Conformed Copy
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30,
1996, or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____ to ____
Commission file number 0-13865
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 Number)
441 North 5th Street, Suite 102
Philadelphia, Pennsylvania 19123
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 625-0700
--------------
Former name, former address and former fiscal year if
changed since last report: not applicable
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, par value $.01 per share
21,268,054 shares outstanding as of November 11, 1996.
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<PAGE>
INDEX TO FORM 10-Q REPORT
PART I. FINANCIAL INFORMATION PAGE NO.
- ------- --------------------- --------
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at September 30, 1996 and 3
December 31, 1995
Consolidated Statements of Operations - Three months and
nine months ended September 30, 1996 and 1995 4
Consolidated Condensed Statements of Cash Flows - Nine 5
months ended September 30, 1996 and 1995
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 9
PART II OTHER INFORMATION
Item 1. Legal proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
2
<PAGE>
Item 1. Financial Statements (Unaudited)
ICC TECHNOLOGIES, INC
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------ ------------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 10,663,326 $ 1,573,475
Receivables -
Employees 28,667 28,667
Engelhard/ICC 16,697 160,973
Prepaid expenses and other 156,738 530,131
------------ ------------
Total current assets 10,865,428 2,293,246
RESTRICTED CASH 2,500,000 2,500,000
PROPERTY AND EQUIPMENT, net 1,988 3,180
------------ ------------
Total assets $ 13,367,416 $ 4,796,426
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 40,502 $ 315,449
Current portion of long-term debt 0 150,000
------------ ------------
Total current liabilities 40,502 465,449
------------ ------------
LOSSES OF ENGELHARD/ICC IN EXCESS OF INVESTMENTS 1,187,880 2,797,165
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value -
Series F, authorized, issued and outstanding 0 shares at September 30,
1996 and 135 shares at December 31, 1995 (liquidation value $256,270
at December 31, 1995) 0 1
Series G Convertible, authorized, issued and outstanding 0 shares at
September 30, 1996 and 135 shares at December 31, 1995 (liquidation
value $664,400 at December 31, 1995) 0 4
Series H Convertible, authorized, issued and outstanding 0 shares
at September 30, 1996 and 1,500 shares at December 31, 1995 0 15
Series I, authorized, issued and outstanding 0 shares
at September 30, 1996 and 500 shares at December 31, 1995 0 5
Series J, authorized, issued and outstanding 0 shares
at September 30, 1996 and 225 shares at December 31, 1995 0 2
Common stock, $.01 par value, authorized 50,000,000 shares,
issued 21,268,051 shares at September 30, 1996 and 14,692,193
shares at December 31, 1995 212,681 146,923
Additional paid-in capital 50,674,857 35,104,011
Accumulated deficit (38,577,074) (33,545,719)
Less: Treasury common stock, at cost, 66,227 shares (171,430) (171,430)
------------ ------------
Total stockholders' equity 12,139,034 1,533,812
------------ ------------
Total liabilities and stockholders' equity $ 13,367,416 $ 4,796,426
============ ============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
3
<PAGE>
ICC TECHNOLOGIES, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------------------------------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
----------- ----------- ----------- ------------
REVENUES
<S> <C> <C> <C> <C>
Interest and other income $ 192,100 $ 72,251 $ 500,990 $ 275,851
EXPENSES
Equity interest in net loss of Engelhard/ICC 1,294,727 1,320,262 4,390,715 3,393,750
General and administrative 329,387 343,283 1,141,630 1,026,768
Interest 0 4,031 0 12,219
----------- ----------- ----------- -----------
Total expenses 1,624,114 1,667,576 5,532,345 4,432,737
----------- ----------- ----------- -----------
NET LOSS $(1,432,014) $(1,595,325) $(5,031,355) $(4,156,886)
CUMULATIVE PREFERRED STOCK
DIVIDEND REQUIREMENTS 0 (84,446) (49,655) (215,339)
----------- ----------- ----------- -----------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $(1,432,014) $(1,679,771) $(5,081,010) $(4,372,225)
=========== =========== =========== ===========
NET LOSS PER COMMON SHARE $ (0.07) $ (0.12) $ (0.25) $ (0.34)
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES 21,192,241 13,785,330 20,027,611 12,955,334
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
4
<PAGE>
ICC TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months ended September 30,
-------------------------------
1996 1995
-------------- -----------
Cash Flows from Operating Activities:
<S> <C> <C>
Net loss $ (5,031,355) $(4,156,886)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 1,192 826
Equity interest in net loss of Engelhard/ICC 4,390,715 3,393,750
Warrants issued for services rendered 0 25,000
Increase in inventory reserve 0 9,000
(Increase) decrease in:
Receivables 144,276 (33,448)
Inventories 0 5,960
Prepaid expenses and other 136,272 (97,074)
Increase (decrease) in:
Accounts payable and accrued expenses (274,947) (37,356)
------------ -----------
Net cash used in operating activities (633,847) (890,228)
------------ -----------
Cash Flows from Investing Activities:
Capital contributions to Engelhard/ICC (6,000,000) (1,000,000)
Purchase of restricted certificate of deposit 0 (2,500,000)
Repayments of loans from Engelhard/ICC 0 1,500,000
Purchases of property and equipment, net 0 (8,184)
------------ -----------
Net cash used in investing activities (6,000,000) (2,008,184)
------------ -----------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock and warrants, net 17,249,578 5,639,412
Cash redemption of Preferred Stock (981,270) 0
Cash dividend on Preferred Stock (394,610) 0
Repayments of borrowings from stockholder (150,000) 0
------------ -----------
Net cash provided by financing activities 15,723,698 5,639,412
------------ -----------
Net increase in cash and cash equivalents 9,089,851 2,741,000
Cash and Cash Equivalents, Beginning of Period 1,573,475 1,114,335
------------ -----------
Cash and Cash Equivalents, End of Period $ 10,663,326 $ 3,855,335
============ ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
5
<PAGE>
ICC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 1996
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. Prior amounts
in the Statement of Operations have been reclassified to conform with
the current year presentation. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. For further
information, refer to the financial statements and footnotes thereto
for the year ended December 31, 1995 included in the Company's Annual
Report on Form 10-K for the year then ended. Results of operations for
the three and nine months ended September 30, 1996 are not necessarily
indicative of results of operations expected for the full year.
(2) BUSINESS AND GOING CONCERN CONSIDERATIONS
Business
ICC Technologies, Inc. ("ICC" or the "Company") is a Delaware
Corporation. ICC through its joint venture Engelhard/ICC ("the
Partnership") with Engelhard Corporation ("Engelhard"), designs,
manufactures and markets innovative climate control systems to
supplement or replace conventional air conditioning systems. The
Partnership's climate control systems are based on proprietary
desiccant technology initially developed by the Company, licensed
honeycomb rotor technology and Engelhard's patented titanium silicate
desiccant, ETS(TM). The Partnership's climate control systems are
designed to address indoor air quality, energy and environmental
concerns and regulations currently affecting the air conditioning
market.
The Partnership was formed on February 7, 1994 pursuant to the terms
and conditions under the Joint Venture Asset Transfer Agreement
("Transfer Agreement") whereby the Partnership succeeded to the
desiccant air conditioning business conducted by ICC prior to the
formation of the Partnership. Since the formation of the Partnership,
the Company has become principally a holding company whose activities
have related primarily to its participation in the management of the
Partnership in which it owns a 50% interest. The Company is not
permitted to engage directly or indirectly in any activities which
would conflict with the Partnership's business as long as the
Partnership is in effect, but the Company is not precluded from
engaging in other activities. The Company currently does not have any
plans to engage in other activities and, therefore, is not expected to
generate any significant revenues, although it will continue to incur
general and administrative expenses.
Going Concern
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. Revenues
and the Company's share of results of operations of the Partnership
have been insufficient to cover costs of operations for the three and
nine months ended September 30, 1996. The Company has incurred
cumulative losses since inception of approximately $39 million and $34
million through September 30, 1996 and December 31, 1995, respectively.
In order to continue operations, the Company has had to raise
additional capital to offset cash utilized in operating and investing
activities. The Company's continuation as a going concern is dependent
6
<PAGE>
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 its operations and its investment in the
Partnership. The accompanying financial statements do not include any
adjustments that may result from the Company's inability to continue as
a going concern.
The cash utilized in the Company's operating and investing activities
during the three and nine months ended September 30, 1996 was financed
primarily through proceeds from the issuance of Common Stock in a
public offering and exercise of stock options and warrants. Management
believes the Partnership will require additional capital contributions
during 1996 and 1997. To the extent the Company requires additional
funds to continue its operations or the Partnership requires capital
contributions in excess of existing available funds, the Company would
expect to satisfy such requirements by seeking equity financing. The
Company's ability to obtain equity financing in the future is dependent
in part on market conditions and the performance of the Partnership.
