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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 14, 1998
ICC Technologies, Inc.
(Exact name of Registrant as specified in its charter)
Delaware
----------------------------------------------
(State or other jurisdiction of incorporation)
0-13865 23-2368845
(Commission File Number) (IRS Employer Identification No.)
44 West 18th Street, New York, New York 10011
(Address of principal executive offices, including zip code)
(212) 634-6950
(Registrant's telephone number)
330 South Warminster Road, Hatboro, PA 19040
(Former name or former address, if changed since last report.)
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Item 2. Acquisition or Disposition of Assets
On October 29, 1998, ICC Technologies, Inc. filed a Current Report on Form
8-K dated October 14, 1998 with respect to the sale of a majority of its
partnership interest in Fresh Air Solutions, L.P. This amendment on Current
Report on Form 8-K/A amends the originally filed 8-K principally with
respect to accounting treatment of the disposition in the pro forma
financial information presented therein.
Sale of Partnership Interests in Fresh Air Solutions, L.P.
General
On October 14, 1998 (the "Closing Date"), ICC Technologies, Inc. ("ICC"),
through its wholly-owned subsidiary, ICC Desiccant Technologies, Inc., a
Delaware corporation ("Seller"), sold a majority of its partnership
interests in Fresh Air Solutions, L.P. ("FAS"), a Pennsylvania limited
partnership engaged in the business of developing, manufacturing and
distributing desiccant-based climate control systems, to Wilshap
Investments, LLC ("Buyer"), an unaffiliated Delaware limited liability
company owned by William A. Wilson, an executive officer of FAS and a former
officer and director of ICC, and Andrew Shapiro, a former director of ICC.
Seller's principal assets consisted of a 1% general partnership interest in
FAS and an 89% limited partnership interest in FAS, which, in turn, in
addition to FAS' operating assets also owned a 20% limited partnership
interest ("Hexcore Interest") in Engelhard Hexcore, L.P. ("Hexcore"), a
Delaware limited partnership controlled by Engelhard Corporation through its
wholly-owned subsidiary Engelhard DT, Inc. Hexcore is engaged in the
business of designing, manufacturing, and selling products fabricated from
honeycomb substrate, and rotors or wheels or similar products used in
climate control systems. As a result of the sale, Buyer replaced Seller as
the sole general partner of FAS and Seller retained, as its sole asset, a
32.4% passive investment limited partnership interest in FAS. ICC will
account for its continuing interest in FAS using the equity method of
accounting.
Basic Terms of the Purchase and Sale Agreement
Purchased Interests. Pursuant to the terms of the Purchase and Sale
Agreement Relating to Partnership Interests in Fresh Air Solutions, L.P.,
dated October 14, 1998, between Seller and Buyer ("Purchase and Sale
Agreement"), Seller sold its entire 1% general partnership interest and a
56.6% limited partnership interest in FAS (collectively referred to as the
"FAS Partnership Interests") to Buyer in consideration for the purchase
price and subject to the assumption of liabilities described below.
Purchase Price. In consideration for the transfer and sale by
Seller of the FAS Partnership Interests, Buyer paid $1,500,000, of which
$1,125,000 was paid in cash to Seller and $375,000 was paid by delivery of
an unsecured promissory note ("Note") issued by FAS, the principal amount of
which, together with accrued interest thereon at the rate of 8%, is payable
in full on October 14, 2000. The Buyer has guaranteed up to a maximum of 60%
of the principal amount of the Note.
