwriters will purchase the total number of shares of Common Stock shown
above if any of such shares are purchased. The Underwriting Agreement provides
that, in the event of a default by an Underwriter, in certain circumstances the
purchase commitments of non-defaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.

The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public initially at the
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession not in excess of $___ per share, and the
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $______ per share to certain other dealers. After the public offering, the
public offering price and concession and discount to dealers may be changed by
the Representatives.

The Company has granted the Underwriters an over-allotment option,
exercisable for 45 days after the date of this Prospectus, to purchase up to an
aggregate of 375,000 additional shares of Common Stock at the public offering
price less the underwriting discounts and commissions set forth on the cover
page of this Prospectus. Such option may be exercised only to cover
over-allotments in the sale of the shares of Common Stock offered hereby. To the
extent such option is exercised, each Underwriter will be committed, subject to
certain conditions, to purchase a number of the additional shares of Common
Stock proportionate to such Underwriter's initial commitment as indicated in the
preceding table.

The Company has agreed to indemnify the Underwriters against, or to
contribute to losses arising out of, certain liabilities in connection with this
offering, including liabilities under the Securities Act.

The Company and its directors and executive officers and certain other
stockholders have agreed not to sell, contract to sell or otherwise dispose of
any shares of Common Stock for a period of 180 days from the date of this
Prospectus without the prior written consent of the Representatives.

Pursuant to a prior agreement with Gerard Klauer Mattison & Co., LLC
("GKM"), the Company paid GKM a fee of $231,000 in September 1995 in connection
with a $3,300,000 private placement of Common Stock and is obligated to pay GKM
an additional fee equal to 7% of the proceeds received by the Company in the
event any of the warrants to purchase 375,000 shares of Common Stock exercisable
at $9.00 per share issued in the private placement are exercised. In addition,
the Company has retained GKM for a period through January 1998, to act as the
Company's exclusive financial advisor with respect to any transfer of the
Company's interest in the Partnership to Engelhard, its affiliates, successors

50
<PAGE>

or assignees, or any other person designated by Engelhard. In connection
with any services performed under such engagement, the Company will pay GKM
customary and normal investment banking fees for transactions of such type and
size, as well as GKM's reasonable out-of-pocket expenses.

In connection with the offering, certain Underwriters and selling group
members (if any) who are qualifying registered market makers on Nasdaq may
engage in passive market making transactions in the Common Stock on Nasdaq in
accordance with Rule 10b-6A under the Exchange Act during the two business day
period before commencement of sales in the offering. The passive market making
transactions must comply with applicable price and volume limits and be
identified as such. In general, a passive market maker may display its bid at a
price not in excess of the highest independent bid for the security. If all
independent bids are lowered below the passive market maker's bid, however, such
bid must then be lowered when certain purchase limits are exceeded. Net
purchases by a passive market maker on each day are generally limited to a
specified percentage of the passive market making average daily trading volume
in the Common Stock during a reference period and must be discontinued when such
limit is reached. Passive market making may stabilize the market price of the
Common Stock at a level above that which might otherwise prevail and, if
commenced, may be discontinued at any time.

NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

The distribution of the Common Stock in Canada is being made only on a
private placement basis exempt from the requirement that the Company prepare and
file a prospectus with the securities regulatory authorities in each province
where trades of the Common Stock are effected. Accordingly, any resale of the
Common Stock in Canada must be made in accordance with applicable securities
laws which will vary depending on the relevant jurisdiction, and which may
require resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the Common Stock.

REPRESENTATIONS OF PURCHASERS

Each purchaser of Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to the Company and the dealer from whom
such purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such Common Stock without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, that such purchaser is purchasing as principal and not as agent
and (iii) such purchaser has reviewed the text above under 'Resale
Restrictions.'

RIGHTS OF ACTION AND ENFORCEMENT

The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.

All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Ontario purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.

51
<PAGE>
LEGAL MATTERS

The validity of the Common Stock offered hereby is being passed upon for
the Company by Mesirov Gelman Jaffe Cramer & Jamieson, Philadelphia,
Pennsylvania. Certain legal matters are being passed upon for the Underwriters
by Cozen and O'Connor, Philadelphia, Pennsylvania.

EXPERTS

The consolidated balance sheets as of December 31, 1994 and 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, included and incorporated by reference in this
Prospectus, have been audited by Coopers & Lybrand L.L.P. (whose report dated
March 24, 1995 includes an explanatory paragraph which refers to conditions that
raise substantial doubt about the Company's ability to continue as a going
concern) and have been included herein in reliance upon the authority of that
firm as experts in accounting and auditing.

The balance sheet as of December 31, 1994 and the statements 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, included and
incorporated by reference in this Prospectus have been audited by Coopers &
Lybrand L.L.P. (whose report dated March 24, 1995 includes an explanatory
paragraph which refers to conditions that raise substantial doubt about the
Partnership's ability to continue as a going concern) and have been included
herein in reliance upon the authority of that firm as experts in accounting and
auditing.

INDEMNIFICATION OF DIRECTORS, OFFICERS AND CONTROLLING PERSONS

The Company's Certificate of Incorporation contains a provision which
limits the personal liability of directors to the Company or the stockholders
for monetary damages for breach of fiduciary duty. The Certificate of
Incorporation provides that a director of the Company shall not be personally
liable for a breach of fiduciary duty as a director except for liabilities (i)
for any breach of the director's duty of loyalty, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for an unlawful dividend payment or an unlawful repurchase of stock,
or (iv) for any transaction from which the director derived an improper personal
benefit.

The Company's Certificate of Incorporation also provides that the Company
will indemnify and pay legal expenses and damages incurred by officers and
directors in any legal action arising from their actions as agents of the
Company as long as the officer or director had acted in good faith in a manner
he reasonably believed to be in or not opposed to the best interests of the
Company, and with respect to any criminal action, had no reasonable cause to
believe his conduct was unlawful.

Nothing in these provisions eliminates a director's fiduciary duty to act
with care or precludes a stockholder from pursuing injunctive or other equitable
remedies.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and therefore is unenforceable.

52
<PAGE>

<PAGE>
INDEX TO FINANCIAL STATEMENTS

ICC TECHNOLOGIES, INC.

FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994:

Consolidated Balance Sheets at September 30, 1995 and December 31, 1994................................. F-3

Consolidated Statements of Operations for the three and nine months ended September 30, 1995 and 1994... F-4

Consolidated Statements of Cash Flows for the nine months ended September 30, 1995 and 1994............. F-5

Notes to Consolidated Financial Statements.............................................................. F-6

FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992:

Report of Independent Accountants....................................................................... F-11

Consolidated Balance Sheets at December 31, 1994 and 1993............................................... F-12

Consolidated Statements of Operations for the years ended December 31, 1994, 1993 and 1992.............. F-13

Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the years ended December 31,
1994, 1993 and 1992.................................................................................. F-14

Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1993 and 1992.............. F-15

Notes to Consolidated Financial Statements.............................................................. F-16
</TABLE>

F-1
<PAGE>
INDEX TO FINANCIAL STATEMENTS, CONTINUED

ENGELHARD/ICC

PAGE
---------

<S> <C>
FINANCIAL STATEMENTS FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 AND THE NINE MONTHS
ENDED SEPTEMBER 30, 1995 AND THE PERIOD FEBRUARY 7, 1994 (DATE OF FORMATION) TO SEPTEMBER 30, 1994:

Balance Sheets at September 30, 1995 and December 31, 1994.............................................. F-29

Statements of Operations for the three months ended September 30, 1995 and 1994, the nine months ended
September 30, 1995, and the period February 7, 1994 (date of formation) to September 30, 1994........ F-30

Statements of Cash Flows for the nine months ended September 30, 1995, and the period February 7, 1994
(date of formation) to September 30, 1994............................................................ F-31

Notes to Financial Statements........................................................................... F-32

FINANCIAL STATEMENTS FOR THE PERIOD FEBRUARY 7, 1994 (DATE OF FORMATION) TO DECEMBER 31, 1994:

Report of Independent Accountants....................................................................... F-37

Balance Sheet at December 31, 1994...................................................................... F-38

Statement of Operations for the period February 7, 1994 (date of formation) to December 31, 1994........ F-39

Statement of Changes in Partners' Capital for the period February 7, 1994 (date of formation) to
December 31, 1994.................................................................................... F-40

Statement of Cash Flows for the period February 7, 1994 (date of formation) to December 31, 1994........ F-41

Notes to Financial Statements........................................................................... F-42
</TABLE>

F-2
<PAGE>
ICC TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

SEPTEMBER 30, DECEMBER 31,
1995 1994
-------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................................................... $ 3,855,335 $ 1,114,335
Receivables:
Employees.................................................................... 28,667 28,667
Engelhard/ICC................................................................ 157,543 124,095
Inventories, net................................................................ 2,000 16,960
Prepaid expenses and other...................................................... 187,284 65,210
-------------- --------------
Total current assets...................................................... 4,230,829 1,349,267
RESTRICTED BANK CERTIFICATE OF DEPOSIT............................................ 2,500,000 --
INVESTMENTS IN ENGELHARD/ICC...................................................... -- 1,048,255
PROPERTY AND EQUIPMENT, net....................................................... 3,944 --
OTHER ASSETS...................................................................... 3,414 --
-------------- --------------
Total assets.............................................................. $ 6,738,187 $ 2,397,522
-------------- --------------
-------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable -- trade....................................................... $ 15,059 $ 93,838
Current portion of note payable to stockholder.................................. 150,000 --
Accrued liabilities............................................................. 165,058 182,944
-------------- --------------
Total current liabilities................................................. 330,117 276,782
LOSSES OF ENGELHARD/ICC IN EXCESS OF INVESTMENTS.................................. 2,904,804 --
-------------- --------------
NOTE PAYABLE TO STOCKHOLDER....................................................... -- 150,000
-------------- --------------
-------------- --------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value --
Series F, authorized, issued and outstanding 135 shares at September 30,
1995, and 6,885 shares at December 31, 1994 (liquidation value $241,764 at
September 30, 1995 and $11,632,063 at December 31, 1994)................... 1 69
Series G Convertible, authorized 400 shares; issued and outstanding 350
shares at September 30, 1995 and December 31, 1994 (liquidation value
$626,797 at September 30, 1995 and $591,318 at December 31, 1994).......... 4 4
Series H Convertible, authorized, issued and outstanding 1,500 shares at
September 30, 1995 and December 31, 1994................................... 15 15
Series I, authorized, issued and outstanding 500 shares at September 30, 1995
and December 31, 1994...................................................... 5 5
Series J, authorized, issued and outstanding 225 shares at September 30, 1995
and December 31, 1994...................................................... 2 2
Common stock, $.01 par value, authorized 50,000,000 shares, issued 14,592,540
shares at September 30, 1995 and 12,288,632 shares at December 31, 1994...... 145,925 122,887
Additional paid-in capital...................................................... 34,907,976 29,241,534
Accumulated deficit............................................................. (31,379,232) (27,222,346)
Less: Treasury common stock, at cost, 66,227 shares............................. (171,430) (171,430)
-------------- --------------
Total stockholders' equity................................................ 3,503,266 1,970,740
-------------- --------------
Total liabilities and stockholders' equity................................ $ 6,738,187 $ 2,397,522
-------------- --------------
-------------- --------------
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-3
<PAGE>
ICC TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------ ------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES....................................... -- -- $ 6,500 $ 88,360
COST OF GOODS SOLD............................. -- -- 5,961 80,335
-------------- -------------- -------------- --------------
Gross profit................................. -- -- 539 8,025
OPERATING EXPENSES:
Marketing.................................... -- -- -- 155,283
Engineering and development.................. -- -- -- 150,523
General and administrative................... $ 343,283 $ 446,266 1,026,768 933,435
-------------- -------------- -------------- --------------
Total operating costs..................... 343,283 446,266 1,026,768 1,239,241
-------------- -------------- -------------- --------------
Loss from operations................... (343,283) (446,266) (1,026,229) (1,231,216)
INTEREST:
Interest income.............................. 72,251 54,207 275,312 71,447
Interest expense on stockholder's loans...... (4,031) (2,750) (12,219) (10,736)
-------------- -------------- -------------- --------------
68,220 51,457 263,093 60,711
-------------- -------------- -------------- --------------
EQUITY INTEREST IN NET LOSS OF ENGELHARD/ICC... (1,320,262) -- (3,393,750) --
-------------- -------------- -------------- --------------
NET LOSS....................................... (1,595,325) (394,809) (4,156,886) (1,170,505)
PREFERRED STOCK DIVIDEND REQUIREMENTS.......... (84,446) (45,125) (215,339) (175,875)
-------------- -------------- -------------- --------------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS..... $ (1,679,771) $ (439,934) $ (4,372,225) $ (1,346,380)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
NET LOSS PER COMMON SHARE...................... $ (0.12) $ (0.04) $ (0.34) $ (0.12)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
WEIGHTED AVERAGE COMMON SHARES................. 13,785,330 12,083,108 12,955,334 11,081,990
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-4
<PAGE>
ICC TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss..................................................................... $ (4,156,886) $ (1,170,505)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization............................................. 826 49,181
Equity interest in net loss of Engelhard/ICC.............................. 3,393,750 --
Warrants issued for services rendered..................................... 25,000 --
Increase in bad debt and inventory reserve................................ 9,000 111,112
(Increase) decrease in:
Receivables............................................................ (33,448) 45,035
Inventories............................................................ 5,960 (67,664)
Prepaid expenses and other............................................. (97,074) (20,341)
Increase (decrease) in:
Accounts payable....................................................... (78,779) (21,361)
Accrued expenses....................................................... 41,423 (62,825)
-------------- --------------
Net cash used in operating activities............................... (890,228) (1,137,368)
Cash Flows from Investing Activities:
Capital contribution to Engelhard/ICC........................................ (1,000,000) --
Repayments of loans from Engelhard/ICC....................................... 1,500,000 --
Purchase of restricted certificate of deposit................................ (2,500,000) --
Purchase of property and equipment, net...................................... (8,184) (9,300)
-------------- --------------
Net cash used in investing activities............................... (2,008,184) (9,300)
-------------- --------------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock and warrants, net..................... 5,639,412 5,062,303
Repayments of borrowings from stockholders................................... -- (185,272)
Borrowings from Engelhard Corporation........................................ -- 400,000
-------------- --------------
Net cash provided by financing activities........................... 5,639,412 5,277,031
-------------- --------------
Net increase in cash and cash equivalents...................................... 2,741,000 4,130,363
Cash and Cash Equivalents, Beginning of Period................................. 1,114,335 1,142,674
-------------- --------------
Cash and Cash Equivalents, End of Period....................................... $ 3,855,335 $ 5,273,037
-------------- --------------
-------------- --------------
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-5

<PAGE>
ICC TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 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 reflected herein. For further information, refer to the financial
statements and footnotes thereto for the year ended December 31, 1994 included
elsewhere herein. Results of operations for the nine months ended September 30,
1995 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, approximately $8,600,000 in cash, (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 to engage in the business of designing,
manufacturing and marketing climate control systems to supplement or replace
conventional air conditioning systems ('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.

Prior to consummation of the Transfer Agreement, ICC was engaged in the
business of designing, manufacturing and marketing desiccant cooling systems for
climate control for commercial buildings. The Partnership has and the Company
expects the Partnership to continue to conduct such business and to market its
products to such potential users.

F-6
<PAGE>
ICC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. BUSINESS AND GOING CONCERN CONSIDERATIONS: -- (CONTINUED)

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 nine months ended September 30, 1995. The Company has
incurred cumulative losses since inception of $31,379,232 through September 30,
1995. In order to continue operations, the Company has had to raise additional
capital to offset cash consumed in operations and support of the Partnership.
Until the Partnership generates positive cash flows from operations, it will be
primarily dependent upon its partners to provide any required working capital.
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.

Management intends to raise additional capital as required to continue
operations and to support the Partnership; however, there can be no assurance
that the Company will be able to raise additional capital. See Note 4, Stock
Transactions.