There can be no assurance that the Company would be able to obtain
equity financing in the future.
(3) INVESTMENT IN ENGELHARD/ICC PARTNERSHIP
The following are the summarized unaudited financial results of the
Partnership:
<TABLE>
<CAPTION>
Quarter Quarter Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September
1996 1995 1996 30, 1995
----------- ----------- ----------- -----------
Results of operations:
<S> <C> <C> <C> <C>
Revenues $ 2,891,779 $ 2,009,538 $ 7,688,527 $ 7,171,504
Cost of goods sold 3,073,232 2,283,118 9,303,479 7,175,429
----------- ----------- ----------- -----------
Gross loss (181,453) (273,580) (1,614,952) (3,925)
Operating expenses:
Marketing 887,566 862,851 2,603,764 2,524,468
Engineering 274,006 280,470 813,931 694,747
Research and development 215,389 257,556 799,235 898,135
General and administrative 934,712 847,423 2,639,111 2,084,030
----------- ----------- ----------- -----------
Loss from operations 2,493,126 2,521,880 8,470,993 6,205,305
Interest expense 96,327 118,643 310,436 582,194
----------- ----------- ----------- -----------
Net loss $ 2,589,453 $ 2,640,523 $ 8,781,429 $ 6,787,499
=========== =========== =========== ===========
Balance sheet information: September 30, December 31,
1996 1995
----------- -----------
Cash $ 1,118,017 $ 346,480
Receivables 3,521,601 2,057,420
Inventory 4,745,382 3,385,125
Other current assets 258,132 158,939
Property, plant and equipment 7,939,459 8,263,642
Cash held in escrow 301,084 865,744
Other noncurrent assets 1,960,784 1,802,155
----------- -----------
Total assets $19,844,459 $16,879,505
=========== ===========
Current liabilities $ 1,286,311 $ 1,519,394
Revolving credit line 2,750,000 2,750,000
Long term debt 8,681,221 8,701,755
Partners' capital 7,126,927 3,908,356
----------- -----------
Total liabilities and capital $19,844,459 $16,879,505
=========== ===========
</TABLE>
7
<PAGE>
The Company's investment in the Partnership is owned by a wholly-owned
subsidiary, ICC Desiccant Technologies, Inc., whose sole operating
asset is the Partnership investment. The investment in the Partnership
is accounted for under the equity method of accounting. The Company's
proportionate share of losses in the Partnership are $1,294,727 and
$1,320,262 for the three months ended September 30, 1996 and 1995,
respectively and $4,390,715 and $3,393,750 for the nine months ended
September 30, 1996 and 1995, respectively. The Partnership has incurred
cumulative losses of approximately $23.7 million since inception
through September 30, 1996. The Company's share of the Partnership's
cumulative losses and capital contributions have resulted in losses in
excess of the Company's investment of $1,187,880 and $2,797,165 as of
September 30, 1996 and December 31, 1995, respectively. The Company and
Engelhard each made additional capital contributions of $1 million to
the Partnership during the three months ended September 30, 1996;
aggregating to $6 million of capital contributions made by each of the
Company and Engelhard during the nine months ended September 30, 1996.
Receivables from the Partnership were $16,697 and $160,973 at September
30, 1996 and December 31, 1995, respectively. The Company and Engelhard
are guarantors of the Partnership's long term debt which totals
approximately $ 8.7 million as of September 30, 1996. Provisions for
obsolete inventory of $75,000 and $215,000 were made for the three and
nine month periods ended September 30, 1996, respectively, which were
included in general and administrative expense.
(4) STOCK TRANSACTIONS:
Equity Investments
The Company received proceeds of approximately $64,000 and $932,000
from the exercise of stock options and warrants to purchase
approximately 14,000 and 476,000 shares of Common Stock in the three
month period ended September 30, 1996 and 1995, respectively. The
Company received proceeds of approximately $254,000 and $2,629,000 from
the exercise of stock options and warrants to purchase approximately
117,000 and 1,059,000 shares of Common Stock in the nine month period
ended September 30, 1996 and 1995, respectively.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company, through the Partnership, designs, manufactures and markets
innovative climate control systems to supplement or replace conventional air
conditioning systems. The Partnership's climate control systems are based on
proprietary desiccant technology initially developed by the Company, a licensed
honeycomb rotor technology and Engelhard's patented titanium silicate desiccant,
ETS(TM).
