0000893220-95-000526.txt : 19950821 0000893220-95-000526.hdr.sgml : 19950821 ACCESSION NUMBER: 0000893220-95-000526 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ICC TECHNOLOGIES INC CENTRAL INDEX KEY: 0000756502 STANDARD INDUSTRIAL CLASSIFICATION: 3585 IRS NUMBER: 232368845 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13865 FILM NUMBER: 95562242 BUSINESS ADDRESS: STREET 1: 441 N FIFTH ST STE 102 CITY: PHILADELPHIA STATE: PA ZIP: 19123 BUSINESS PHONE: 2156250700 MAIL ADDRESS: STREET 2: 441 NORTH FIFTH STREET CITY: PHILADELPHIA STATE: PA ZIP: 19123 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL COGENERATION CORP DATE OF NAME CHANGE: 19891005 10-Q 1 FORM 10-Q, ICC TECHNOLOGIES, INC. 1 CONFORMED COPY SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q /X/ Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 1995, or / / Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ____ or ____ Commission file number 0-13865 ICC TECHNOLOGIES, INC. ------------------------------------------------------------- (Exact name of registrant as specified in its charter) 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 13,303,141 shares outstanding as of August 7, 1995. 2 INDEX TO FORM 10-Q REPORT
PART I. FINANCIAL INFORMATION PAGE NO. ------ --------------------- -------- Item 1. Financial Statements (Unaudited) Balance Sheets at June 30, 1995 and December 31, 1994 3 Statements of Operations - Three months and six months ended June 30, 1995 and 1994 4 Statements of Cash Flows - Three months and six months ended June 30, 1995 and 1994 5 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 10 PART II OTHER INFORMATION Item 1. Legal proceedings 14 Item 2. Changes in Securities 14 Item 3. Defaults Upon Senior Securities 14 Item 4. Submission of Matters to Vote of Security Holders 14 Item 5. Other Information 14 Item 6. Exhibits and Reports on Form 8-K 14 SIGNATURES 15
2 3 ICC TECHNOLOGIES, INC CONSOLIDATED BALANCE SHEETS
June 30, December 31, 1995 1994 ----------------- ------------------- ASSETS ------ CURRENT ASSETS: Cash and cash equivalents $ 1,179,618 $ 1,114,335 Receivables - Employees 28,667 28,667 Engelhard/ICC 324,771 124,095 Inventories, net 11,000 16,960 Prepaid expenses and other 15,292 65,210 ----------------- ------------------ Total current assets 1,559,348 1,349,267 RESTRICTED BANK CERTIFICATE OF DEPOSIT 2,500,000 0 INVESTMENTS IN NET ASSETS OF AND LOANS TO ENGELHARD/ICC 0 1,048,255 PROPERTY AND EQUIPMENT, net 4,357 0 ----------------- ------------------ Total assets $ 4,063,705 $ 2,397,522 ================= ================== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Accounts payable - Trade $ 2,772 $ 93,838 Current portion of long-term debt 150,000 0 Accrued liabilities 154,893 182,944 ----------------- ------------------ Total current liabilities 307,665 276,782 ----------------- ------------------ LOSSES OF ENGELHARD/ICC IN EXCESS OF INVESTMENTS IN NET ASSETS 2,584,541 0 ----------------- ------------------ NOTES PAYABLE TO STOCKHOLDERS 0 150,000 ----------------- ------------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value - Series F, authorized, issued and outstanding 6,885 shares (liquidation value $12,329,986 at June 30, 1995 and $11,632,063 at December 31, 1994) 69 69 Series G Convertible, authorized and issued 400 shares; 350 shares outstanding (liquidation value $626,797 at June 30, 1995 and $591,318 at December 31, 1994) 4 4 Series H Convertible, authorized, issued and outstanding 1,500 shares at June 30, 1995 and December 31, 1994 15 15 Series I, authorized, issued and outstanding 500 shares at June 30, 1995 and December 31, 1994 5 5 Series J, authorized, issued and outstanding 225 shares at June 30, 1995 and December 31, 1994 2 2 Common stock, $.01 par value, authorized 50,000,000 shares, issued 12,926,707 shares at June 30, 1994 and 12,288,632 shares at December 31, 1994 129,267 122,887 Note receivable from issuance of Common Stock (2,200,000) 0 Additional paid-in capital 33,197,474 29,241,534 Accumulated deficit (29,783,907) (27,222,346) Less: Treasury common stock, at cost, 66,227 shares (171,430) (171,430) ----------------- ------------------ Total stockholders' equity 1,171,499 1,970,740 ----------------- ------------------ Total liabilities and stockholders' equity $ 4,063,705 $ 2,397,522 ================= ==================