F-7
<PAGE>
ICC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. INVESTMENT IN ENGELHARD/ICC PARTNERSHIP:

The following are the summarized unaudited financial results of the
Partnership:

<TABLE>
<CAPTION>
PERIOD
FEBRUARY 7
QUARTER QUARTER NINE MONTHS (DATE OF
ENDED ENDED ENDED FORMATION) TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Revenues........................................ $ 2,009,538 $ 379,912 $ 7,171,504 $ 997,156
Cost of goods sold.............................. 2,283,118 328,282 7,175,429 876,872
-------------- -------------- -------------- --------------
Gross profit (loss)............................. (273,580) 51,630 (3,925) 120,284
Operating expenses:
Marketing..................................... 862,851 659,882 2,524,468 1,373,024
Engineering................................... 280,470 290,897 694,747 750,357
Research and development...................... 257,556 231,904 898,135 540,999
General and administrative.................... 847,423 466,093 2,084,030 1,000,461
-------------- -------------- -------------- --------------
Loss from operations............................ (2,521,880) (1,597,146) (6,205,305) (3,544,557)
Interest expense (income)....................... 118,643 (24,947) 582,194 (102,093)
-------------- -------------- -------------- --------------
Net loss........................................ $ (2,640,523) $ (1,572,199) $ (6,787,499) $ (3,442,464)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------

</TABLE>

SEPTEMBER 30, DECEMBER 31,
1995 1994
-------------- --------------
<S> <C> <C>
BALANCE SHEET INFORMATION:
Cash and cash equivalents....................... $ 40,998 $ 648,451
Receivables..................................... 1,497,441 663,551
Inventory....................................... 4,358,148 2,439,509
Other current assets............................ 47,181 75,836
Cash held in escrow............................. 1,060,865 --
Property, plant and equipment................... 7,988,625 7,946,511
Other noncurrent assets......................... 1,792,549 1,612,497
-------------- --------------
Total assets.................................. $ 16,785,807 $ 13,386,355
-------------- --------------
-------------- --------------
Current liabilities............................. $ 1,628,157 $ 1,730,732
Short-term loan................................. 2,750,000 --
Long-term debt.................................. 8,714,570 175,044
Notes payable to general partners............... -- 8,000,000
Partners' capital............................... 3,693,080 3,480,579
-------------- --------------
Total liabilities and capital................. $ 16,785,807 $ 13,386,355
-------------- --------------
-------------- --------------
</TABLE>

The Company's investment in the Partnership is owned by its wholly-owned
subsidiary, I-Partner, whose principal asset is the Partnership investment. The
investment in the Partnership is accounted for under the equity method of
accounting. On February 7, 1994, date of formation, the Company's investment in
the Partnership was approximately $0. The investment remained at $0 through
September 30, 1994 because the Company had no obligation to provide additional
financial support to the Partnership. In December 1994, each general partner
provided additional financing in the amount of $4,000,000 to the Partnership
('General Partners' Bridge Loan') in connection with the acquisition of the real
property and substantially all other assets of an existing manufacturing
facility located in Miami, Florida. The General Partners' Bridge Loan resulted
in the Company increasing its investment in the Partnership as well as recording
its proportionate share of previously unrecognized accumulated

F-8
<PAGE>
ICC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. INVESTMENT IN ENGELHARD/ICC PARTNERSHIP: -- (CONTINUED)
losses at that time. In May 1995, $1,500,000 of the bridge loan was repaid to
each general partner. The remaining $2,500,000 for each general partner was
converted into an investment in the Partnership.

In April 1995, the Partnership obtained financing from the issuance of
$8,500,000 of industrial development revenue bonds. The proceeds of these bonds
were used to repay $3,000,000 of the General Partners' Bridge Loan, $1,500,000
to each general partner, and provide for improvements and capital equipment at
the Miami facility. As of September 30, 1995, $1,060,865 of proceeds were held
in escrow and will be released upon the Partnership's incurring qualified
expenditures.

In May 1995, the Company guaranteed 50% of the Partnership's indebtedness
associated with the industrial development revenue bonds. The Company has
established an irrevocable letter of credit for $2,500,000 to support its
portion of the guarantee. The Company's letter of credit is collateralized by a
certificate of deposit in the amount of $2,500,000.

The general partners are guarantors of the Partnership's long-term debt
which totals approximately, $8,700,000 as of September 30, 1995.

Subsequent to September 30, 1995, each general partner contributed an
additional $2,000,000 to the Partnership.

The Company's proportionate share of losses in the Partnership are
$1,320,262 and $3,393,750 for the three and nine months ended September 30,
1995. The Partnership has incurred cumulative losses of approximately
$12,400,000 since inception. The Company's share of the cumulative losses have
resulted in recognition of losses in excess of the Company's investment in and
advances to the Partnership of $2,904,809, which has been reflected as a
liability in the September 30, 1995 balance sheet.

Receivables from the Partnership were $157,543 at September 30, 1995.
Interest income earned by the Company in connection with the General Partners'
Bridge Loan amounted to approximately $164,000 for the nine months ended
September 30, 1995. The Partnership charged the Company approximately $24,000
and $64,000 for the three and nine months ended September 30, 1995,
respectively, for various administrative office support services which were
provided.

4. STOCK TRANSACTIONS:

Equity Issuances

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. In
August 1995, the promissory note was paid. The Company issued 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 $932,000 from the exercise
of stock options to purchase approximately 476,000 shares of Common Stock
granted under its option plans for the three months ended September 30, 1995.
The Company received proceeds of approximately $1,683,000 from the exercise of
options to purchase approximately 794,000 shares of Common Stock granted under
its option plans for the nine months ended September 30, 1995.

The Company received proceeds of approximately $946,000 from the exercise
of warrants to purchase approximately 265,000 shares of Common Stock for the
nine month period ended September 30, 1995.

F-9
<PAGE>
ICC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. STOCK TRANSACTIONS: -- (CONTINUED)
Preferred Stock

The shares of Series G and H Convertible Preferred Stock may be converted
into Common Stock 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 Preferred Stock and Series G Convertible
Preferred Stock began to accrue a cash dividend at a rate equal to 15% of their
respective accrued liquidation preference. Cumulative undeclared and unpaid
dividends as of September 30, 1995 for the Preferred Stock amounted to
approximately $908,000. The Company may pay the redemption of Series F Preferred
Stock in shares of Common Stock. In August 1995, the 6,750 shares of Series F
Preferred Stock were redeemed by the issuance of 925,000 shares of Common Stock.

5. NEW ACCOUNTING STANDARD:

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation. SFAS No. 123 establishes a fair value based method of accounting
for stock-based compensation plans. It encourages entities to adopt that method
in place of the intrinsic value method currently in place under the provisions
of Opinion No. 25 of the Accounting Principles Board (APB). Under the fair value
method of accounting, all arrangements under which employees receive shares of
stock or other equity instruments or under which employers incur liabilities to
employees in amounts based on the price of its stock result in the measurement
of compensation cost at the grant date of the award which is recognized over the
service period, usually the vesting period. Under the intrinsic value method,
compensation cost is measured by the excess of the quoted market price of the
stock, if any, over the amount the employee must pay to acquire the stock. For
example, granting immediately exercisable stock options to an employee at an
exercise price equal to the quoted market price of the stock results in the
recognition of compensation expense at the date of grant under the fair value
method of SFAS No. 123; under the intrinsic value method of APB No. 25, no
compensation expense is recognized. However, SFAS No. 123 allows the Company to
elect to continue its current method of accounting under APB No. 25 for employee
stock-based compensation arrangements. The Company expects to continue its
current method of accounting under APB No. 25 for employee stock-based
compensation arrangements. If the Company continues its current method of
accounting, pro forma disclosures of net income and earnings per share must be
disclosed, as if the Company had adopted the recognition provisions of SFAS No.
123.

The accounting and disclosure requirements of SFAS No. 123 are effective
for the Company in 1996. The Company has not yet determined the impact of SFAS
No. 123.

F-10
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To The Stockholders of ICC Technologies, Inc.:

We have audited the accompanying consolidated balance sheets of ICC
Technologies, Inc. as of December 31, 1994 and 1993 and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of ICC Technologies,
Inc. as of December 31, 1994 and 1993 and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1994 in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1, the Company
incurred losses accumulating to $27,222,346 through December 31, 1994. This
factor, among others, raises substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
described in Note 1. The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 24, 1995

F-11
<PAGE>

ICC TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS

DECEMBER 31, DECEMBER 31,
1994 1993
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................................................... $1,114,335 $1,142,674
Receivables:
Trade, net of allowance for doubtful accounts of $19,112 and $35,000,
respectively................................................................. -- 243,127
Employees..................................................................... 28,667 90,095
Engelhard/ICC................................................................. 124,095 --
Inventories, net................................................................ 16,960 533,008
Prepaid expenses and other...................................................... 65,210 68,427
------------ ------------
Total current Assets........................................................ 1,349,267 2,077,331
INVESTMENTS IN NET ASSETS OF AND LOANS TO ENGELHARD/ICC 1,048,225 --
PROPERTY AND EQUIPMENT, net....................................................... -- 329,319
OTHER ASSETS, net................................................................. -- 157,652
------------ ------------
Total assets................................................................ $2,397,522 $2,564,302
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable -- trade....................................................... $ 93,838 $ 407,595
Current portion of long-term debt............................................... -- 150,000
Accrued liabilities............................................................. 182,944 313,036
------------ ------------
Total current liabilities................................................... 276,782 870,631
------------ ------------
NOTE PAYABLE TO ENGELHARD CORPORATION............................................. -- 500,000
------------ ------------
NOTE PAYABLE TO STOCKHOLDERS...................................................... 150,000 150,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value --
Series F, authorized, issued and outstanding 6,885 shares at December 31, 1994
and 1993 (liquidation value $11,632,063 at December 31, 1994 and $10,352,494
at December 31, 1993)........................................................ 69 69
Series G Convertible, authorized 400 shares; issued and outstanding 350 shares
at December 31, 1994 and 1993 (liquidation value $591,318 at December 31,
1994 and $526,271 at December 31, 1993)...................................... 4 4
Series H Convertible, authorized, issued and outstanding 1,500 shares at
December 31, 1994 and 2,100 shares at December 31, 1993...................... 15 21
Series I, authorized, issued and outstanding 500 shares at December 31, 1994
and 1993..................................................................... 5 5
Series J, authorized, issued and outstanding 225 shares at December 31, 1994
and 1993..................................................................... 2 2
Common stock, $.01 par value, authorized 50,000,000 shares; issued 12,288,632
shares at December 31, 1994 and 9,969,278 shares at December 31, 1993........... 122,887 99,693
Additional paid-in capital........................................................ 29,241,534 23,946,571
Accumulated deficit............................................................... (27,222,346) (22,831,264)
Less: Treasury common stock, at cost, 66,227 shares............................... (171,430) (171,430)
------------ ------------
Total stockholders' equity.................................................. 1,970,740 1,043,671
------------ ------------
Total liabilities and stockholders' equity.................................. $2,397,522 $2,564,302
------------ ------------
------------ ------------
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-12
<PAGE>

ICC TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

YEAR ENDED DECEMBER 31,
----------------------------------------------
1994 1993 1992
-------------- -------------- --------------
<S> <C> <C> <C>
REVENUES..................................................... $ 88,360 $ 1,201,156 $ 957,459
COST OF GOODS SOLD........................................... 80,419 1,176,619 939,199
-------------- -------------- --------------
Gross profit............................................... 7,941 24,537 18,260
-------------- -------------- --------------
OPERATING EXPENSES:
Marketing.................................................. 155,822 878,542 653,557
Engineering and development................................ 150,523 1,099,575 521,161
General and administrative................................. 1,427,929 2,093,733 1,388,209
-------------- -------------- --------------
Total operating costs................................... 1,734,274 4,071,850 2,562,927
-------------- -------------- --------------
Loss from operations................................. (1,726,333) (4,047,313) (2,544,667)
INTEREST:
Interest income............................................ 162,285 14,876 4,726
Interest expense........................................... -- (1,415) (2,181)
Interest expense on stockholders' loans.................... (14,611) (24,000) (24,751)
-------------- -------------- --------------
147,674 (10,539) (22,206)
-------------- -------------- --------------
EQUITY INTEREST IN NET LOSS OF ENGELHARD/ICC................. (2,812,423) -- --
-------------- -------------- --------------
NET LOSS..................................................... (4,391,082) (4,057,852) (2,566,873)
PREFERRED STOCK DIVIDEND REQUIREMENTS........................ (227,750) (261,500) (241,938)
-------------- -------------- --------------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS................... $ (4,618,832) $ (4,319,352) $ (2,808,811)
-------------- -------------- --------------
-------------- -------------- --------------
NET LOSS PER COMMON SHARE.................................... $ (0.41) $ (0.51) $ (0.47)
-------------- -------------- --------------
-------------- -------------- --------------
WEIGHTED AVERAGE COMMON SHARES............................... 11,390,981 8,550,852 5,978,505
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-13
<PAGE>

ICC TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

COMMON TREASURY TOTAL
STOCK ADDITIONAL COMMON STOCKHOLDERS'
PREFERRED ($0.01 PAR PAID-IN ACCUMULATED STOCK, EQUITY
STOCK VALUE) CAPITAL DEFICIT AT COST (DEFICIT)
----------- ----------- ------------ ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1991............. $ 94 $ 57,897 $ 16,911,776 $(16,206,539) $ (171,430) $ 591,798
Sale of 500 shares of Series I
preferred stock.................... 5 -- 499,995 -- -- 500,000
Sale of 225 shares of Series J
preferred stock.................... 2 -- 224,998 -- -- 225,000
Issuance of 405,772 shares of common
stock, net of offering expenses.... -- 4,058 785,001 -- -- 789,059
Net loss............................. -- -- -- (2,566,873) -- (2,566,873)
----- ----------- ------------ ------------ ---------- -------------
BALANCE DECEMBER 31, 1992.............. 101 61,955 18,421,770 (18,773,412) (171,430) (461,016)
Conversion of 50 shares Series G
preferred stock into 408,528 shares
of common stock.................... -- 4,085 (4,085) -- -- --
Issuance of 2,918,998 shares of
common stock through a private
placement, net of offering
expenses........................... -- 28,200 4,309,924 -- -- 4,338,124
Issuance of shares of common stock... -- 1,875 713,712 -- -- 715,587
Issuance of 357,900 shares of common
stock through exercise of stock
options............................ -- 3,578 505,250 -- -- 508,828
Net loss............................. -- -- -- (4,057,852) -- (4,057,852)
----- ----------- ------------ ------------ ---------- -------------
BALANCE, DECEMBER 31, 1993............. 101 99,693 23,946,571 (22,831,264) (171,430) 1,043,671
Conversion of 600 shares Series H
preferred stock into 300,000 shares
of common stock.................... (6) 3,000 (2,994) -- -- --
Issuance of 1,100,000 shares of
common stock through a private
placement, net of offering
expenses........................... -- 11,000 3,477,920 -- -- 3,488,920
Issuance of 919,354 shares of common
stock through exercise of stock
options and warrants............... -- 9,194 1,640,837 -- -- 1,650,031
Issuance of warrants to purchase
40,000 shares of common stock...... -- -- 179,200 -- -- 179,200
Net loss............................. -- -- -- (4,391,082) -- (4,391,082)
----- ----------- ------------ ------------ ---------- -------------
BALANCE, DECEMBER 31, 1994............. $ 95 $ 122,887 $ 29,241,534 $(27,222,346) $ (171,430) $ 1,970,740
----- ----------- ------------ ------------ ---------- -------------
----- ----------- ------------ ------------ ---------- -------------
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-14
<PAGE>

ICC TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1994 1993 1992
-------------- -------------- --------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss................................................... $ (4,391,082) $ (4,057,852) $ (2,566,873)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 49,181 107,590 111,106
Equity interest in net loss of Engelhard/ICC............ 2,812,423 -- --
Termination expense..................................... -- 30,000 --
(Gain) loss on retirements of fixed assets.............. -- (225) 87,683
Common stock and warrants issued for services
rendered............................................. 179,200 212,969 2,900
Provision for doubtful accounts......................... 16,112 15,000 10,000
Increase in inventory reserve........................... 95,000 48,000 69,000
Write-off of equipment and other assets................. -- 70,044 86,838
(Increase) decrease in:
Receivables.......................................... 67,321 (110,588) 149,930
Inventories.......................................... (67,664) (164,472) 354,159
Prepaid expenses and other........................... (23,873) (31,138) 32,580
Other assets......................................... -- (32,151) (36,847)
Increase (decrease) in:
Accounts payable........................................ (53,418) 109,813 27,719
Accrued expenses........................................ (55,918) 128,193 244,531
-------------- -------------- --------------
Net cash used in operating activities................ (1,372,718) (3,674,817) (1,427,274)
-------------- -------------- --------------
Cash Flows from Investing Activities:
Loans to Engelhard/ICC..................................... (4,000,000) -- --
Purchases of property and equipment, net................... (9,300) (300,040) (17,329)
-------------- -------------- --------------
Net cash used in investing activities................ (4,009,300) (300,040) (17,329)
-------------- -------------- --------------
Cash Flows from Financing Activities:
Proceeds from sale of common stock and warrants, net....... 5,138,951 4,643,208 550,805
Proceeds from sale of preferred stock, net................. -- -- 725,000
Borrowings from stockholders............................... -- -- 60,000
Repayments of borrowings from stockholders................. (185,272) (60,000) --
Payments made under capital lease obligations and long-term
debt.................................................... -- -- (39,113)
Borrowings from Engelhard Corporation, net................. 400,000 500,000 --
-------------- -------------- --------------
Net cash provided by financing activities............ 5,353,679 5,083,208 1,296,692
-------------- -------------- --------------
Net increase (decrease) in cash and cash equivalents......... (28,339) 1,108,351 (147,911)
Cash and Cash Equivalents, Beginning of Period............... 1,142,674 34,323 182,234
-------------- -------------- --------------
Cash and Cash Equivalents, End of Period..................... $ 1,114,335 $ 1,142,674 $ 34,323
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-15
<PAGE>

ICC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND GOING CONCERN CONSIDERATIONS:

Business

ICC Technologies, Inc. (the 'Company' or 'ICC') is a Delaware corporation.
On February 7, 1994, the Company and Engelhard Corporation, 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
Corporation, 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 Engelhard Corporation 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. In
addition, Engelhard Corporation extinguished a $900,000 obligation due to it by
the Company.