Assumption of Liabilities. As a condition to the sale of the FAS
Partnership Interests, Buyer agreed to assume, pay, perform and discharge
(i) all of the liabilities of Seller, in its capacity as general partner of
FAS or otherwise relating to or arising out of the FAS business, and FAS
known by William A. Wilson or Manfred Hanuschek, the chief financial officer
of FAS and former chief executive of ICC, regardless of when they arose; and
(ii) all liabilities of Seller, in its capacity as the general partner of
FAS or otherwise relating to or arising out of the business of FAS, and FAS
which arose on or after November 18, 1997, whether or not known by ICC,
Seller or Buyer or any of their
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respective principals, and (iii) all liabilities of ICC relating to or
arising out of the FAS business known by William A. Wilson or Manfred
Hanuschek (regardless of when they arose) or which arose on or after
November 18, 1997 (whether or not known by ICC, Seller or Buyer or any of
their respective principals) including, without limitation, all liabilities
that ICC and Seller have under or associated with the revolving credit loan
from Mellon Bank, N.A. to FAS pursuant to a Promissory Note dated February
27, 1998 by and between FAS and Mellon Bank, N.A. ("Mellon Loan"), and the
Agreement of Lease between 330 South Warminster Associates, L.P. and
Engelhard/ICC dated February 21, 1997 (which was assigned by Engelhard/ICC
to FAS on February 27, 1998) ("Hatboro Lease"), as well as certain other
liabilities enumerated in Section 1 of the Purchase and Sale Agreement
insofar as such enumerated liabilities come within the meaning of the
assumed liabilities as described above.
Representations and Warranties. The Seller and Buyer made customary
representations and warranties to each other, including as to organization,
authorization, non-contravention, title and known liabilities of FAS.
Conditions to Obligation to Close. The sale of the FAS Partnership
Interests was subject to customary conditions to closing, including the
execution and delivery of documents and instruments and the receipt of
approvals and consents necessary to effectuate the sale of the FAS
Partnership Interests and the withdrawal of Seller as the general partner of
FAS and the admission of Buyer as the sole general partner of FAS. In
addition, it was a condition to closing that Engelhard Corporation enter
into an agreement with William A. Wilson to purchase the Hexcore Interest
from FAS on such terms as were disclosed to ICC and Seller prior to closing.
As a condition to Seller's obligation to close on the sale, Seller was
released from all liability under the Mellon Loan by Mellon Bank, N.A. and
ICC and Seller were released from all liability under the Hatboro Lease by
the landlord of such property.
Indemnification. The Seller and Buyer have each agreed to indemnify
the other for any breach of any representations, warranties, or covenants by
the indemnifying party contained in the Purchase and Sale Agreement.
Post-Closing Covenants.
Change of Name. Seller agreed to change its name to a name
not substantially similar to its current name within 10 days from closing.
Right of First Refusal. If Seller desires to directly transfer
any of its remaining limited partnership interest in FAS, Seller has agreed
to give written notice of such offer to Buyer. Buyer shall have the option
to participate in the purchase of Seller's partnership interests for the
price and upon the other terms and conditions contained in the offer, so
long as Buyer purchases all of the remaining partnership interests so
offered by Seller.
Come Along Rights. If Buyer desires to transfer any of its
partnership interests in FAS, Buyer has agreed to give written notice of
such intended transfer to Seller. Seller shall have the option to
participate in the proposed transfer, upon the same terms and conditions as
Buyer, up to that percentage of Seller's remaining limited partnership
interest in FAS equaling the product of (i) a fraction, the numerator of
which is the percentage of Seller's remaining limited partnership interest
in FAS as of the date of such proposed transfer and the denominator of which
is the percentage of aggregate general and limited partnership interests
actually owned as of the date of such written
2
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notice by Buyer and Seller, multiplied by (ii) the partnership interest
proposed to be transferred by Buyer.
No Board Representation. Following the closing, neither ICC
nor Seller shall have the right to have any representatives elected to the
Board of Directors or other governing body of Buyer.
3
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Item 7. Financial Statements and Exhibits
(b) Pro forma financial information.
Page No.
Unaudited Pro Forma Financial Information 4
Unaudited Pro Forma Condensed Consolidated Statement of Operations
for the year ended December 31, 1997 5
Unaudited Pro Forma Condensed Consolidated Statement of Operations
for the six months ended June 30, 1998 6
Unaudited Pro Forma Condensed Consolidated Balance Sheet
as of June 30, 1998 7
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements 8
3
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Unaudited Pro Forma Financial Information
Basis of Presentation:
The following Unaudited Pro Forma Condensed Consolidated Statements of
Income for the twelve months ended December 31, 1997 assumes that the
acquisition of Rare Medium, Inc. ("Rare Medium") occurred on January 1,
1997. This presentation entails adding the results of operations of Rare
Medium to those reported by the Company in its Form 10-K for the twelve
months ended December 31, 1997, and making certain pro forma adjustments as
described in the Notes to Unaudited Pro Forma Financial Statements.