Pursuant to the formation of the Partnership on February 7, 1994, the Company
transferred its assets related to its desiccant climate control business,
subject to certain liabilities, to the Partnership in exchange for a 50%
interest in the Partnership through its wholly-owned subsidiary, ICC Desiccant
Technologies, Inc. Engelhard, in exchange for a 50% interest in the Partnership,
contributed capital to the Partnership, entered into a supply agreement to sell
ETS(TM) to the Partnership and entered into a license agreement granting the
Partnership an exclusive royalty-free license to use ETS(TM) in the
Partnership's business, including heating, ventilation and air conditioning. The
desiccant climate control business conducted by the Company prior to the
formation of the Partnership is now being conducted by the Partnership, and the
Company has become principally a holding company. Further, substantially all of
the employees of the Company have become employees of the Partnership and the
leases for the space occupied by, and certain other obligations of, the Company
have been assumed by the Partnership.
Since the formation of the Partnership, the Company's activities have related
primarily to its participation in the management of the Partnership in which it
owns a 50% interest. The Company is not permitted to engage directly or
indirectly in any activities which would conflict with the Partnership's
business as long as the Partnership is in effect, but the Company is not
precluded from engaging in other activities. The Company currently does not have
any plans to engage in other activities and, therefore, is not expected to
generate any significant revenues, although it will continue to incur general
and administrative expenses.
The Company accounts for its interest in the Partnership under the equity method
of accounting for investments. Although the Company has no obligation to provide
additional financing to the Partnership, because the Company has, and expects to
continue to fund its share of the Partnership's activities, the Company
recognizes its share of the losses of the Partnership.
Results of Operations
As described above, since the formation of the Partnership, the Company's sole
activities have related to its participation in the management of the
Partnership. The Company did not generate operating revenues but did have
continuous expenses during the nine month period ended September 30, 1996. The
Company's general and administrative expenses decreased $13,896 to $329,387 for
the three month period ended September 30, 1996, compared to $343,283 for the
same period in 1995. The Company's general and administrative expenses increased
$114,862 to $1,141,630 for the nine month period ended September 30, 1996,
compared to $1,026,768 for the same period in 1995. The increase for the nine
month period ended September 30, 1996 was primarily the result of increased
payroll and insurance costs.
The Company's net loss for the three months ended September 30, 1996 decreased
$163,311 to $1,432,014, compared with the net loss of $1,595,325 for the same
period in 1995. The decrease in net loss is attributable to the Company's 50%
share of the reduction in the Partnership's net loss and to the reduction in the
Company's general and administration expense for the three months ended
September 30, 1996, as compared to the same period in 1995. The Company's net
loss for the nine months ended September 30, 1996 increased $874,469 to
$5,031,355, compared with the net loss of $4,156,886 for the same period in
1995. This increase in the net loss is primarily attributable to the Company's
50% share of the increase in the Partnership's net loss for the nine months
ended September 30, 1996, as compared to the same period in 1995. Net loss per
share of Common Stock decreased to $.07 for the three month period ended
September 30, 1996, compared with $.12 per share for the same period of 1995,
and net loss per share of
9
<PAGE>
Common Stock decreased to $.25 for the nine month period ended September 30,
1996, compared with $.34 per share for the same period of 1995. Such decrease
was primarily the result of the issuance of additional shares of Common Stock
and elimination of preferred stock dividend requirements in the nine months
ended September 30, 1996.