The Partnership was formed on February 7, 1994 to engage in the business of
designing, manufacturing and marketing climate control systems to supplement or
replace conventional air conditioning systems ('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 a 50%
interest in the Partnership. Although the Company 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, the Company is not
precluded from engaging in other activities. The Company will continue to sell
its remaining cogeneration inventory. 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.

Prior to the formation of the Partnership, the Company 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 desiccant cooling 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 other types of air conditioning and dehumidification products. The
Company expects the Partnership to continue such business and to market 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.

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 have been insufficient to
cover costs of operations. The Company has incurred cumulative losses since
inception of $27,222,346 and a net loss during 1994 of $4,391,082. 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

F-16
<PAGE>
ICC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1. BUSINESS AND GOING CONCERN CONSIDERATIONS: -- (CONTINUED)

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. Although ICC is not obligated to contribute
additional capital to the Partnership, in 1994, it loaned to the Partnership
$4,000,000 for the purchase of certain assets and has guaranteed certain
obligations of 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. Capital of
approximately $8,600,000 to the Partnership has been contributed by Engelhard
Corporation which is also obligated to provide a $3,000,000 line of credit to
the Partnership. In 1994, Engelhard also loaned $4,000,000 to the Partnership
for the purchase of certain assets. 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.

2. THE PARTNERSHIP:

On February 7, 1994 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 ICC's wholly-owned subsidiary,
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. The assets and liabilities were transferred by the Company
at historical cost with no gain or loss being recorded by the Company.

F-17
<PAGE>
ICC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. THE PARTNERSHIP: -- (CONTINUED)

Summarized results of operations and balance sheet information of the
Partnership as of December 31, 1994 and for the period from formation (February
7, 1994) through December 31, 1994, are as follows:

PERIOD ENDED
DECEMBER 31, 1994
------------------
<S> <C>
RESULTS OF OPERATIONS:
Revenues................................................................ $ 1,620,386
Loss from operations.................................................... (5,699,721)
Net loss................................................................ $ (5,624,845)

DECEMBER 31, 1994
------------------
BALANCE SHEET INFORMATION:
Cash and cash equivalents............................................... $ 648,451
Receivables............................................................. 663,551
Inventory............................................................... 2,439,509
Other current assets.................................................... 75,836
Property, plant and equipment........................................... 7,946,511
Other noncurrent assets................................................. 1,612,497
------------------
Total assets.......................................................... $ 13,386,355
------------------
------------------
Accounts payable and accrued expenses................................... $ 1,543,798
Payable to general partners............................................. 186,934
Long-term debt.......................................................... 175,044
Notes payable to general partners....................................... 8,000,000
Partners' capital....................................................... 3,480,579
------------------
Total liabilities and partners' capital............................... $ 13,386,355
------------------
------------------
</TABLE>

In December 1994, the Partnership acquired for $8 million in cash, the real
property and substantially all other manufacturing assets of an existing
manufacturing facility located in Miami, Florida from Ciba-Geigy Corporation
('Ciba'), which currently produces the small cell, honeycomb substrate used to
manufacture the desiccant and heat exchange rotors that are an integral part of
the Partnership's products. The former Ciba plant produced primarily large cell
substrate which the Partnership is prohibited to produce or sell other than to
Ciba. The Partnership also acquired, as part of the transaction, an exclusive
technology license to use Ciba's proprietary process which is necessary to
manufacture such small cell, honeycomb structures. The Company's and the
Partnership's management believe that the acquisition gives the Partnership
complete control of the critical technologies and manufacturing processes for
its current products as well as those in the foreseeable future. Assets acquired
consisted of approximately $6.9 million of plant, property and equipment and
$1.1 million of intangibles.

To finance the acquisition, the Company and Engelhard each lent to the
Partnership $4,000,000. The loans, which are evidenced by promissory notes,
mature on December 31, 1995 and bear interest payable monthly at the Prime Rate
plus 1%. A portion of the principal amount of each of the loans is intended to
be repaid by the Partnership prior to the maturity date upon the receipt of
replacement financing which the Partnership is currently seeking and the
remainder would be repaid from funds from operations to the extent such funds
were available. The Partnership is in the process of obtaining third party
replacement financing. There is no assurance that the Partnership will be able
to obtain replacement financing prior to the maturity date or that such
replacement financing will be sufficient to repay the loans.

F-18
<PAGE>

ICC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. THE PARTNERSHIP: -- (CONTINUED)

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, 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.

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 December 1994, the general partners each loaned
$4,000,000 to the Partnership. The Company's proportionate share of losses in
the Partnership is $2,812,423, which has been recognized and offset against the
Company's investment in net assets and loans to Engelhard/ICC as of December 31,
1994.

Receivables from the Partnership were $124,095 at December 31, 1994.
Interest income earned from the Partnership amounted to approximately $32,000 in
1994. The Company received $250,000 in connection with the formation of the
Partnership for reimbursement of certain expenses incurred in connection with
the Joint Development Program efforts which preceded the formation of the
Partnership. The Partnership provided approximately $91,000 in various
administrative office support services to the Company. The general partners are
guarantors of the long-term debt of $175,044.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents for the purpose of
determining cash flows.

Inventories

Inventories are valued at the lower of cost (using specific identification)
or market.

Property and Equipment

Property and equipment are stated at cost. Costs of major additions and
improvements are capitalized and replacements, maintenance and repairs, which do
not improve or extend the life of the respective assets, are charged to
operations as incurred.

When an asset is sold, retired or otherwise disposed of, the cost of the
property and equipment and the related accumulated depreciation are removed from
the respective accounts, and any resulting gains or losses are reflected in
operations.

Depreciation is computed using the straight-line method over the estimated
useful lives of three to seven years.

Income Taxes

In 1993, the Company implemented Statement of Financial Accounting
Standards (SFAS) No. 109, 'Accounting for Income Taxes.' SFAS No. 109 requires
that deferred income taxes be computed using the asset and liability method
rather than the deferred method previously in effect. Adoption of SFAS No. 109
did not have a material effect on the Company's financial statements.

F-19
<PAGE>

ICC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- (CONTINUED)

Revenue Recognition

Revenues are recognized when equipment is shipped for equipment sales
contracts, when equipment is installed and operating for installation contracts,
and when the electric and thermal energy is used by the customer for energy
sales contracts. Energy and maintenance service revenue is recognized when
services provided are complete. Energy and maintenance service revenues totaled
$0, $97,101 and $177,023, for 1994, 1993 and 1992, respectively. Energy and
maintenance service cost of goods sold totaled $12,750, $263,833 and $247,363,
for 1994, 1993 and 1992, respectively.

Development Costs

Development costs are expensed as incurred. Development costs amounted to
approximately $24,000, $1,000,000 and $365,000 in 1994 ,1993, and 1992,
respectively.

Net Loss Per Common Share

The net loss per common share is based on the weighted average number of
shares of Common Stock outstanding during each year. Stock options, warrants and
convertible preferred stock have not been included, since they are antidilutive.
Cumulative dividends on the Series H Convertible Preferred Stock, the Series I
Preferred Stock, and the Series J Preferred Stock amounting to $227,750,
$261,500 and $241,938 for the periods ended December 31, 1994, 1993 and 1992,
respectively (see note 9), have been added to the net loss for determining the
net loss applicable to common stockholders in computing the net loss per common
share for the years ended December 31, 1994 and 1993. The computations of fully
diluted loss per share for the years ended December 31, 1994, 1993, and 1992
were antidilutive; therefore, the amounts reported herein for primary and fully
diluted loss per share are the same.

Concentration of Credit Risk

The Company invests its cash primarily in deposits with major banks.
Ongoing credit evaluations of customers' financial condition are performed and
generally no collateral is required. The Company maintains reserves for
potential credit losses and such losses, in the aggregate, have not exceeded
management's expectations.

4. SUPPLEMENTAL CASH FLOWS AND EQUITY DISCLOSURE:

Cash paid during the year for interest was $35,628, $1,415 and $2,169, in
1994, 1993, and 1992, respectively.

Included in the Statement of Cash Flows for 1994 were cash proceeds of
$3,488,920 from the issuance of 1,100,000 shares of Common Stock. Also included
were cash proceeds of $1,650,031 from the issuance of 919,354 shares of Common
Stock upon exercise of stock options and warrants. Excluded from the Statement
of Cash Flows in 1994 were the effects of certain non-cash financing
transactions related to the conversion of 600 shares of Series G Convertible
Preferred Stock into 300,000 shares of Common Stock. Also the Company
transferred to the Partnership, upon formation, approximately $60,000 of net
liabilities which consisted of approximately: $240,000 in receivables; $490,000
of inventory; $290,000 of property and equipment; $180,000 in other assets;
$360,000 in accounts payable and accrued liabilities and $900,000 of notes
payable to Engelhard.

Included in the Statement of Cash Flows for 1993 were cash proceeds of
$4,643,208 from the issuance of 3,144,598 shares of Common Stock. Excluded from
the Statement of Cash Flows in 1993 were the effects of certain non-cash
financing transactions related to: the issuance of 4,000 shares of

F-20
<PAGE>

ICC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. SUPPLEMENTAL CASH FLOWS AND EQUITY DISCLOSURE: -- (CONTINUED)

the Company's Common Stock in settlement of approximately $43,000 of accounts
payable to an equipment vendor; the issuance of 100,000 shares of Common Stock
to an equipment vendor in settlement of approximately $388,000 of accounts
payable and the establishment of a prepaid equipment account of approximately
$45,000; the issuance of 7,140 shares of Common Stock to a vendor in settlement
of approximately $35,000 of accounts payable; the issuance of 10,000 shares of
Common Stock with a fair market value of $30,000 to a former officer and
recorded as severance expense; the issuance of incentive stock options to
purchase 33,300 shares of Common Stock upon exercise of incentive stock options
by an employee borrowing $60,150 from the Company which was repaid in
installments through March 1994; the issuance of 408,528 shares of common stock
upon the conversion of 50 shares of Series G Convertible Preferred Stock. Also,
an employee receivable of approximately $5,000 was offset against the deferred
salaries account included in accrued liabilities.

Included in the Statement of Cash Flows for 1992 were cash proceeds of
$550,805 from the sale of 373,472 shares of Common Stock. Also included were
cash proceeds of $725,000 from the sale of 500 shares of Series I Preferred
Stock and 225 shares of Series J Preferred Stock. Excluded from the Statement of
Cash Flows in 1992 were the effects of certain non-cash financing transactions
related to: the issuance of 18,000 shares of Common Stock upon the conversion of
accounts payable of a related party for legal services of approximately
$171,000; the issuance of 12,000 shares of Common Stock to an equipment vendor
in settlement of approximately $60,000 of accounts payable; and the issuance of
2,300 shares of Common Stock upon the exercise of options for approximately
$2,900, the exercise price for which was forgiven and charged to bonus expense.
Also, a $15,000 note was issued to a former officer and director in exchange for
approximately $8,200 in deferred salary and approximately $6,800 in severance
costs.

5. INVENTORIES:

Inventories comprise the following:

DECEMBER 31,
----------------------
1994 1993
--------- -----------
<S> <C> <C>
Purchased parts.................................................... $ 16,960 $ 380,745
Work-in-process.................................................... -- 152,263
--------- -----------
$ 16,960 $ 533,008
--------- -----------
--------- -----------
</TABLE>

Purchased parts at December 31, 1994 consist only of cogeneration equipment
and related parts that have been recorded at their net realizable value.
Purchased parts at December 31, 1993 consist primarily of desiccant
dehumidification equipment and related components to be used in the manufacture
of the Company's products. Work-in-process represents the costs (including
acquisition and installation costs) of the Company's products and system
installations currently in progress which are to be completed in the next year.
If a loss is indicated on an installation, a provision is made currently for
that loss. At December 31, 1994 and 1993, the Company's inventory balance of
$16,960 and $533,008, respectively, is net of a reserve for obsolete inventory
of approximately $430,000 and $383,000, respectively. For the years ended 1994,
1993, and 1992, the Company made provisions of approximately $95,000, $48,000,
and $69,000 respectively, for inventory obsolescence. The increase in inventory
obsolescence reserve was included in engineering and development expense in the
accompanying Consolidated Statement of Operations. The Company disposed of
inventory which was charged directly to engineering and development of
approximately $52,000, and $87,000 in 1993, and 1992, respectively.

F-21
<PAGE>
ICC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. PROPERTY AND EQUIPMENT:

Property and equipment, net, comprise the following:

DECEMBER 31,
------------------------
1994 1993
---------- ------------
<S> <C> <C>
Office and computer
equipment...................................................... -- $ 471,330
Cogeneration equipment........................................... $ 66,106 66,106
Furniture and fixtures........................................... -- 155,535
---------- ------------
66,106 692,971
Less -- Accumulated depreciation................................. (66,106) (363,652)
---------- ------------
$ -- $ 329,319
---------- ------------
---------- ------------
</TABLE>

The Company retired $79,847 and $139,030 of equipment in the years ended
December 31, 1993 and 1992, resulting in a (gain) or loss on retirement of
$(225) and $87,683, respectively.

Property and equipment included fully depreciated assets of approximately
$66,106 and $145,000 as of December 31, 1994 and 1993, respectively.

7. ACCRUED EXPENSES:

Accrued expenses comprise the following:

DECEMBER 31,
------------------------
1994 1993
----------- -----------
<S> <C> <C>
Professional fees................................................. $ 30,202 $ 142,000
Accrued interest.................................................. 49,142 70,158
Other............................................................. 103,600 100,878
----------- -----------
$ 182,944 $ 313,036
----------- -----------
----------- -----------
</TABLE>

8. LONG-TERM DEBT AND NOTES PAYABLE TO STOCKHOLDERS:

Long-term debt and notes payable to stockholders comprise the following:

DECEMBER 31,
------------------------
1994 1993
----------- -----------
<S> <C> <C>
Notes payable to stockholders..................................... $ 150,000 $ 300,000
Note payable to Engelhard......................................... -- 500,000
----------- -----------
150,000 800,000
Less -- current portion........................................... -- 150,000
----------- -----------
$ 150,000 $ 650,000
----------- -----------
----------- -----------
</TABLE>

The future minimum payments for the Company consist of the note payable to
stockholder of $150,000 due in 1996.