Prior to February 27, 1998, the Company conducted operations through
Engelhard/ICC, a general partnership formed in February 1994, in which the
Company, along with Engelhard Corporation ("Engelhard"), each owned,
indirectly, a 50% general partnership interest. At that time, the Company
was essentially a holding company for the partnership interests and, its
investment in the Partnership was accounted for using the equity method of
accounting.
In February 1998, a restructuring of the Engelhard/ICC partnership occurred,
resulting in its division into two separate operating partnerships: Fresh
Air Solutions LP ("Fresh Air Solutions") and Engelhard HexCore LP
("Engelhard HexCore"). ICC indirectly owned 90% of Fresh Air Solutions and
20% of Engelhard HexCore. Engelhard indirectly owned 10% of Fresh Air
Solutions and 80% of Engelhard HexCore. In the following Unaudited Pro Forma
Condensed Consolidated Statements of Income for the twelve months ended
December 31, 1997, the effect of the sale of the 57.6% interest in Fresh Air
Solutions is illustrated by adjusting the equity in interest in the net loss
of Engelhard/ICC reported for 1997 by the amount that is estimated to have
related to the operations which were, as of the restructuring, included in
FAS.
Pursuant to the Restructuring, the Company obtained full management control
of Fresh Air Solutions, L.P. as of January 1, 1998 and was responsible for
providing full financial support. Accordingly, as of that date, the Company
consolidated the assets and liabilities of Fresh Air Solutions, and from
that date the results of operations as reported by the Company included 100%
of the results of operations of Fresh Air Solutions, L.P.
The Unaudited Pro Forma Condensed Consolidated Statements of Income for the
year ended December 31, 1997 and for the six months ended June 30, 1998
assume that the sale of the 57.6% interest in Fresh Air Solutions occurred
as of January 1, 1997, and also that the acquisition of Rare Medium occurred
on January 1, 1997. This presentation entails adding the results of
operations of Rare Medium through March, 1998 to those reported by the
Company in its Form 10-K for the year ended December 31, 1997 and the Second
Quarter Form 10-Q for the six months ended June 30, 1998, and deducting the
results of operations of Fresh Air Solutions for these periods, which were
included therein, except for the 32.4% interest in FAS which has been
retained. The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
June 30, 1998 assumes both transactions occurred on June 30, 1998.
The acquisition of Rare Medium has been accounted for under the purchase
method of accounting. The purchase price has been allocated based on the
fair values of the assets acquired and liabilities assumed as of the date of
acquisition. The unaudited pro forma financial statements do not purport to
represent what the Company's results of operations or financial position
actually would have been had the acquisition or the sale occurred on the
dates specified, or to project the Company's results of operations or
financial position for any future period or date. The pro forma adjustments
are based upon available information and do not reflect any benefits from
economies which might be achieved from the combined operations. In the
opinion of management all adjustments have been made that are necessary to
present fairly the unaudited pro forma financial statements. The unaudited
pro forma balance sheets and statements of operations should be read in
conjunction with the audited financial statements and notes thereto of the
respective companies.