The Partnership's revenue for the three and nine months ended September 30, 1996
was $2,891,779 and $7,688,527, respectively, compared to $2,009,538 and
$7,171,504, respectively, for the same periods in 1995. The increase in revenue
was attributable to an increase in equipment sales, the effects of which more
than offset a decline in sales of substrate from the Miami plant to Ciba Geigy
pursuant to a supply contract and the receipt of a non-recurring licensing fee
of $500,000 from Chung-Hsin in 1995. Equipment sales increased to approximately
$2 and $4.5 million for the three and nine months ended September 30, 1996,
respectively, compared to approximately $500,000 and $1.8 million for the three
and nine months ended September 30, 1995, respectively. Sales of substrate
decreased to approximately $900,000 and $3.1 million for the three and nine
months ended September 30, 1996, respectively, compared to approximately $1.5
and $4.8 million for the three and nine months ended September 30, 1995,
respectively. It is anticipated that the sale of substrate will continue at
current levels over the next year. The Partnership recorded a gross loss of
approximately $181,000 and $1,615,000 for the three and nine months ended
September 30, 1996, respectively, compared to a gross loss of approximately
$274,000 and $4,000 for the same periods in 1995. The improvement in gross loss
for the three months ended September 30, 1996, as compared to the same period in
1995, is primarily the result of improved manufacturing efficiencies in labor
hours and material costs with respect to equipment sales which offset a decline
in margins associated with lower substrate sales. The increase in gross loss for
the nine months ended September 30, 1996, as compared to the same period in
1995, is due primarily to increases in manufacturing costs of equipment without
a proportionate increase in revenues, along with a decline in margins associated
with lower substrate sales and receipt in 1995 of a non-recurring licensing fee.
The Partnership's operating expenses increased to $2,311,673 and $6,856,041 for
the three and nine months ended September 30, 1996, respectively, compared to
$2,248,300 and $6,201,388 for the same periods in 1995, respectively, due
primarily to higher general and administrative and engineering costs. General
and administrative and engineering expenses have increased primarily as a result
of increased payroll costs.
The Partnership's net loss for the three month period ended September 30, 1996
decreased to $2,589,453 as compared to $2,640,523 for the same period in 1995.
The decrease in net loss for the three month period ended September 30, 1996 as
compared to the same period in 1995 is due primarily to improvements in gross
loss attributable to equipment sales and decrease in operating expenses and
interest expense. The Partnership's net loss for the nine month period ended
September 30, 1996 increased to $8,781,429 as compared to $6,787,499 for the
same period in 1995. The increase in net loss for the nine month period ended
September 30, 1996 as compared to the same period in 1995 is due primarily to
the increase in operating costs and gross loss.
The Partnership's backlog for equipment amounted to approximately $2 million at
November 11, 1996.
Liquidity and Capital Resources
The Company's cash and cash equivalents increased $9,089,761 to $10,663,326 as
of September 30, 1996, as compared to $1,573,475 as of December 31, 1995. The
increase in cash and cash equivalents is primarily due to the public sale of
2,500,000 shares of Common Stock. In February 1996, the Company issued 2,500,000
shares in a secondary offering at $7 per share less underwriting discounts and
commissions of $.49 per share. Proceeds of $16,275,000 were offset by costs of
approximately $750,000 incurred in connection with the offering. In connection
with the offering, all outstanding Preferred Stock was converted into 3,609,696
shares of Common Stock or redeemed in cash for $981,270. In addition, accrued
dividends on the Preferred Stock amounting to approximately $1,044,000 were
declared and paid in cash, except for $649,396 of such dividends associated with
the Series G Preferred Stock which were
10
<PAGE>
paid in the form of 162,349 shares of Common Stock in accordance with the
original terms of such series. As a result of such conversion and redemption of
Preferred Stock, there are currently no shares of Preferred Stock outstanding.
The Company plans to use the remaining net proceeds from the offering to fund
primarily its half of the estimated future financing requirements of the
Partnership and to fund the Company's working capital requirements. In April
1996, the underwriters of the secondary offering exercised their overallotment
option and purchased 186,813 of Common Stock for proceeds of approximately $1.2
million after underwriting discounts and commissions.
Net cash used in operating activities by the Company was $633,847 for the nine
months ended September 30, 1996 due to the net loss (before non-cash charges and
the Company's 50% share of the net loss of the Partnership) of $639,448 and net
working capital provided of $5,601. Investing activities consisted of the
Company and Engelhard each making additional capital contributions of $6,000,000
to the Partnership in the nine months ended September 30, 1996, including
capital contributions of $1 million each to the Partnership in the three months
ended September 30, 1996. Net cash used in operating activities and for
investments in the Partnership by the Company were financed by proceeds from the
issuance of Common Stock in a public offering in February 1996 and exercise of
stock options and warrants. Net cash provided by financing activities amounted
to $15,723,692 for the nine months ended September 30, 1996.