Upon entering into the Joint Venture Asset Transfer Agreement, Engelhard
loaned the Company $500,000, which loan was evidenced by a promissory note,
dated September 8, 1993. The loan to the Company, together with $500,000 of the
Company's own funds, was to be used solely for (i) funding operations of the
Company related to its desiccant air conditioning business and (ii) to reimburse
Engelhard for all costs, charges and expenses incurred by Engelhard for work
conducted by it in accordance with the Joint Development Agreement. No interest
was payable on the principal amount of the promissory note.

F-22
<PAGE>

ICC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. LONG-TERM DEBT AND NOTES PAYABLE TO STOCKHOLDERS: -- (CONTINUED)

In January 1994, Engelhard loaned to the Company an additional $400,000,
evidenced by a promissory note dated January 15, 1994. The note has the same
terms and conditions as the September 8, 1993 promissory note. On February 7,
1994, pursuant to the Joint Venture Asset Transfer Agreement, the net assets of
the Company's desiccant line of business were transferred to the Partnership and
the Partnership assumed the indebtedness evidenced by the $500,000 Engelhard
loan and the $400,000 Engelhard loan and such indebtedness was converted by
Engelhard into a capital contribution of the Partnership.

Two directors of the Company provided working capital demand loans
amounting to a total of $60,000 in December 1992. The loans were repaid in April
1993.

Warburg Pincus Capital Company L.P. (WPCC) and RIT Capital Partners plc
(RIT) provided working capital loans of $450,000 each prior to 1991 at the prime
interest rate plus 2 percent. The prime interest rate as of December 31, 1994,
1993, and 1992, was 8.5%, 6.0%, and 6.0%, respectively. During 1991, WPCC and
RIT purchased 300 shares each of Series H Convertible Preferred Stock. The Stock
was purchased through the exchange of $600,000 in debt plus accrued interest of
approximately $138,000. The remaining loans totalling $300,000 were scheduled to
mature in April 1996. On February 4, 1994, the Company paid the Warburg Pincus
$150,000 loan plus accrued interest of $35,628.

At December 31, 1994, the Company was not in compliance with a reporting
covenant contained in the debt agreement which stated that RIT would receive
audited financial statements by February 28 of each year. RIT waived compliance
with the covenant through January 1, 1996. The most restrictive covenant of this
debt agreement provides that the Company will not pay or declare any dividends
until such time as the principal and interest have been paid in full.

Interest expense on all stockholder loans were $14,611, $24,000, and
$24,751 in 1994, 1993, and 1992, respectively.

9. STOCK TRANSACTIONS:

Equity Issuances

In June 1994, the Company sold 1,100,000 shares of common stock at a
purchase price of $3.56 per share for aggregate cash proceeds of $3,916,000, and
two directors each sold 150,000 shares, at a purchase price of $3.56 for
aggregate cash proceeds to each of $534,000. Pursuant to an agreement between
the Company and the two directors, the Company agreed to pay all commissions and
expenses incurred in connection with the offering. Accordingly, the net proceeds
to the Company, after payment of such commissions and expenses, were $3,488,920.
In connection with the offering, the Company issued to an individual, who
subsequently became a director, for financial advisory services, warrants for
the purchase of 215,000 shares of common stock. Those warrants have an exercise
price of $3.25 - $4.75 per share and expire in 1999.

In July 1993, the Company registered under the Securities Act of 1933 up to
1,060,000 shares of common stock of which 950,000 shares were to be issued upon
the exercise of outstanding warrants and 110,000 shares were to be issued in
exchange for certain obligations: 100,000 shares to an equipment vendor in
settlement of approximately $388,000 in accounts payable and 10,000 shares to a
former officer of the Company as severance pay. As of December 31, 1993, the
Company had received $2,087,500 in cash for 950,000 shares of Common Stock
purchased upon the exercise of outstanding warrants. Expenses for this offering
for legal, accounting, and printing costs amounted to approximately $112,000.
This amount was offset against proceeds, reducing net proceeds from the offering
to approximately $1,976,000.

F-23
<PAGE>

ICC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. STOCK TRANSACTIONS: -- (CONTINUED)

The Company received $1,543,009 in cash for 732,354 shares of Common Stock
upon the exercise of incentive and nonqualified stock options for the year ended
December 31, 1994. Also, the Company received during 1994 net proceeds of
$286,222 from the exercise of warrants to acquire 187,000 shares of Common Stock
granted to placement agents in connection with the February and March 1993,
private placements, referred to below.

In March and April 1993, pursuant to a private placement commenced on March
30, 1993, the Company sold 374,000 shares of Common Stock for gross proceeds of
approximately $561,000 and net proceeds, after payment of commissions and
expenses of the offering, of approximately $459,000.

In March 1993, pursuant to a private placement commenced in February 1993,
the Company sold 1,496,000 shares of Common Stock for gross proceeds of
$2,244,000 and net proceeds, after payment of commissions and expenses of the
offering, of approximately $1,903,000.

In June 1992, the Company sold to an investor group led by the Chairman of
the Board, who is also a stockholder, for $225,000, 225 shares of Series J
Preferred Stock. The Series J Preferred Stock bears a 10% dividend which will
accrue, but not be payable until declared by the Board of Directors of the
Company. The investors also received options to purchase 128,574 shares of
Common Stock at $1.75 per share, exercisable for a period of four years
beginning June 3, 1993. The Series J Preferred Stock dividend in 1994 was
$22,500 and had accumulated to a total of $57,938 at December 31, 1994, all of
which has accrued but is not payable until declared.

Also in June 1992, two private investors purchased 228,572 shares of Common
Stock for $400,000.

In March 1992, the Company sold to an investor group led by the Chairman of
the Board, who is also a stockholder, for $500,000, 500 shares of Series I
Preferred Stock. The Series I Preferred Stock bears a 10% dividend which will
accrue, but not be payable until declared by the Board of Directors of the
Company. The investors also received options to purchase 400,000 shares of
Common Stock at $2.25 per share, exercisable for a period of four years
beginning March 12, 1993. The Series I Preferred Stock dividend in 1994 was
$50,000 and had accumulated to a total of $140,000 at December 31, 1994, all of
which has accrued but is not payable until declared.

The Company's Series H Convertible Preferred Stock bears a 9% dividend
which will accrue, but not be payable until declared by the Board of Directors
of the Company. The Series H Convertible Preferred Stock dividend in 1994 was
$155,250 and had accumulated to a total of $659,250 all of which has accrued but
is not payable until declared.

The Company's Series G and H Preferred Stock, which have voting rights, are
convertible into 2,859,696 and 750,000 shares of Common Stock, respectively.

Conversion of Debt to Equity and Issuance of Equity for Assets or Services

During 1993 and 1992, the Company issued Common Stock to settle various
liabilities and to acquire various assets or services (see note 4).

F-24
<PAGE>

ICC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. STOCKS OPTIONS AND WARRANTS:

The Company provides an incentive and a nonqualified stock option plan for
directors, officers, and key employees of the Company and others. Under these
plans, options may be granted for the purchase of up to 6,850,000 shares of
Common Stock. The number of options to be granted and the option prices are
determined by the Stock Option Committee of the Board of Directors in accordance
with the terms of the plans. Under the terms of the Incentive Stock Option Plan,
the option price cannot be less than 100% of the fair market value of the Common
Stock on the date of the grant. Incentive stock options are exercisable based on
a vesting schedule from the grant date. Under the Nonqualified Stock Option
Plan, the option price as determined by the Stock Option Committee may be
greater or less than the fair market value of the Common Stock as of the date of
the grant, and the options are generally exercisable for three to five years
subsequent to the grant date. At December 31, 1994, the Company had 1,750,000
and 5,100,000 shares of Common Stock reserved for the Company's Incentive Stock
Option Plan and Nonqualified Stock Option Plan, respectively.

The Company also authorized in 1994 the Equity Plan For Directors. The
Equity Plan For Directors is a formula based stock option plan that is dependent
upon the performance of the market price of the Common Stock. Under the Equity
Plan For Directors, options may be granted for the purchase of up to 500,000
shares of Common Stock to outside directors. Under the terms of the Equity Plan
For Directors, the option price cannot be less than 100% of the fair market
value of the Common Stock on the date of the grant.

In 1993, three employees, including an officer of the Company, exercised
options to purchase 54,600 shares of common stock. The employees borrowed the
amount of the exercise price of $82,850 from the Company. At December 31, 1993,
$60,150 was outstanding and was included in receivables -- employees. The
outstanding amount was repaid in installments through March 14, 1994.
Compensation expense of $142,969 was recorded on these transactions in 1993.

F-25
<PAGE>
ICC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. STOCKS OPTIONS AND WARRANTS: -- (CONTINUED)
Information with respect to stock options is summarized as follows:

AVAILABLE
FOR OUTSTANDING EXERCISABLE
GRANT OPTIONS OPTIONS PRICE RANGE
------------ ------------ ----------- -----------------
<S> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1992.......................... 1,127,752 1,931,203 $ .01-$2.785
Additional shares authorized in 1992................ 1,000,000 --
Granted............................................. (1,577,874) 1,577,874 $ .907-$5.00
Canceled............................................ 145,000 (145,000) $ 1.00-$2.50
Exercised........................................... -- (169,200) $ 1.00-$5.00
------------ ------------
BALANCE AT DECEMBER 31, 1992........................ 694,878 3,194,877 $ .01-$4.50
------------ ------------
Exercisable at December 31, 1992.................... 811,335 $ .01-$4.50
-----------
-----------
Additional shares authorized in 1993................ 1,500,000 --
Granted............................................. (1,167,140) 1,167,140 $ 1.75-$4.937
Canceled............................................ 375,801 (375,801) $ .907-$2.375
Exercised........................................... -- (435,440) $ .01-$4.937
------------ ------------
BALANCE AT DECEMBER 31, 1993........................ 1,403,539 3,550,776 $ .01-$4.50
------------ ------------
------------ ------------
Exercisable at December 31, 1993.................... 1,531,774 $ .01-$4.50
-----------
-----------
Additional shares authorized in 1994................ 1,500,000 --
Granted............................................. (1,295,000) 1,295,000 $ 4.375-$9.125
Canceled............................................ 502,403 (502,403) $ 1.00-$4.50
Exercised........................................... -- (732,354) $ .05-$3.625
------------ ------------
BALANCE AT DECEMBER 31, 1994........................ 2,110,942 3,611,019 $ .05-$9.125
------------ ------------
------------ ------------
Exercisable at December 31, 1994.................... 1,219,784 $ .01-$9.125
-----------
-----------
</TABLE>

In connection with the settlement of a claim, warrants to purchase 40,000
shares of Common Stock were issued as described in Note 12. In addition to the
warrants and Convertible Preferred Stock issued in connection with the
transactions described in Note 9, the Company had the following warrants to
purchase shares of common Stock outstanding at December 31, 1994, 1993, and
1992, respectively:

WARRANTS OUTSTANDING
---------------------------
NUMBER
OF SHARES PRICE RANGE
----------- --------------
<S> <C> <C>
DECEMBER 31, 1994
Consultants................................................ 140,000 $ 2.25-$3.00
Officers and directors..................................... 965,000 $ 2.00-$4.75
-----------
-----------
1,105,000
-----------
-----------
DECEMBER 31, 1993
Consultants................................................ 100,000 $ 3.00
Investors.................................................. 187,000 $ 1.65
Officers and directors..................................... 750,000 $ 2.00-$2.50
-----------
1,037,000
-----------
-----------
DECEMBER 31, 1992
Consultants................................................ 100,000 $ 3.00
Officers and directors..................................... 950,000 $ 2.00-$3.00
-----------
1,050,000
-----------
-----------
</TABLE>

F-26
<PAGE>
ICC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. 401(K) PROFIT SHARING PLAN:

All full-time employees of the Company and those part-time employees of the
Company who complete at least 1,000 hours of service in a given year are
eligible to participate in the Company's 401(k) Profit Sharing Plan ('the
Plan'). Under the Plan, an employee may elect to contribute on a pre-tax basis
to a retirement account from 1% to 20% of the employee's compensation up to the
maximum annual contributions permitted by the Internal Revenue Code. Each
employee is fully vested at all times with respect to his or her contributions.
Within certain limits prescribed by the Plan and applicable law, the Board of
Directors may authorize matching contributions and discretionary employer
contributions to the Plan. Discretionary employer contributions are allocated,
subject to certain limitations, pro-rata to eligible employees who have
completed at least 1,000 hours of service for a given year based on their
compensation. The Company did not make any matching or discretionary
contributions during the years ended December 31, 1994, 1993 or 1992.

The Company does not provide any post-retirement medical benefits.

12. COMMITMENTS AND CONTINGENCIES:

Net rental expense under operating leases was $20,833, $145,819 and
$104,868 for the years ended December 31, 1994, 1993 and 1992, respectively. The
Company assigned all of its leases to the Partnership upon its formation and the
Partnership assumed the lease obligations.

Employment Contracts

At December 31, 1994, the Company had an employment contract with one
officer. The terms of the contract, which were modified in February, 1994,
provide for total annual compensation of $50,000, plus certain other benefits,
through December 31, 1996.

Claims and Legal Actions

In 1994, the Company settled certain litigation brought against it pursuant
to which the Company granted a warrant to purchase 40,000 shares of its Common
Stock at $2.25 per share.

13. OTHER RELATED-PARTY TRANSACTIONS:

Employee accounts receivable amounted to $28,667, $90,095 and $9,729, at
December 31, 1994, 1993, and 1992, respectively. In December 1993, $59,150 was
due from an officer related to the exercise price of stock options. The amount
was collected in full in March 1994. In April 1993, the Company loaned $70,000
to its Chairman of the Board, a major stockholder of the Company, pursuant to
the terms of a promissory note, which provides that such amount is due and
payable on demand together with interest at the rate of 10%. As of December 31,
1994, the balance remaining on the Note was $28,667 plus accrued interest.

14. CHANGE IN METHOD OF ACCOUNTING FOR INCOME TAXES:

Effective January 1, 1993, the Company adopted SFAS No. 109 'Accounting for
Income Taxes.' Primarily due to the Company's history of losses, adoption of
SFAS No. 109 did not have any significant effect on its results of operations or
financial position. SFAS No. 109 requires the use of the liability method in
accounting for income taxes. Deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. A valuation allowance
has been provided on the net deferred tax assets due to the uncertainty of
realization. The adoption of SFAS No. 109 was not material to the Company. Prior
to

F-27
<PAGE>

ICC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. CHANGE IN METHOD OF ACCOUNTING FOR INCOME TAXES: -- (CONTINUED)

the adoption of SFAS No. 109 the Company utilized the deferred method of
accounting for income taxes.

Temporary differences and carryforwards which give rise to deferred tax
assets at December 31, 1994 and 1993 are as follows:

<TABLE>
<CAPTION>
1994 1993
-------------- --------------
<S> <C> <C>
Net operating loss carryforward............................. $ 8,740,000 $ 7,113,000
Inventory reserve and bad debt allowance.................... 180,000 276,000
Other....................................................... 6,000 18,000
-------------- --------------
8,926,000 7,407,000
Less valuation allowance.................................... (8,926,000) (7,407,000)
-------------- --------------
Total....................................................... $ -- $ --
-------------- --------------
-------------- --------------
</TABLE>

The Company has incurred losses since inception. At December 31, 1994, the
Company had net operating loss carryforwards of approximately $25 million, which
begin to expire in 1999. The availability and use of losses against future
taxable income, if any, may be limited by Internal Revenue Code Section 382 as a
result of certain changes in ownership that have occurred.