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Unaudited Pro Forma Condensed Consolidated Statement of Operations Year Ended
December 31, 1997
<TABLE>
<CAPTION>
ICC (1) Rare (2) Adj. (3) Total
------- -------- -------- -----
<S> <C> <C> <C> <C>
Revenue $ -- $3,856,223 $ 3,856,223
Cost of sales -- 1,538,678 1,538,678
------------ ---------- ----------- ----------
Gross profit -- 2,317,545 -- 2,317,545
Operating expenses:
General and administrative 1,991,594 1,349,494 -- 3,341,088
Equity interest in net loss of -- -- -- --
Engelhard / ICC 11,985,361 -- (6,716,239) 5,269,122
Amortization of goodwill -- -- 14,980,875 14,980,875
Stock-based compensation -- 4,088,641 -- 4,088,641
Finders fee -- 500,000 -- 500,000
------------ ---------- ----------- -----------
Total operating expenses 13,976,955 5,938,135 8,264,636 28,179,726
------------ ---------- ----------- -----------
Income (loss) from operations (13,976,955) (3,620,590) (8,264,636) (25,862,181)
Other income / (expense)
Interest and other income 492,870 21,921 -- 514,791
Interest expense -- -- (1,887,000) (1,887,000)
------------ ---------- ----------- -----------
Total other income / (expense) 492,870 21,921 (1,887,000) (1,372,209)
------------ ---------- ----------- -----------
Income (loss) before provision for
income taxes (13,484,085) (3,598,669) (10,151,636) (27,234,390)
Provision for income taxes -- 29,135 -- 29,135
------------ ---------- ----------- -----------
Net loss $(13,484,085) $(3,627,804) $(10,151,636) $(27,263,525)
============ =========== =========== ============
Net loss per common share $ (0.63) $ (2.38) $ (1.06)
============ =========== ============
Weighted average common shares 21,339,635 $ 4,269,300 25,608,935
============ =========== ============
</TABLE>
5
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Unaudited Pro Forma Condensed Consolidated Statement of Operations Six Months
Ended June 30, 1998
<TABLE>
<CAPTION>
ICC (4) FAS (5) Q1 Rare (6) Adj. (7) Total
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenue $ 3,799,473 $(2,784,383) $ 1,041,532 $ -- $ 2,056,622
Operating expenses:
Cost of revenue 3,987,353 (3,261,400) 620,428 -- 1,346,381
General and administrative 4,961,485 (2,669,151) 650,006 -- 2,942,340
Amortization of intangible assets 3,807,755 -- -- 3,807,755 7,615,510
----------- ----------- ----------- ----------- ------------
Total operating expenses 12,756,593 (5,930,551) 1,270,434 3,807,755 11,904,231
----------- ----------- ----------- ----------- ------------
Loss from operations (8,957,120) 3,146,168 (228,902) (3,807,755) (9,847,609)
Other income (expense):
Gain on restructuring of Engelhard 24,256,769 510,540 -- -- 24,767,309
Interest and other income 226,832 (24,360) 6,167 -- 208,639
Interest expense (493,691) 95,324 (1,208) (471,750) (871,325)
Equity interest in net
loss of investment (133,450) -- -- (1,207,766) (1,341,216)
----------- ----------- ----------- ----------- ------------
Total other income (expense) 23,856,460 581,504 4,959 (1,679,516) 22,763,407
----------- ----------- ----------- ----------- ------------
Net income (loss) $14,899,340 $ 3,727,672 $ (223,943) $(5,487,271) $ 12,915,798
=========== =========== =========== =========== ============
Net loss per common share $ 0.60 $ 0.52
=========== ============
Weighted average common shares 24,691,994 24,691,994
=========== ============
</TABLE>
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Unaudited Condensed Consolidated Pro Forma Balance Sheet
As of June 30, 1998
<TABLE>
<CAPTION>
ICC (8) FAS (9) Adj. (10) Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4,887,503 $ (2,018,312) $ 1,125,000 $ 3,994,191
Accounts receivable less allowance
for doubtful accounts 2,682,865 (1,341,569) 1,341,296
Inventories / work in process 3,074,333 (2,734,033) 340,300
Prepaid expenses and other current
assets 564,371 (250,206) 314,165
Prepaid expenses and other
current assets 157,772 157,772
------------ ------------ ------------ ------------
Total current assets 11,366,844 (6,344,120) 1,125,000 6,147,724
Restricted cash equivalents -- --
Property, plant and equipment, net 3,329,652 (2,292,720) 1,036,932
Note receivable -- 375,000 375,000
Goodwill, net 41,935,300 41,935,300
Other assets, net 47,460 (410) 1 47,051
------------ ------------ ------------ ------------
Total assets $ 56,679,256 $ (8,637,250) $ 1,500,001 $ 49,542,007
============ ============ ============ ============
CURRENT LIABILITIES:
Accounts payable and
accrued expenses 5,518,607 (3,687,618) -- 1,830,989
Deferred taxes payable --
Income taxes payable --
Deferred revenue 317,688 317,688
Loan payable to stockholder --
------------ ------------ ------------ ------------
5,836,295 (3,687,618) -- 2,148,677
Notes payable 24,293,678 (2,093,678) 22,200,000
Deferred rent payable 70,082 70,082
------------ ------------ ------------ ------------
Total liabilities 30,200,055 (5,781,296) -- 24,418,759
Commitments
STOCKHOLDERS' EQUITY:
Common stock 259,969 259,969
Additional paid-in capital 65,909,609 65,909,609
Note receivable from director (230,467) (230,467)
Retained earnings (deficit) (39,288,480) (2,855,764) 1,500,001 (40,644,433)
Treasury common stock (171,430) (171,430)
------------ ------------ ------------ ------------
Total stockholders' equity 26,479,201 (2,855,954) 1,500,001 25,123,248
------------ ------------ ------------ ------------
Total liabilities and
stockholders' equity $ 56,679,256 $ (8,637,250) $ 1,500,001 $ 49,542,007
============ ============ ============ ============
</TABLE>
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Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
1. Represents the audited Consolidated Statement of Operations of
registrant as reported in the Company's Annual Report on Form 10-K-A
for the year ended December 31, 1997. These amounts include the
operations of the FAS' climate control systems business, which at that
time was conducted through an unconsolidated partnership Engelhard /
ICC, on the equity method of accounting.
2. Represents the results of operations of Rare Medium for the year ended
December 31, 1997, as included in the registrant's Report on From 8-K/A
dated June 25, 1998.
3. Includes pro forma adjustments to: (i) reduce the equity interest in
the net loss of Engelhard / ICC to an estimate of the loss except for
the 32.4% equity interest retained in FAS; (ii) recognize amortization
of goodwill using a three-year amortization period relating to the
acquisition of Rare Medium; and (iii) recognize one year of interest at
8.5% on the $22.2 million note which was partial consideration for the
acquisition of Rare Medium.
4. Represents the unaudited Condensed Consolidated Statement of Operations
of registrant as reported in the Company's Quarterly Report on Form
10-Q for the six months ended June 30, 1998. These amounts include the
results of operations of Rare Medium from its acquisition by the
Company in April through June 30, 1998.
5. Represents a reduction of the unaudited results of operations of FAS
for the six month ended June 30, 1998. These amounts were included in
the reported results of operation for the registrant for this period.
6. Represents the unaudited results of operations of Rare Medium for the
first quarter of 1998. This period's results of operations were not
included in the registrant's reported results of operations for the six
months ended June 30, 1998, due to Rare Medium's being acquired in
April, 1998.
7. Includes pro forma adjustments to: (i) recognize $1,207,766 equity
interest in the net loss of FAS attributable to a 32.4% interest in FAS
; (ii) recognize interest expense and amortization of goodwill for the
first quarter as a result of the acquisition of Rare Medium.
8. Represents the unaudited Condensed Consolidated Balance Sheet of
registrant as reported in the Company's Quarterly Report on Form 10-Q
for the six months ended June 30, 1998. These amounts include the
assets and liabilities of Rare Medium and FAS.
9. Represents a reduction of the amounts shown on the unaudited Condensed
Consolidated Balance Sheet of registrant by the unaudited Condensed
Balance Sheet of FAS as of June 30, 1998.
10. Adjustments include the receipt of $1,125,000 of cash and a $375,000
note, and the valuation of the remaining 32.4% interest in FAS at $1.
8
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(c) Exhibits
Exhibit No. Description
2.1 Purchase and Sale Agreement Relating to Partnership Interests
in Fresh Air Solutions, L.P. by and between ICC Desiccant
Technologies, Inc. and Wilshap Investments, LLC dated as of
October 14, 1998. (Previously filed as part of Current Report
on Form 8-K dated October 14, 1998).
SIGNATURE
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 hereto duly authorized.
ICC TECHNOLOGIES, INC.
Registrant
By: /s/ Glenn S. Meyers
Glenn S. Meyers, President
and Chief Executive Officer
Date: November 13, 1998
9