The Partnership's cash and cash equivalents increased to $1,118,017 at September
30, 1996 from $346,480 at December 31, 1995. The increase was due primarily to
capital contributions of $6 million by each the Company and Engelhard and an
approximate $600,000 drawdown on cash in escrow, offset by cash used in
operating activities of approximately $11 million (resulting from the
Partnership's net losses and working capital requirements) and cash used in
investing activities of approximately $900,000. The Partnership is expected to
require additional financing to support current operations and anticipated
future expansion, and will be dependent on the Company and Engelhard to provide
such additional financing. There can be no assurance that the Company or
Engelhard will be willing, or able, to provide such additional financing.
Management believes the Partnership will continue to require additional capital
contributions during 1996 and 1997 and the Company plans to use the net proceeds
from the public offering of 2.5 million shares completed in February 1996 to
fund its portion of such required capital contributions. To the extent
Partnership capital contributions in excess of the net proceeds from such
offering are required or if the Company requires additional funds to continue
its operations, the Company would expect to satisfy such requirements by seeking
equity financing. The Company's ability to 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.
The Company received proceeds of approximately $64,000 and $932,000 from the
exercise of stock options and warrants to purchase approximately 14,000 and
476,000 shares of Common Stock in the three month period ended September 30,
1996 and 1995, respectively. The Company received proceeds of approximately
$254,000 and $2,629,000 from the exercise of stock options and warrants to
purchase approximately 117,000 and 1,059,000 shares of Common Stock in the nine
month period ended September 30, 1996 and 1995, respectively.
ICC has not declared any dividends on Common Stock and does not expect to
declare dividends in the foreseeable future. Payment of future dividends will
rest within the discretion of the Board of Directors and will depend, among
other things, on ICC's earnings, capital requirements and financial condition.
The independent accountants report on the audit of the Company's 1995 financial
statements includes an explanatory paragraph regarding substantial doubts about
the Company's ability to continue as a going concern. The Company's accompanying
financial statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. Revenues and the Company's share of results of
operations of the Partnership have been insufficient to cover costs of
operations for the nine months ended September 30, 1996. The Company has
suffered recurring losses accumulating to approximately $39 million as of
September 30, 1996. In order
11
<PAGE>
to continue operations, the Company has had to raise additional capital to
offset cash utilized in operating and investing activities. The Company's
continuation as a going concern is dependent upon its ability to: (i) generate
sufficient cash flows to meet its obligations on a timely basis, (ii) obtain
additional financing as may be required and (iii) ultimately, attain profitable
operations and positive cash flow from its operations and its investment in the
Partnership. The accompanying financial statements do not include any
adjustments that may result from the Company's inability to continue as a going
concern.
The independent accountants report on the audit of the Partnership's 1995
financial statements also includes an explanatory paragraph regarding
substantial doubts about the Partnership's ability to continue as a going
concern. The Partnership has incurred cumulative losses of approximately $25
million since inception through September 30, 1996. The Partnership's
continuation as a going concern will remain dependent upon its ability to: (i)
generate sufficient cash flows to meet its obligations on a timely basis, (ii)
obtain additional financing or refinancing as may be required and (iii)
ultimately, attain profitable operations and positive cash flow from operations.
Except for historical matters contained in this Quarterly Report, statements
made in this Quarterly Report are forward-looking and are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that these forward-looking statements reflect numerous
assumptions and involve risks and uncertainties which may affect the Company's
or the Partnership's business and prospects and cause actual results to differ
materially from these forward-looking statements, including the factors
mentioned in this Quarterly Report appearing where each forward-looking
statement is made, sufficient funds to finance working capital and other
financing requirements of the Company and the Partnership, market acceptance of
the Partnership's products, competition in the air conditioning industry and
other factors discussed in the Company's fillings with the Securities and
Exchange Commission, including but not limited to, its Annual Report on Form
10-K for the year ended December 31, 1995, Proxy Statement dated April 25, 1996,
and Quarterly Reports on Form 10-Q for the quarterly periods ended March 31,
1996 and June 30, 1996, respectively, and the final Prospectus dated February
14, 1996 included in the Company's Registration Statement on Form S-2
(Registration No. 33-80223).
12
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
No legal proceedings by, or against, the Company were
initiated in the quarter ended September 30, 1996.
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: 27 Financial Data Schedule
(b) The following reports have been filed with the Securities and
Exchange Commission.
None
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: November 11, 1996 BY: /s/ Irwin L. Gross
----------------- -------------------------------
Irwin L. Gross, Chairman
and President
DATE: November 11, 1996 BY: /s/ Manfred Hanuschek
----------------- -------------------------------
Manfred Hanuschek
Chief Financial Officer
14
<PAGE>
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