15. OPERATING STATEMENT INFORMATION:

Selected operating statement information for each of the three years in the
period ended December 31, 1994 is as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
1994 1993 1992
--------- ----------- -----------
<S> <C> <C> <C>
Maintenance and repairs............................... $ 1,411 $ 26,119 $ 9,166
Advertising........................................... $ 12,031 $ 109,071 $ 104,460
Amortization:
Patent and Software................................. $ 1,650 $ 16,278 $ 35,835
</TABLE>

For the years ended December 31, 1994, 1993 and 1992, the Company's reserve
for doubtful accounts was approximately $19,000, $35,000 and $20,000,
respectively. During 1994, 1993 and 1992, the provision for doubtful accounts
was increased by approximately $16,000, $18,000 and $10,000, respectively, which
was included in the general and administrative expense in the accompanying
Consolidated Statements of Operations. In 1993, accounts receivable deemed
uncollectible and charged to the reserve for doubtful accounts amounted to
approximately $3,000. In connection with the formation of the Partnership in
1994, $32,000 of the reserve for doubtful accounts was transferred to the
Partnership along with the related receivables.

F-28
<PAGE>

ENGELHARD/ICC
BALANCE SHEET
(UNAUDITED)

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
-------------- --------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents....................................................... $ 40,998 $ 648,451
Receivables:
Trade, net of allowance for doubtful accounts................................ 1,495,691 661,801
Employees.................................................................... 1,750 1,750
Inventories, net................................................................ 4,358,148 2,439,509
Prepaid expenses and other...................................................... 47,181 75,836
-------------- --------------
Total current assets...................................................... 5,943,768 3,827,347
PROPERTY, PLANT AND EQUIPMENT, net................................................ 7,988,625 7,946,511
PURCHASED INTANGIBLES............................................................. 1,149,069 1,252,613
OTHER ASSETS, net................................................................. 643,480 359,884
CASH HELD IN ESCROW............................................................... 1,060,865 --
-------------- --------------
Total assets.............................................................. $ 16,785,807 $ 13,386,355
-------------- --------------
-------------- --------------
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts Payable:
Trade........................................................................ $ 608,653 $ 1,309,570
ICC Technologies, Inc........................................................ 157,543 124,095
Engelhard Corporation........................................................ 160,007 62,839
Accrued liabilities............................................................. 701,954 234,228
Notes payable to general partners:
ICC Technologies, Inc........................................................ -- 4,000,000
Engelhard Corporation........................................................ -- 4,000,000
Short-term loan................................................................. 2,750,000 --
Current portion of long-term debt............................................... 47,331 28,013
-------------- --------------
Total current liabilities................................................. 4,425,488 9,758,745
-------------- --------------
LONG-TERM DEBT.................................................................... 8,667,239 147,031
-------------- --------------
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL................................................................. 3,693,080 3,480,579
-------------- --------------
Total liabilities and partners' capital................................... $ 16,785,807 $ 13,386,355
-------------- --------------
-------------- --------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-29
<PAGE>

ENGELHARD/ICC
STATEMENTS OF OPERATIONS
(UNAUDITED)

<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 7,
THREE MONTHS ENDED NINE MONTHS 1994 (DATE OF
------------------------------ ENDED FORMATION) TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES......................................... $ 2,009,538 $ 379,912 $ 7,171,504 $ 997,156
COST OF GOODS SOLD............................... 2,283,118 328,282 7,175,429 876,872
-------------- -------------- -------------- --------------
Gross (loss) profit............................ (273,580) 51,630 (3,925) 120,284
-------------- -------------- -------------- --------------
OPERATING EXPENSES:
Marketing...................................... 862,851 659,882 2,524,468 1,373,024
Engineering.................................... 280,470 290,897 694,747 750,357
Research and development....................... 257,556 231,904 898,135 540,999
General and administrative..................... 847,423 466,093 2,084,030 1,000,461
-------------- -------------- -------------- --------------
Total operating costs....................... 2,248,300 1,648,776 6,201,380 3,664,841
-------------- -------------- -------------- --------------
Loss from operations........................ (2,521,880) (1,597,146) (6,205,305) (3,544,557)
INTEREST:
Interest income................................ 11,847 24,947 40,741 102,601
Interest expense............................... (130,490) -- (622,935) (508)
-------------- -------------- -------------- --------------
(118,643) 24,947 (582,194) 102,093
-------------- -------------- -------------- --------------
NET LOSS......................................... $ (2,640,523) $ (1,572,199) $ (6,787,499) $ (3,442,464)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-30
<PAGE>

ENGELHARD/ICC
STATEMENT OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 7, 1994
(DATE OF
FOR THE NINE FORMATION)
MONTHS ENDED TO
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------ ------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss................................................................ $ (6,787,499) $ (3,442,457)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation......................................................... 650,940 408,352
Amortization......................................................... 144,311 56,096
(Increase) decrease in:
Receivables....................................................... (833,890) (253,858)
Inventories....................................................... (1,918,639) (1,088,240)
Prepaid expenses and other........................................ 28,655 (40,415)
(Decrease) increase in:
Accounts payable.................................................. (700,917) 152,957
Payables to ICC Technologies, Inc................................. 33,448 1,444
Payables to Engelhard Corporation................................. 97,168 --
Customer deposits................................................. -- 24,485
Accrued expenses and other liabilities............................ 467,726 107,894
------------------ ------------------
Net cash used in operating activities............................. (8,818,697) (4,073,742)
------------------ ------------------
Cash Flows from Investing Activities:
Purchases of property, plant and equipment -- Miami..................... (462,106) --
Purchases of property, plant and equipment -- other, net................ (230,948) (944,850)
Purchases of intangibles -- other....................................... (108,384) (169,332)
------------------ ------------------
Net cash used in investing activities............................. (801,438) (1,114,182)
------------------ ------------------
Cash Flows from Financing Activities:
Proceeds from long-term debt............................................ 69,956 15,477
Proceeds from bond issuance, net of cash held in escrow................. 7,439,135 --
Bond issuance costs..................................................... (215,979) --
Borrowings from short-term loan......................................... 2,750,000 --
Repayment of long-term debt............................................. (30,430) --
Capital contributions by general partners............................... 2,000,000 --
Proceeds from Engelhard Corporation (at formation)...................... -- 8,633,434
Proceeds from Joint Development Program (at formation).................. -- 21,990
Equalization payment to ICC Technologies, Inc........................... -- (250,000)
Repayments of notes payable to general partners......................... (3,000,000) --
------------------ ------------------
Net cash provided by financing activities......................... 9,012,682 8,420,901
------------------ ------------------
Net (decrease) increase in cash and cash equivalents...................... (607,453) 3,232,977
Cash and Cash Equivalents, Beginning of Period............................ 648,451 --
------------------ ------------------
Cash and Cash Equivalents, End of Period.................................. $ 40,998 $ 3,232,977
------------------ ------------------
------------------ ------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-31

<PAGE>

ENGELHARD/ICC
NOTES TO FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION:

The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. 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 period February 7, 1994
(date of formation) to December 31, 1994, included elsewhere herein. Results
of operations for the three and nine months ended September 30 are not
necessarily indicative of results of operations expected for the full year.

2. BUSINESS:

Business and Formation

Engelhard/ICC (the 'Partnership') is a Pennsylvania general partnership.
The Partnership is engaged in the business of designing, manufacturing and
marketing climate control systems to supplement or replace conventional air
conditioning systems. On February 7, 1994, ICC Technologies, Inc. ('ICC') and
Engelhard Corporation ('Engelhard'), through their respective subsidiaries (the
'general partners'), formed the Partnership. The desiccant air conditioning
business conducted by ICC prior to the formation of the Partnership is now being
conducted by the Partnership.

The general partners both have an equal 50% interest in the Partnership.
In exchange for its 50% interest in the Partnership, ICC 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 in
cash, (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.

ICC transferred to the Partnership, upon formation, approximately $60,000
of net liabilities which consisted of approximately: $240,000 in receivables;
$490,000 of inventory; $290,000 of property and equipment; $180,000 in other
assets; $360,000 in accounts payable and accrued liabilities; and $900,000 notes
payable to Engelhard. The amounts transferred were recorded at ICC's historical
cost basis.

Going Concern

The accompanying financial statements have been prepared assuming the
Partnership will continue as a going concern, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business.
Until the Partnership generates sufficient cash flows from operations, it will
be primarily dependent upon its partners to provide any required working
capital. Revenues have been insufficient to cover costs of operations for the
Partnership. The Partnership'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.

F-32

<PAGE>

ENGELHARD/ICC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

2. BUSINESS: -- (CONTINUED)

The Partnership obtained third party financing through the issuance of
bonds in April 1995 (see note 7). Additional financial support continues to be
supplied to the Partnership by the Partners until the Partnership attains
sufficient positive cash flows; however, there can be no assurance that the
Partnership will be able to obtain the sufficient cash flows. The financial
statements do not include any adjustments should the Partnership be unable to
continue as a going concern.

3. REVENUES:

Revenues comprise the following:

<TABLE>
<CAPTION>
PERIOD FROM
THREE MONTHS THREE MONTHS NINE MONTHS FEBRUARY 7,
ENDED ENDED ENDED 1994 TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Equipment sales......................... $ 491,313 $ 364,412 $ 1,832,807 $ 958,106
Substrate processing.................... 1,503,725 -- 4,796,697 --
Licensing fees.......................... -- -- 500,000 --
Maintenance and service................. 14,500 15,500 42,000 39,050
------------- ------------- ------------- -------------
$ 2,009,538 $ 379,912 $ 7,171,504 $ 997,156
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>

The Partnership fabricates large cell honeycomb substrate materials at its
Miami facility under a Manufacturing and Supply Agreement with Ciba-Geigy
Corporation ('Ciba'). Ciba provides the raw materials to be fabricated into
large cell honeycomb substrate and retains title to the raw materials,
work-in-process and finished goods. The partnership receives processing fees for
fabricating the raw materials into large cell honeycomb substrate. Processing
fees are recognized in revenues in the period the fabricated substrate material
is shipped.

4. INVENTORIES:

Inventories comprise the following:

SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- -------------
<S> <C> <C>
Raw materials and purchased parts............................. $ 2,897,857 $ 1,388,498
Work-in-process............................................... 1,042,078 391,818
Finished goods................................................ 418,213 659,193
------------- -------------
$ 4,358,148 $ 2,439,509
------------- -------------
------------- -------------
</TABLE>

Inventories are carried at lower of cost (first in, first out) or market.
Market for raw materials is based in replacement costs and for finished goods
and work-in-process at net realizable value. Inventory of $120,000 was written
off against the inventory allowance for the nine months ended September 30,
1995.

F-33

<PAGE>

ENGELHARD/ICC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

5. PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment, net, consist of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
-------------- --------------
<S> <C> <C>
Land.......................................................... $ 390,000 $ 390,000
Building...................................................... 1,610,000 1,610,000
Machinery and equipment....................................... 6,947,342 6,253,877
Furniture, fixtures and leasehold improvements................ 289,509 262,228
------------- -------------
9,236,851 8,516,105
Less -- accumulated depreciation.............................. (1,248,226) (569,594)
------------- -------------
$ 7,988,625 $ 7,946,511
------------- -------------
------------- -------------
</TABLE>

6. OTHER ASSETS:

Other assets consist of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- -------------
<S> <C> <C>
Patents....................................................... $ 513,893 $ 410,373
Bond issuance costs........................................... 215,979 --
Accumulated amortization...................................... (111,764) (75,861)
------------- -------------
618,108 334,512
Deposits...................................................... 25,372 25,372
------------- -------------
$ 643,480 $ 359,884
------------- -------------
------------- -------------
</TABLE>

7. ASSET ACQUISITION:

On December 1, 1994, the Partnership acquired for $8 million in cash, real
property and substantially all other manufacturing assets of an existing
manufacturing facility located in Miami, Florida from Ciba which currently
produces the small cell, honeycomb substrate used to manufacture the desiccant
and heat exchange rotors that are an integral part of the Partnership's
products. The former Ciba plant produced primarily large cell substrate which
the Partnership is prohibited to produce or sell to parties other than Ciba. The
Partnership also acquired, as part of the transaction, an exclusive technology
license to use Ciba's proprietary process which is necessary to manufacture such
small cell, honeycomb structures. Assets acquired consisted of approximately
$6.9 million of property, plant and equipment and $1.1 million of intangibles.
To finance the acquisition, the general partners each lent to the Partnership
$4,000,000 ('General Partners' Loan'). In April 1995, the Partnership obtained
financing from the issuance of $8,500,000 of industrial development revenue
bonds (see note 8). The proceeds of these bonds were used to repay $3,000,000 of
the General Partners' Loan, $1,500,000 to each general partner and provide for
improvements and capital equipment at the Miami facility (see note 9).

F-34

<PAGE>

ENGELHARD/ICC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

8. LONG-TERM DEBT:

Long-term debt consists of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- -------------
<S> <C> <C>
Industrial development revenue bonds interest determined
weekly and payable weekly; bonds mature on April 1, 2020,
but are subject to redemption at the option of the
Partnership from April 1, 2000.............................. $ 8,500,000 --
Notes payable
due April 2000; interest at 2% per annum; interest payable
monthly; interest and principal payable in equal monthly
installments over 60-month period commencing April 1995..... 191,000 $ 152,200
Notes payable
due February 1998; interest at 3% per annum; principal
installments over 60-month interest at 3% per annum;
principal and interest payable in equal monthly installments
over 36-month period commencing April 1995.................. 23,560 22,844
------------- -------------
8,714,570 175,044
Less -- current portion....................................... (47,331) (28,013)
------------- -------------
$ 8,667,239 $ 147,031
------------- -------------
------------- -------------
</TABLE>

In connection with the issuance of the industrial revenue bonds (see note
7), cash of $1,060,865 was held in escrow pending the Partnership's incurrence
of certain qualified expenditures.

Maturities of long-term debt at September 30, 1995 for the Partnership
consist of:

<TABLE>
<S> <C>
1995................................................... $ 8,534
1996................................................... 51,870
1997................................................... 53,016
1998................................................... 45,370
1999................................................... 44,512
thereafter............................................. 8,511,268
-------------
$ 8,714,570
-------------
-------------
</TABLE>

The general partners are guarantors of the long-term debt. The notes
payable due April 2000 are collateralized by related purchased property and
equipment. In addition, Engelhard is the guarantor on the short-term loan which
amounts to $2,750,000 as of September 30, 1995.

9. PARTNERS' CAPITAL:

In conjunction with the General Partners' Loan of $8,000,000 and issuance
of $8,500,000 of industrial development revenue bonds (see note 7), $3,000,000
was repaid to each general partner and the remaining $5,000,000 outstanding
balance on the loan was converted into a capital contribution, $2,500,000 for
each general partner.

In August 1995, $1,000,000 was contributed by each of the general partners.
Subsequent to September 30, 1995, an additional $2,000,000 was contributed by
each of the general partners.

F-35

<PAGE>

ENGELHEARD/ICC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

10. RELATED-PARTY TRANSACTIONS:

The Partnership provided approximately $24,000 and $64,000 during the three
and nine months ended September 30, 1995, and $19,000 and $67,000 for the three
month and year to date periods ended September 30, 1994 in various
administrative office support services to ICC. Furthermore, Engelhard provided
approximately $147,000 and $285,000 during the three and nine months ended
September 30, 1995, and $137,000 and $254,000 during the three month and year to
date periods ended September 30, 1994, in various administration services to the
Partnership. The Partnership incurred approximately $10,000 and $328,000 for the
three and nine months ended September 30, 1995, of interest expense payable to
the general partners in connection with the $8,000,000 promissory notes (see
note 7).

11. SUPPLEMENTAL CASH FLOW DISCLOSURES:

Excluded from the Statement of Cash Flows for the period ended September
30, 1994, were the effects of assets and liabilities transferred to the
Partnership from ICC which consisted of approximately $240,000 in receivables;
$490,000 of inventory; $290,000 of property and equipment; $180,000 in other
assets; $360,000 in accounts payable and accrued liabilities; and $900,000 notes
payable to Engelhard.

Excluded from the Statement of Cash Flows for the nine months ended
September 30, 1995 was the conversion of $5,000,000 of General Partners' Loans
to Partners' Capital and the write-off of $14,283 of bad debts against the
allowance.

F-36

<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To The Partners of Engelhard/ICC:

We have audited the accompanying balance sheet of Engelhard/ICC as of December
31, 1994 and the related statements of operations, changes in partners' capital
and cash flows for the period February 7, 1994 (date of formation) to December
31, 1994. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Engelhard/ICC as of December
31, 1994 and the results of its operations and its cash flows for the period
February 7, 1994 (date of formation) to December 31, 1994 in conformity with
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 1, the
Partnership incurred losses of $5,624,845 through December 31, 1994 and the
Partnership is primarily dependent upon its partners for financial support.
These factors, among others, raise substantial doubt about the Partnership's
ability to continue as a going concern. Management's plans in regard to these
matters are described in Note 1. The accompanying financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 24, 1995

F-37
<PAGE>

ENGELHARD/ICC
BALANCE SHEET

<TABLE>
<CAPTION>
DECEMBER 31,
1994
-------------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents..................................................................... $ 648,451
Receivables:
Trade, net of allowance for doubtful accounts of $23,179................................... 661,801
Employees.................................................................................. 1,750
Inventories, net.............................................................................. 2,439,509
Prepaid expenses and other.................................................................... 75,836
--------------
Total current assets.................................................................... 3,827,347
PROPERTY, PLANT AND EQUIPMENT, net.............................................................. 7,946,511
PURCHASED INTANGIBLES........................................................................... 1,252,613
OTHER ASSETS, net............................................................................... 359,884
--------------
Total assets............................................................................ $ 13,386,355
--------------
--------------

LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable:
Trade...................................................................................... $ 1,309,570
ICC Technologies, Inc...................................................................... 124,095
Engelhard Corporation...................................................................... 62,839
Accrued liabilities........................................................................... 234,228
Notes payable to general partners:
ICC Technologies, Inc...................................................................... 4,000,000
Engelhard Corporation...................................................................... 4,000,000
Current portion of long-term debt............................................................. 28,013
--------------
Total current liabilities.................................................................. 9,758,745
--------------
LONG-TERM DEBT.................................................................................. 147,031
--------------
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL............................................................................... 3,480,579
--------------
Total liabilities and partners' capital................................................. $ 13,386,355
--------------
--------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-38
<PAGE>

ENGELHARD/ICC
STATEMENT OF OPERATIONS
FOR THE PERIOD FEBRUARY 7, 1994 (DATE OF FORMATION) TO DECEMBER 31, 1994

<TABLE>
<CAPTION>
1994
--------------
<S> <C>
REVENUES......................................................................................... $ 1,620,386

COST OF GOODS SOLD............................................................................... 1,591,821
--------------

Gross profit................................................................................... 28,565
--------------

OPERATING EXPENSES:

Marketing...................................................................................... 2,061,027

Engineering.................................................................................... 1,233,282

Research and development....................................................................... 894,837

General and administrative..................................................................... 1,539,140
--------------

Total operating costs....................................................................... 5,728,286
--------------

Loss from operations..................................................................... (5,699,721)

INTEREST:

Interest income................................................................................ 138,718

Interest expense............................................................................... (63,842)
--------------

74,876
--------------

NET LOSS......................................................................................... $ (5,624,845)
--------------
--------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-39
<PAGE>

ENGELHARD/ICC
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIOD FEBRUARY 7, 1994 (DATE OF FORMATION) TO DECEMBER 31, 1994

<TABLE>
<CAPTION>
1994
--------------
<S> <C>
Capital contributed by Engelhard, cash........................................................... $ 8,633,434

Net assets of ICC transferred, excluding $900,000 note payable to Engelhard contributed to
partners' capital.............................................................................. 839,322

Equalization amount due ICC at formation......................................................... (389,322)

Residual funds from joint development program contributed to partners' capital................... 21,990

Net loss of Partnership.......................................................................... (5,624,845)
--------------

Partners' capital, December 31, 1994............................................................. $ 3,480,579
--------------
--------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-40
<PAGE>

ENGELHARD/ICC
STATEMENT OF CASH FLOWS
FOR THE PERIOD FEBRUARY 7, 1994 (DATE OF FORMATION) TO DECEMBER 31, 1994

<TABLE>
<S> <C>
Cash Flows from Operating Activities:
Net loss....................................................................................... $ (5,624,845)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation................................................................................ 224,516
Amortization................................................................................ 24,219
(Increase) decrease in:
Receivables.............................................................................. (426,602)
Inventories.............................................................................. (1,950,797)
Prepaid expenses and other............................................................... (49,346)
Increase (decrease) in:
Accounts payable......................................................................... 1,049,231
Payables to ICC Technologies, Inc........................................................ (15,227)
Payables to Engelhard Corporation........................................................ 62,839
Accrued expenses and other liabilities................................................... 134,649
--------------
Net cash used in operating activities................................................. (6,571,363)
--------------
Cash Flows from Investing Activities:
Purchases of property, plant and equipment -- Miami............................................ (6,900,000)
Purchases of intangibles -- Miami.............................................................. (1,100,000)
Purchases of property, plant and equipment -- other............................................ (979,939)
Purchases of intangibles -- other.............................................................. (380,715)
--------------
Net cash used in investment activities................................................ (9,360,654)
--------------
Cash Flows from Financing Activities:
Proceeds from long-term debt................................................................... 175,044
Proceeds from Engelhard Corporation (at formation)............................................. 8,633,434
Proceeds from Joint Development Program (at formation)......................................... 21,990
Equalization payment to ICC.................................................................... (250,000)
Proceeds from notes payable to general partners................................................ 8,000,000
--------------
Net cash provided by financing activities............................................. 16,580,468
--------------
Net increase in cash and cash equivalents........................................................ 648,451
Cash and Cash Equivalents, Beginning of period................................................... --
--------------
Cash and Cash Equivalents, End of period......................................................... $ 648,451
--------------
--------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-41
<PAGE>

ENGELHARD/ICC
NOTES TO FINANCIAL STATEMENTS

1. BUSINESS:

Business and Formation

The general partners both have an equal 50% interest in the Partnership. In
exchange for its 50% interest in the Partnership, ICC 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 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.

ICC transferred to the Partnership, upon formation, approximately $60,000
of net liabilities which consisted of approximately: $240,000 in receivables;
$490,000 of inventory; $290,000 of property and equipment; $180,000 in other
assets; $360,000 in accounts payables and accrued liabilities; and $900,000
notes payable to Engelhard Corporation. The amounts transferred were recorded at
ICC's historical cost basis.

Going Concern

The accompanying financial statements have been prepared assuming the
Partnership will continue as a going concern, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business.
Until the Partnership generates sufficient cash flows from operations, it will
be primarily dependent upon the partners to provide any required working
capital. Revenues have been insufficient to cover costs of operations for the
Partnership. The Partnership'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.

The Partnership intends to seek additional financial support from the
partners or third parties as needed to continue operations until the Partnership
attains positive sufficient cash flows; however, there can be no assurance that
the Partnership will be able to obtain the additional financing or sufficient
cash flows. The financial statements do not include any adjustments should the
Partnership be unable to continue as a going concern.

Basis of Presentation

The financial statements include the accounts of the Partnership for the
period from February 7, 1994 (date of formation) to December 31, 1994 (the
'period ended December 31, 1994').

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents for the purpose of
determining cash flows.

F-42
<PAGE>
ENGELHARD/ICC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

1. BUSINESS: -- (CONTINUED)
Inventories

Inventories are valued at the lower of cost (first-in, first-out) or
market.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Assets under capital
lease are recorded at the present value of the future lease payments. Costs of
major additions and improvements are capitalized and replacements, maintenance
and repairs, which do not improve or extend the life of the respective assets,
are charged to operations as incurred.

Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. Leased assets under capital leases are amortized
over the period of the lease or the service lives of the improvements, whichever
is shorter, using the straight-line method.

Purchased Intangible Assets

Purchased intangible assets, consisting primarily of a license agreement
acquired in connection with the acquisition of certain assets (see note 6), are
amortized over ten years using the straight-line method.

Patents

Patents are amortized over their estimated useful lives not exceeding
seventeen years.

Income Taxes

Partnership income, if any, is taxable to the general partners.
Accordingly, no provision for income taxes has been made by the Partnership.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Revenue Recognition

Revenues are recognized when equipment is shipped for equipment sales
contracts, and when equipment is installed and operating for installation
contracts. Maintenance service revenue is recognized when services provided are
complete. Maintenance revenues totaled $55,230 for the period ended December 31,
1994.

Research and Development Costs

Research and development costs are expensed as incurred. Research and
development costs amounted to approximately $895,000 for the period ended
December 31, 1994. Included in this amount are approximately $320,000 of
development costs incurred by Engelhard Corporation on behalf of and paid for by
the Partnership.

F-43
<PAGE>
ENGELHARD/ICC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- (CONTINUED)

Warranty

The Partnership's warranty on its equipment is for one year from date of
shipment. The Partnership records a reserve for the estimated cost of repairing
or replacing any faulty equipment covered under the Partnership's warranty.

Concentration of Credit Risk

The Partnership invests its cash primarily in deposits with major banks.
The Partnership has sold its equipment and services to end-users in retail
industry, primarily in the continental United States. Concentration of credit
risk with respect to trade receivables is moderate due to the relatively diverse
customer base. Ongoing credit evaluations of customers' financial condition are
performed and generally no collateral is required. The Partnership maintains
reserves for potential credit losses and such losses, in the aggregate, have not
exceeded management's expectations.

3. INVENTORIES:

Inventories comprise the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1994
-------------
<S> <C>
Raw materials and purchased parts................................. $ 1,388,498
Work-in-process................................................... 391,818
Finished goods.................................................... 659,193
-------------
$ 2,439,509
-------------
-------------
</TABLE>

Raw materials purchased from Engelhard amounted to approximately $169,000.

4. PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment, net, consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1994
-------------
<S> <C>
Land.............................................................. $ 390,000
Building.......................................................... 1,610,000
Machinery and equipment........................................... 6,253,877
Furniture, fixtures and leasehold improvements.................... 262,228
-------------
8,516,105
Less -- accumulated depreciation.................................. (569,594)
-------------
$ 7,946,511
-------------
-------------
</TABLE>

Machinery and equipment purchased through or from Engelhard amount to
approximately $122,000.

F-44
<PAGE>
ENGELHARD/ICC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

5. OTHER ASSETS:

Other assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1994
------------
<S> <C>
Patents............................................................ $ 410,373
Accumulated amortization........................................... (75,861)
------------
334,512
Deposits........................................................... 25,372
------------
$ 359,884
------------
------------
</TABLE>

6. ASSET ACQUISITION:

To finance the acquisition, the general partners each lent to the
Partnership $4,000,000. The loans, which are evidenced by promissory notes,
mature on December 31, 1995 and bear interest payable monthly at the Prime Rate
plus 1%. The principal amount of each of the loans is intended to be repaid by
the Partnership prior to the maturity date upon the receipt of replacement
financing which the Partnership is currently seeking. The Partnership is in the
process of obtaining third party replacement financing. There is no assurance
that the Partnership will be able to obtain replacement financing prior to the
maturity date or that such replacement financing will be sufficient to repay the
loans.

7. LONG-TERM DEBT:

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1994
------------
<S> <C>
Notes payable
due April 2000; interest at 2% per annum; interest payable
monthly; interest and principal payable in equal monthly
installments over 60-month period commencing April 1995.......... $ 152,200
Notes payable
due February 1998; interest at 3% per annum; principal and
interest payable in equal monthly installments over 36-month
period commencing March 1995..................................... 22,844
------------
175,044
Less -- current portion............................................ (28,013)
------------
$ 147,031
------------
------------
</TABLE>

F-45
<PAGE>
ENGELHARD/ICC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

7. LONG-TERM DEBT: -- (CONTINUED)

The future minimum payments for the Partnership consists of:

The general partners are guarantors of the long-term debt. The notes
payable due April 2000 are collateralized by related purchased property and
equipment.

8. COMMITMENTS AND CONTINGENCIES:

Lease Commitments

The Partnership has operating lease commitments for its facilities,
vehicles and certain equipment. In certain instances, these leases contain
purchase and renewal options, both of which are at fair market value. The
Partnership's offices are leased on a month-to-month basis.

The future minimum lease payments for these leases at December 31, 1994 are
as follows:

Rental expense under these operating leases was $188,158 for the period
ended December 31, 1994.

The Partnership assumed, at formation, a five-year lease commitment which
began April 1993, for approximately 55,000 square feet of manufacturing and
assembly space. Additionally, the Partnership is responsible for paying its
allocable portion of all real estate taxes, water and sewer rates, and common
expenses. The Partnership assumed a lease, which expires in 1996, in connection
with the asset acquisition (see note 6), for a building with approximately
24,000 square feet and corresponding parking lot adjacent to the Miami
manufacturing facility.

Employment Contracts

At December 31, 1994, the Partnership had an employment contract with one
officer. The contract expires in 1999, subject to certain provisions in the
contract. The contract provides for total annual compensation of $155,000, plus
certain benefits.

F-46
<PAGE>
ENGELHARD/ICC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

9. RELATED-PARTY TRANSACTIONS:

The Partnership provided approximately $91,000 in various administrative
office support services to ICC. Engelhard provides research and development
services to the Partnership. Furthermore, Engelhard provided approximately
$297,000 in various administration services to the Partnership. The Partnership
incurred approximately $63,000 interest expense payable to the general partners
in connection with the $8 million promissory notes issued (See note 6). In
accordance with the Transfer Agreement entered into by the general partners, a
distribution of approximately $140,000 was due ICC.

10. SUPPLEMENTAL CASH FLOW DISCLOSURES:

Excluded from the Statement of Cash Flows were the effects of assets and
liabilities transferred to the Partnership from ICC which consisted of
approximately $240,000 in receivables; $490,000 of inventory; $290,000 of
property and equipment; $180,000 in other assets; $360,000 in accounts payable
and accrued liabilities; and $900,000 notes payable to Engelhard.

F-47
<PAGE>

DESICCANT AND HEAT EXCHANGE ROTORS
[PICTURE-SEE DESCRIPTION IN APPENDIX A, NO. 4]

ETS(TRADEMARK) DESICCANT [PICTURE-SEE DESCRIPTION IN APPENDIX A, NO. 4]

HONEYCOMB SUBSTRATE [PICTURE-SEE DESCRIPTION IN APPENDIX A, NO. 4]

<PAGE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN
OR MADE, ANY SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF
THE SECURITIES OFFERED THEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.

------------------------

TABLE OF CONTENTS

PAGE
---------
<S> <C>

AVAILABLE INFORMATION.......................... 3
INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE.................................... 3
PROSPECTUS SUMMARY............................. 4
RISK FACTORS................................... 8
USE OF PROCEEDS................................ 12
PRICE RANGE OF COMMON STOCK.................... 13
DIVIDEND POLICY................................ 14
PREFERRED STOCK TRANSACTIONS................... 14
DILUTION....................................... 15
CAPITALIZATION................................. 16
SELECTED CONSOLIDATED FINANCIAL DATA OF THE
COMPANY...................................... 17
SELECTED FINANCIAL DATA OF THE PARTNERSHIP..... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................... 19
BUSINESS....................................... 26
MANAGEMENT..................................... 41
PRINCIPAL STOCKHOLDERS......................... 45
CERTAIN TRANSACTIONS........................... 46
DESCRIPTION OF CAPITAL STOCK................... 46
SHARES ELIGIBLE FOR FUTURE
SALE......................................... 47
UNDERWRITING................................... 49
NOTICE TO CANADIAN RESIDENTS................... 51
LEGAL MATTERS.................................. 51
EXPERTS........................................ 51
INDEMNIFICATION OF DIRECTORS, OFFICERS AND
CONTROLLING PERSONS.......................... 52
INDEX TO FINANCIAL
STATEMENTS................................... F-1
</TABLE>

2,500,000 SHARES

(ICC TECHNOLOGIES LOGO)

COMMON STOCK

------------------------
PROSPECTUS
------------------------

JANNEY MONTGOMERY SCOTT INC.
GERARD KLAUER MATTISON & CO., LLC

, 1996

<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

SEC registration fee........................................................ $ 11,649
NASD filing fee............................................................. 3,878
NASDAQ National Market listing fee.......................................... 66,827*
Legal fees and expenses..................................................... 150,000*
Accounting fees and expenses................................................ 110,000*
Blue sky fees and expenses.................................................. 10,000*
Transfer Agent and Registrar fees and expenses.............................. 2,000*
Printing costs.............................................................. 30,000*
Miscellaneous............................................................... 10,646*
-----------
TOTAL.................................................................. $ 395,000*
===========

</TABLE>

- ------------------
*Estimated.

Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Nothing in these provisions eliminates a director's fiduciary duty to act
with care or precludes a stockholder from pursuing injunctive or other equitable
remedies.

Under Section 145 of the Delaware General Corporation Law, as amended, the
Company has the power to indemnify directors and officers under certain
prescribed circumstances and subject to certain limitations against certain
costs and expenses, including attorney's fees, actually and reasonably incurred
in connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which any of them is a party by reason of
his being a director or officer of the Company if it is determined that he acted
in accordance with the applicable standard of conduct set forth in such
statutory provisions.

See Section 8(b) of the Underwriting Agreement, filed as Exhibit 1 hereto,
pursuant to which the Underwriters agree to indemnify the Company, its
directors, officers and controlling persons against certain liabilities,
including liabilities under the Securities Act.

The Company has also purchased directors' and officers' liability
insurance.

Item 16. EXHIBITS

EXHIBIT NO.
- --------------
<S> <C>

+ 1 Form of Underwriting Agreement among the Company, Janney Montgomery Scott Inc. and Gerard
Klauer Mattison & Co., LLC
</TABLE>

II-1
<PAGE>
<TABLE>
<CAPTION>

EXHIBIT NO.
- --------------
<S> <C>
2.1 Joint Venture Asset Transfer Agreement between Engelhard and Engelhard DT, Inc. and the Company
and ICC Desiccant Technologies, Inc., dated September 8, 1993, was filed as Exhibit A to the
Company's Definitive Proxy Statement dated December 23, 1993 for Stockholders Meeting held
January 17, 1994 and is hereby incorporated by reference.

+ 2.2 Amendment dated December 20, 1993 to Joint Venture Asset Transfer Agreement between Engelhard
and Engelhard DT, Inc. and the Company and ICC Desiccant Technologies, Inc., dated September 8,
1993.

2.3 Agreement for Purchase and Sale of Assets by and between the Partnership and Ciba-Geigy dated
November 29, 1994 was filed as Exhibit 10(p) to the Company's Form 10-K for year ended December
31, 1994 and is hereby incorporated by reference.
4.1 The Company's Certificate of Designation for Series F Preferred Stock and Series G Convertible
Preferred Stock, was filed as an Exhibit to the Company's Form 10-K for the fiscal year ended
December 31, 1989 and is hereby incorporated by reference.
4.2 The Company's Certificate of Designation for Series H Convertible Preferred Stock, was filed as
an Exhibit to the Company's Form 8-K dated March 26, 1991 and is hereby incorporated by
reference.
4.3 The Company's Certificate of Designation for Series I Preferred Stock, was filed as an Exhibit
to the Company's Form 8-K dated March 12, 1992 and is hereby incorporated by reference.
4.4 The Company's Certificate of Designation for Series J Preferred Stock, was filed as an Exhibit
to the Company's Form 8-K dated June 8, 1992 and is hereby incorporated by reference.

5 Opinion of Mesirov Gelman Jaffe Cramer & Jamieson.

10.1 Lease Agreement for the Partnership's Executive Offices dated June 14, 1989, was filed as an
Exhibit to the Company's Form 8-K filed June 12, 1990 and is hereby incorporated by reference.
10.2 The Company's Incentive Stock Option Plan, as amended, was filed as Exhibit 4(g) to the
Company's Registration Statement on Form S-8, No. 33-85636 filed on October 26, 1994 and is
hereby incorporated by reference.
10.3 The Company's Nonqualified Stock Option Plan, as amended and restated, was filed as Exhibit C
to the Company's Definitive Proxy Statement dated November 18, 1994 for Stockholders Meeting
held December 15, 1994 and is hereby incorporated by reference.
10.4 The Company's Equity Plan for Directors, was filed as Appendix A to the Company's Definitive
Proxy Statement dated November 18, 1994 for Stockholders Meeting held December 15, 1994 and is
hereby incorporated by reference.
10.5 Agreement to Restructure and Retire the ICC Technologies, Inc. Lease Financing Obligations to
Textron Financial Corporation, was filed as an exhibit to the Company's Form 8-K filed June 12,
1990 and is hereby incorporated by reference.
10.6 Conversion and Waiver Agreement between RIT Capital Partners, plc, Warburg, Pincus Capital
Company L.P. and the Company dated June 6, 1990 including all exhibits thereto, was filed as an
exhibit to the Company's Form 10-K for the fiscal year ended December 31, 1989 and is hereby
incorporated by reference.
10.7 Joint Development Program Agreement between the Company and Engelhard dated May 26, 1992, was
filed as Exhibit 10(f) to the Company's Form 10-K for the fiscal year ended December 31, 1992
and is hereby incorporated by reference.
10.8 Employment Agreement between William A. Wilson and the Company, dated July 2, 1991, was filed
as an exhibit to the Company's Quarterly Report on Form 10-Q for period ended September 30,
1991 and is hereby incorporated by reference.
10.9 Amendment dated February 28, 1994 to Employment Agreement between William A. Wilson and the
Company was filed as Exhibit 10(h)2 to the Company's 10-K for the fiscal year ended December
31, 1994 and is hereby incorporated by reference.
</TABLE>

II-2
<PAGE>
<TABLE>
<CAPTION>

EXHIBIT NO.
- --------------
<S> <C>

+10.10 General Partnership Agreement of Engelhard/ICC, between Engelhard DT Inc. and ICC Desiccant
Technologies, Inc., dated February 7, 1994.

10.11 Technology License Agreement between Engelhard and the Company and the Partnership, dated
February 7, 1994, was filed as Exhibit 10(j) to the Company's Form 10-K for the fiscal year
ended December 31, 1993 and is hereby incorporated by reference.
10.12 Supply Agreement between the Partnership and Engelhard dated February 7, 1994, was filed as
Exhibit 10(k) to the Company's Form 10-K for the fiscal year ended December 31, 1993 and is
hereby incorporated by reference.
10.13 Employment Agreement between Irwin L. Gross and the Partnership dated February 8, 1994, was
filed as Exhibit 10(l) to the Company's Form 10-K for the fiscal year ended December 31, 1993
and is hereby incorporated by reference.
10.14 Royalty Agreement between the Partnership and James Coellner and Dean Calton dated February 8,
1994, was filed as Exhibit 10(m) to the Company's Form 10-K for the fiscal year ended December
31, 1993 and is hereby incorporated by reference.
10.15 Lease Agreement for the Partnership's manufacturing space, dated March 25, 1993, was filed as
Exhibit 10(n) to the Company's Form 10-K for the fiscal year ended December 31, 1993 and is
hereby incorporated by reference.
10.16 License Agreement by and between the Partnership and Ciba Composites Anaheim, a business unit
of Ciba Composites, a Division of Ciba-Geigy, dated November 29, 1994, was filed as Exhibit
10.1 to the Company's 10-Q for period ended September 30, 1995 and is hereby incorporated by
reference.
10.17 Manufacturing and Supply Agreement by and between the Partnership and Ciba Composites Anaheim,
a business unit of Ciba Composites, a Division of Ciba-Geigy Corporation, dated November 29,
1994, was filed as Exhibit 10.2 to the Company's 10-Q for period ended September 30, 1995 and
is hereby incorporated by reference.
10.18 Technical Information, Trademark and Patent License Agreement by and between the Partnership
and Chung-Hsin, dated March 27, 1995, was filed as Exhibit 10.3 to the Company's 10-Q for
period ended September 30, 1995 and is hereby incorporated by reference.
10.19 Supply Agreement by and between the Partnership and Chung-Hsin, dated March 27, 1995, was filed
as Exhibit 10.4 to the Company's 10-Q for period ended September 30, 1995 and is hereby
incorporated by reference.
10.20 Agreement by and among Engelhard, the Company and the Partnership, dated April 1, 1995 relating
to the Dade County Industrial Development Revenue Bonds, was filed as Exhibit 10.5 to the
Company's 10-Q for period ended September 30, 1995 and is hereby incorporated by reference.
10.21 Memorandum of Understanding by and between the Partnership and Samsung, dated June 30, 1995,
was filed as Exhibit 10.6 to the Company's 10-Q for period ended September 30, 1995 and is
hereby incorporated by reference.
10.22 Form of Amendment dated August 9, 1995 to Agreement of October 6, 1992 regarding formation of
ICC International by and between the Partnership and AB Air was filed as Exhibit 10.7 to the
Company's 10-Q for period ended September 30, 1995 and is hereby incorporated by reference.

10.23 Agreement Regarding Joint Development Program between the Partnership and AB Air dated August
21, 1995.

23.1 Consent of Mesirov Gelman Jaffe Cramer & Jamieson is included in their opinion filed as Exhibit
5 hereto.
23.2 Consent of Coopers & Lybrand L.L.P., independent accountants.

+24 Power of attorney (set forth on signature page hereto).

</TABLE>

- ------------------
+ Previously filed.

II-3
<PAGE>

Item 17. UNDERTAKINGS

(a) The undersigned Registrant hereby undertakes:

(i) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as at the time it was declared
effective.

(ii) For the purposes of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions discussed in Item 15 of this registration statement,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all
requirements for filing on Form S-2 and has duly caused this Amendment to this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Philadelphia, Commonwealth of Pennsylvania, on
January 10, 1996.

ICC TECHNOLOGIES, INC.

By: /s/ IRWIN L. GROSS
----------------------------
Irwin L. Gross
Chairman and President

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE TITLE DATE
<S> <C> <C>

/s/ IRWIN L. GROSS Chairman of the Board January 10, 1996
- -------------------------- and President
Irwin L. Gross (Principal Executive
Officer)

/s/ WILLIAM A. WILSON Vice Chairman of the January 10, 1996
- -------------------------- Board and Director
William A. Wilson

/s/ MANFRED HANUSCHEK Chief Financial January 10, 1996
- -------------------------- Officer and Treasurer
Manfred Hanuschek (Principal Financial and
Accounting Officer)

/s/ ALBERT RESNICK Director January 10, 1996
- --------------------------
Albert Resnick

/s/ STEPHEN SCHACHMAN Director January 10, 1996
- --------------------------
Stephen Schachman

/s/ ANDREW SHAPIRO Director January 10, 1996
- --------------------------
Andrew Shapiro

/s/ MARK S. HAUSER Director January 10, 1996
- --------------------------
Mark S. Hauser

</TABLE>

II-5

<PAGE>

EXHIBITS INDEX

EXHIBIT NO.
- --------------
<S> <C>

+ 1 Form of Underwriting Agreement among the Company, Janney Montgomery Scott Inc. and Gerard Klauer
Mattison & Co., LLC

2.1 Joint Venture Asset Transfer Agreement between Engelhard and Engelhard DT, Inc. and the Company
and ICC Desiccant Technologies, Inc., dated September 8, 1993, was filed as Exhibit A to the
Company's Definitive Proxy Statement dated December 23, 1993 for Stockholders Meeting held January
17, 1994 and is hereby incorporated by reference.

+2.2 Amendment dated December 20, 1993 to Joint Venture Asset Transfer Agreement between Engelhard and
Engelhard DT, Inc. and the Company and ICC Desiccant Technologies, Inc., dated September 8, 1993.

4.1 The Company's Certificate of Designation for Series F Preferred Stock and Series G Convertible
Preferred Stock, was filed as an Exhibit to the Company's Form 10-K for the fiscal year ended
December 31, 1989 and is hereby incorporated by reference.

4.2 The Company's Certificate of Designation for Series H Convertible Preferred Stock, was filed as an
Exhibit to the Company's Form 8-K dated March 26, 1991 and is hereby incorporated by reference.

4.3 The Company's Certificate of Designation for Series I Preferred Stock, was filed as an Exhibit to
the Company's Form 8-K dated March 12, 1992 and is hereby incorporated by reference.

4.4 The Company's Certificate of Designation for Series J Preferred Stock, was filed as an Exhibit to
the Company's Form 8-K dated June 8, 1992 and is hereby incorporated by reference.

5 Opinion of Mesirov Gelman Jaffe Cramer & Jamieson.

10.1 Lease Agreement for the Partnership's Executive Offices dated June 14, 1989, was filed as an
Exhibit to the Company's Form 8-K filed June 12, 1990 and is hereby incorporated by reference.

10.2 The Company's Incentive Stock Option Plan, as amended, was filed as Exhibit 4(g) to the Company's
Registration Statement on Form S-8, No. 33-85636 filed on October 26, 1994 and is hereby
incorporated by reference.

10.3 The Company's Nonqualified Stock Option Plan, as amended and restated, was filed as Exhibit C to
the Company's Definitive Proxy Statement dated November 18, 1994 for Stockholders Meeting held
December 15, 1994 and is hereby incorporated by reference.

10.4 The Company's Equity Plan for Directors, was filed as Appendix A to the Company's Definitive Proxy
Statement dated November 18, 1994 for Stockholders Meeting held December 15, 1994 and is hereby
incorporated by reference.

10.5 Agreement to Restructure and Retire the ICC Technologies, Inc. Lease Financing Obligations to
Textron Financial Corporation, was filed as an exhibit to the Company's Form 8-K filed June 12,
1990 and is hereby incorporated by reference.

10.6 Conversion and Waiver Agreement between RIT Capital Partners, plc, Warburg, Pincus Capital Company
L.P. and the Company dated June 6, 1990 including all exhibits thereto, was filed as an exhibit to
the Company's Form 10-K for the fiscal year ended December 31, 1989 and is hereby incorporated by
reference.
<PAGE>

10.7 Joint Development Program Agreement between the Company and Engelhard dated May 26, 1992, was
filed as Exhibit 10(f) to the Company's Form 10-K for the fiscal year ended December 31, 1992 and
is hereby incorporated by reference.

10.8 Employment Agreement between William A. Wilson and the Company, dated July 2, 1991, was filed as
an exhibit to the Company's Quarterly Report on Form 10-Q for period ended September 30, 1991 and
is hereby incorporated by reference.

10.9 Amendment dated February 28, 1994 to Employment Agreement between William A. Wilson and the
Company was filed as Exhibit 10(h)2 to the Company's 10-K for the fiscal year ended December 31,
1994 and is hereby incorporated by reference.

+10.10 General Partnership Agreement of Engelhard/ICC, between Engelhard DT Inc. and ICC Desiccant
Technologies, Inc., dated February 7, 1994.

10.12 Supply Agreement between the Partnership and Engelhard dated February 7, 1994, was filed as
Exhibit 10(k) to the Company's Form 10-K for the fiscal year ended December 31, 1993 and is hereby
incorporated by reference.

10.13 Employment Agreement between Irwin L. Gross and the Partnership dated February 8, 1994, was filed
as Exhibit 10(l) to the Company's Form 10-K for the fiscal year ended December 31, 1993 and is
hereby incorporated by reference.

10.14 Royalty Agreement between the Partnership and James Coellner and Dean Calton dated February 8,
1994, was filed as Exhibit 10(m) to the Company's Form 10-K for the fiscal year ended December 31,
1993 and is hereby incorporated by reference.

10.15 Lease Agreement for the Partnership's manufacturing space, dated March 25, 1993, was
filed as Exhibit 10(n) to the Company's Form 10-K for the fiscal year ended December 31, 1993 and
is hereby incorporated by reference.

10.16 License Agreement by and between the Partnership and Ciba Composites Anaheim, a business unit of
Ciba Composites, a Division of Ciba-Geigy, dated November 29, 1994, was filed as Exhibit 10.1 to
the Company's 10-Q for period ended September 30, 1995 and is hereby incorporated by reference.

10.17 Manufacturing and Supply Agreement by and between the Partnership and Ciba Composites Anaheim, a
business unit of Ciba Composites, a Division of Ciba-Geigy Corporation, dated November 29, 1994,
was filed as Exhibit 10.2 to the Company's 10-Q for period ended September 30, 1995 and is hereby
incorporated by reference.

10.18 Technical Information, Trademark and Patent License Agreement by and between the Partnership and
Chung-Hsin, dated March 27, 1995, was filed as Exhibit 10.3 to the Company's 10-Q for period ended
September 30, 1995 and is hereby incorporated by reference.

10.19 Supply Agreement by and between the Partnership and Chung-Hsin, dated March 27, 1995, was filed as
Exhibit 10.4 to the Company's 10-Q for period ended September 30, 1995 and is hereby incorporated
by reference.

10.20 Agreement by and among Engelhard, the Company and the Partnership, dated April 1, 1995 relating to
the Dade County Industrial Development Revenue Bonds, was filed as Exhibit 10.5 to the Company's
10-Q for period ended September 30, 1995 and is hereby incorporated by reference.
<PAGE>

10.21 Memorandum of Understanding by and between the Partnership and Samsung, dated June 30, 1995, was
filed as Exhibit 10.6 to the Company's 10-Q for period ended September 30, 1995 and is hereby
incorporated by reference.

10.22 Form of Amendment dated August 9, 1995 to Agreement of October 6, 1992 regarding formation of ICC
International by and between the Partnership and AB Air was filed as Exhibit 10.7 to the Company's
10-Q for period ended September 30, 1995 and is hereby incorporated by reference.

10.23 Agreement Regarding Joint Development Program between the Partnership and AB Air dated August 21,
1995.

23.1 Consent of Mesirov Gelman Jaffe Cramer & Jamieson is included in their opinion filed as Exhibit 5
hereto.

23.2 Consent of Coopers & Lybrand L.L.P., independent accountants.

+24 Power of attorney (set forth on signature page hereto).
</TABLE>

- ------------------
+ Previously filed.

<PAGE>
APPENDIX A FOR GRAPHIC AND IMAGE MATERIAL

Pursuant to Item 304 of Regulation S-T, the following table presents
fair and accurate narrative descriptions of graphic and image material
omitted from this EDGAR Submission File due to ASCII-incompatibility
and cross-references this material to the location of each occurrence in
the text.

DESCRIPTION OF OMITTED LOCATION OF GRAPHIC
GRAPHIC OR IMAGE OR IMAGE IN TEXT
---------------------- -------------------
1. Four-color page on outside of Inside front cover of the
gate-fold containing six graphs Prospectus
depicting the following:

Graph showing number of dehumidification
hours and cooling hours per month that
the outdoor humidity and temperature
exceed indoor air temperature of 75
degrees Fahrenheit and 50 percent relative
humidity in Washington. The aggregate
number of such dehumidification and
cooling hours per year appears
below such graph.

The following are the approximate number
of dehumidification and cooling hours
per month depicted in the graph for Washington:

Month Dehumidification Cooling
- ----- ---------------- -------
Jan 0 0
Feb 0 0
Mar 0 0
Apr 0 25
May 400 100
June 700 300
July 750 425
Aug 750 450
Sep 500 225
Oct 200 25
Nov 25 0
Dec 0 0

Graph showing number of dehumidification
hours and cooling hours per month that the
outdoor humidity and temperature exceed
indoor air temperature of 75 degrees
Fahrenheit and 50 percent relative
humidity in New York. The aggregate number
of such dehumidification and cooling hours
per year appears below such graph.

The following are the approximate number
of dehumidification and cooling hours
per month depicted in the graph for New York:

Month Dehumidification Cooling
- ----- ---------------- -------
Jan 0 0
Feb 0 0
Mar 0 0
Apr 0 25
May 0 75
June 550 250
July 750 400
Aug 725 350
Sep 450 175
Oct 75 50
Nov 0 0
Dec 0 0

Graph showing number of dehumidification
hours and cooling hours per month that the
outdoor humidity and temperature exceed indoor
air temperature of 75 degrees Fahrenheit and
50 percent relative humidity in Houston.
The aggregate number of such dehumidification
and cooling hours per year appears below
such graph.

The following are the approximate number
of dehumidification and cooling hours
per month depicted in the graph for Houston:

Month Dehumidification Cooling
- ----- ---------------- -------
Jan 200 25
Feb 125 25
Mar 300 50
Apr 650 200
May 725 400
June 725 575
July 750 675
Aug 750 675
Sep 725 500
Oct 625 200
Nov 300 75
Dec 275 25

Graph showing number of dehumidification
hours and cooling hours per month that the
outdoor humidity and temperature exceed
indoor air temperature of 75 degrees
Fahrenheit and 50 percent relative humidity
in Tampa. The aggregate number of such
dehumidification and cooling hours per year
appears below such graph.

The following are the approximate number
of dehumidification and cooling hours
per month depicted in the graph for Tampa:

Month Dehumidification Cooling
- ----- ---------------- -------
Jan 375 50
Feb 250 50
Mar 400 100
Apr 625 250
May 750 450
June 725 600
July 750 700
Aug 750 700
Sep 725 650
Oct 675 375
Nov 600 150
Dec 450 50

Graph showing number of dehumidification
hours and cooling hours per month that the
outdoor humidity and temperature exceed
indoor air temperature of 75 degrees
Fahrenheit and 50 percent relative humidity
in Taipei. The aggregate number of such
dehumidification and cooling hours per year
appears below such graph.

The following are the approximate number
of dehumidification and cooling hours
per month depicted in the graph for Taipei:

Month Dehumidification Cooling
- ----- ---------------- -------
Jan 350 25
Feb 350 50
Mar 500 75
Apr 650 200
May 750 450
June 725 600
July 750 750
Aug 750 725
Sep 725 625
Oct 750 300
Nov 675 100
Dec 525 50

Graph showing number of dehumidification
hours and cooling hours per month that the
outdoor humidity and temperature exceed
indoor air temperature of 75 degrees Fahrenheit
and 50 percent relative humidity in Tokyo. The
aggregate number of such dehumidification and
cooling hours per year appears below such graph.

The following are the approximate number
of dehumidification and cooling hours
per month depicted in the graph for Tokyo:

Month Dehumidification Cooling
- ----- ---------------- -------
Jan 0 0
Feb 0 0
Mar 0 0
Apr 0 25
May 500 50
June 650 150
July 750 400
Aug 750 525
Sep 700 200
Oct 200 25
Nov 0 0
Dec 0 0

2. Four-color two-page spread on inside of gate Inside front cover of the
fold containing a diagram showing a desiccant Prospectus
climate control system.

3. Diagram depicting the basic operation Page 29
of the gas or waste heat powered
climate control systems.

4. Four-color page depicting each of the Inside back cover of the
following: Prospectus

Photo showing desiccant and heat
exchange rotors

Photo showing ETS desiccant

Photo showing honeycomb substrate

MESIROV GELMAN JAFFE CRAMER & JAMIESON
ATTORNEYS AT LAW

EXHIBIT 5

(215) 994-1000

January 11, 1996

Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549

RE: ICC TECHNOLOGIES, INC.
REGISTRATION STATEMENT ON FORM S-2 (NO. 33-80223)

Dear Sir/Madam:

This firm is counsel to ICC Technologies, Inc. (the 'Company'). As such, we
are familiar with the corporate proceedings relating to the Registration
Statement on Form S-2, File No. 33-80223 (the 'Registration Statement'), filed
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended, covering 2,875,000 shares of the $.01 par value Common Stock to be
offered and sold to the Underwriters named in the Registration Statement, of
which (i) 2,500,000 shares (the 'Primary Shares') will be sold by the Company,
and (ii) a total of 375,000 shares (the 'Option Shares') will be sold upon
exercise by the Underwriters of an option granted to them by the Company, solely
for the purpose of covering over-allotments.

We have examined the original or copies, certified or otherwise identified
to our satisfaction, of the Company's Certificate of Incorporation, as amended,
its By-laws, as amended, resolutions of its Board of Directors, the proposed
Underwriting Agreement between the Company and Janney Montgomery Scott Inc.
and Gerard Klauer Mattison & Co., LLC, and such other documents and corporate
records relating to the Company and the issuance and sale of the Primary Shares
and the Option Shares as we deemed appropriate for purposes of rendering this
opinion.

Based upon the foregoing, it is our opinion that when the Primary Shares
and the Option Shares being registered for sale by the Company are sold in the
manner and for the consideration described in the Registration Statement, such
securities will be legally issued, fully paid and non-assessable.

We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference made to this firm under the heading
'Legal Matters' in the Prospectus comprising a part of the Registration
Statement.

Very truly yours,

/s/ Mesirov Gelman Jaffe Cramer & Jamieson

1735 MARKET STREET o PHILADELPHIA, PA 19103-7598 o 215 994 1000 FAX 215 994 1111

EXHIBIT 10.23

AGREEMENT REGARDING
JOINT DEVELOPMENT PROGRAM
(THE AGREEMENT)
BETWEEN
ENGELHARD/ICC
AND
AB AIR TECHNOLOGIES, LTD. (AB AIR)
AUGUST 21, 1995

WHEREAS:

Engelhard/ICC (E/ICC), a partnership of Engelhard Corporation and ICC
Technologies, Inc., and AB Air Technologies (AB Air), Ltd., a company
established in the State of Israel, desire to enter into a program for the
development of a residential desiccant-based air conditioning system, and

WHEREAS:

E/ICC and AB Air both wish to accomplish Phase I of the development program
with a clear definition of the obligations and benefits associated with the
parties to the agreement, according to the project details in Attachment A,

NOW, THEREFORE, THE FOLLOWING ARE AGREED TO BY THE PARTIES TO THE AGREEMENT:

1. The income resulting from the successful completion of the
development program, or any part thereof, which is expected to
consist of licenses and royalties, will be shared in the following
way:

1.1 In Stage 1, income will be used to repay, on an equally
shared basis, the accumulated cost of the Joint Development
Program plus any subsequent accumulation of overhead
expenses.

1.2 In Stage 2, net profit (after deduction of any continuing
overhead expenses) will be shared in the following way: 50%
will be shared by the parties to this agreement equally and
50% will be paid to the partner in the Joint Development
Program that licenses the technology in its territory of
operation. Stage 2 will continue until the accumulated net
profit will reach ten (10) times the accumulated cost of
the Joint Development Program.

1.3 Thereafter, net profit (after deduction of any continuing
overhead expenses) will be shared in the following way: 20%
will be shared by the parties to this agreement equally and
80% will be paid to the partner in the Joint Development
Program that licenses the technology in its territory of
operation.

1.4 For the purpose of this Agreement, the territory of AB Air
will be as defined in the Agreements regarding marketing
and manufacturing, and the territory of Engelhard/ICC will
be all other world-wide territory.

2. The partners in the joint development programs will share equally
in the cost of the program. The budget of the program is proposed
at $206,850 and should not exceed $250,000. The partners will pay
for equal shares of the budget. Should the budget be revised, the
same proportions will be applied. The partners will transfer all
the money to a joint development bank account established on
behalf of the partners in Israel

1
<PAGE>
according to the program projected cash flow in order to prevent
any setbacks. Money will be withdrawn as needed to satisfy the
needs of the program. Amounts withdrawn greater than $2,000 for
external expenses, whether at one time or in cumulative payments
to the same vendor, such as consultants, subcontracts, and
purchased materials will require the prior written approval of
both parties to this agreement. Such approval will be conveyed
within two business days or assumed to be approved.

3. Engelhard/ICC and AB Air agree that the attached document,
Attachment A -- Project Layout and Budget state the objectives of
the joint development program at present.

4.1 A staff will be created at AB Air that will exist solely
for the purposes of the joint development program. Any work
accomplished by such employees for, or on behalf of,
outside entities, including the parties to this Agreement,
beyond the scope of the joint development program, will be
compensated for by the recipient of the services.

4.2 AB Air will perform accounting for the program and will be
compensated for this service in an agreed-upon way, beyond
the O/H stated in Attachment A.

4.3 Any additional expenses will be borne equally by the
parties to the Agreement. This includes, but is not limited
to, expenses prior to the period of performance of the
program, capital expenses beyond the scope of the program
and business-related expenses (such as licensee development
costs) that occur after the conclusion of the program. Such
expenses will be limited at this point to $50,000, of which
about $30,000 has been spent already as expenses prior to
the program. Any expansion of this budget will be agreed to
in advance in writing by the parties to this agreement, and
in no way is either party bound, without such
authorization, to any amount beyond the approved amounts.

5.1 The partners will allow the usage of their know-how,
intellectual assets, relevant patents, software, etc. free
of charge and declare that these assets are their sole
property. All such intellectual property, as necessary to
the program, and as Engelhard/ICC is free to transfer in
consideration of other obligations, will be used only for
the purposes of the program, and will be returned at the
end of the program.

5.2 The acquired property of the program will be owned equally
by the parties to the Agreement during the program. This
includes, but is not limited to, general purpose hardware
and software, specific designs, calculations, computer
files, drawings, and the like, specialty tooling, and
prototype units and test instrumentation. Acquired property
will be disposed of in an equitable fashion at the end of
the program. Those properties owned by a partner outside of
the program and loaned to the program, as described in 5.1
as well any tangible properties, will be returned to the
owner separately from the distribution of the jointly owned
assets.

6. Licensing costs that are specific to marketing in a specific
territory will be borne by the party that deals in that territory.
Costs for general services to support all licensing efforts that
are relevant to all territories, such as technical support, and
materials will be borne equally by the partners, up to reasonable
limits, and excluding foreign travel-time, flights, expenses and
subject to prior consent between the two parties.

7. Each of the parties to this Agreement will submit account
summaries to the other party on a monthly basis. AB Air will
compose a monthly consolidated project summary. Any purchases
beyond the scope of the program will be authorized by both
parties.

2
<PAGE>

8. All intellectual property rights (patents, etc.) that emerge as a
result of the joint development program will be owned jointly by
the parties to the Agreement. Ownership of these rights cannot be
transferred by one party without written authorization by the
other party, except as it occurs through purchase of ownership of
one of the parties to the Agreement.

9. The purpose of the joint development program is the development of
a residential (low tonnage) desiccant-based, all-electric air
conditioning system as defined in Attachment A.

10. The parties to the agreement and their employees are bound to hold
confidential the material developed in the course of the program.
This confidentiality will extend for a period of three years after
the completion of the program or after termination of employment
by a particular employee. All subcontractors and consultants will
be required to operate under a confidentiality agreement with
terms that will be agreed upon by the parties to this agreement.

11. The joint development program may be terminated at any time by
either party only if milestones as described in the attachment are
not met and cannot be met within a reasonable period of time and
within the allocated budget. Upon termination or completion of the
program all confidential materials will be returned to their
respective owner.

12. The management of the R&D program will be shared by AB Air and
Engelhard/ICC. Each will manage the day-to-day activities of
activities in its own territories and together will manage the
overall flow and direction of the program. The AB Air manager will
be Yehoshua Elizov, and the Engelhard/ICC manager will be Barry M.
Cohen. Any substitution of the management must be agreed to by
both parties.

This document includes Attachment A.

By:/s/William Staron By:/s/Israel Barlev
Engelhard/ICC /s/Gideon Goren
/s/David Ezra
AB Air
</TABLE>

EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference and inclusion in this Registration
Statement of ICC Technologies, Inc. (the Company) on Form S-2 (File No.
33-80223) of our 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, dated March 24, 1995, on our audits of the consolidated
financial statements of ICC Technologies, Inc. as of December 31, 1994 and 1993
and for the years ended December 31, 1994, 1993 and 1992, which report is
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1994. We also consent to the incorporation by reference and inclusion in
this Registration Statement of the Company of our report, which includes an
explanatory paragraph which refers to conditions that raise substantial doubt
about Engelhard/ICC's ability to continue as a going concern, dated March 24,
1995, on our audit of the financial statements of Engelhard/ICC as of December
31, 1994 and for the period February 7, 1994 (date of formation) to December 31,
1994, which report is also included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1994. We consent to the references to our firm
under the captions "Selected Consolidated Financial Data of the Company,"
"Selected Financial Data of the Partnership" and "Experts."

COOPERS & LYBRAND L.L.P.
Philadelphia, Pennsylvania

January 10, 1996