The accompanying notes are an integral part of the financial statements. -3- 4 ICC TECHNOLOGIES, INC CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Six months ended ------------------------------ ------------------------------ June 30, June 30, June 30, June 30, 1995 1994 1995 1994 -------------- -------------- -------------- -------------- REVENUES $ 0 $ 0 $ 6,500 $ 88,360 COST OF GOODS SOLD 0 0 5,961 80,335 -------------- -------------- -------------- -------------- Gross Profit (Loss) 0 0 539 8,025 -------------- -------------- -------------- -------------- OPERATING EXPENSES: Marketing 0 0 0 155,283 Engineering and development 0 0 0 150,523 General and administrative 419,237 337,482 683,485 487,169 -------------- -------------- -------------- -------------- Total operating costs 419,237 337,482 683,485 792,975 -------------- -------------- -------------- -------------- (Loss) from operations (419,237) (337,482) (682,946) (784,950) INTEREST: Interest income 93,707 11,072 203,061 17,240 Interest expense on stockholders' loans (4,125) (3,736) (8,188) (7,986) -------------- -------------- -------------- -------------- 89,582 7,336 194,873 9,254 -------------- -------------- -------------- -------------- EQUITY INTEREST IN NET LOSS OF ENGELHARD/ICC (1,073,505) 0 (2,073,488) 0 -------------- -------------- -------------- -------------- NET (LOSS) (1,403,160) (330,146) (2,561,561) (775,696) CUMULATIVE PREFERRED STOCK DIVIDEND REQUIREMENTS (456,774) (65,375) (508,649) (130,750) -------------- -------------- -------------- -------------- NET (LOSS) APPLICABLE TO COMMON STOCKHOLDERS $ (1,859,934) $ (395,521) $ (3,070,210) $ (906,446) ============== ============== ============== ============== NET (LOSS) PER COMMON SHARE $ (0.15) $ (0.04) $ (0.24) $ (0.09) ============== ============== ============== ============== WEIGHTED AVERAGE COMMON SHARES 12,749,218 10,913,049 12,540,386 10,542,098 ============== ============== ============== ==============
The accompanying notes are an integral part of the financial statements. -4- 5 ICC TECHNOLOGIES, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, --------------------------------------- 1995 1994 --------------- ------------------ Cash Flows from Operating Activities: Net loss $ (2,561,561) $ (775,696) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 413 26,807 Equity interest in net loss of Engelhard/ICC 2,073,488 0 Increase in bad debt and inventory reserve 0 57,000 (Increase) decrease in: Receivables (200,676) 53,017 Inventories 5,960 (67,664) Prepaid expenses and other 49,918 30,610 Increase (decrease) in: Accounts payable (91,066) (16,350) Accrued expenses 61,257 (153,653) --------------- ------------------ Net cash used in operating activities (662,267) (845,929) --------------- ------------------ Cash Flows from Investing Activities: Repayments of loans from Engelhard\ICC 1,500,000 0 Purchase of restricted certificate of deposit (2,500,000) 0 Purchases of property and equipment, net (4,770) (9,300) --------------- ------------------ Net cash used in investing activities (1,004,770) (9,300) --------------- ------------------ Cash Flows from Financing Activities: Proceeds from issuance of common stock and warrants, net 1,732,320 4,680,369 Repayments of borrowings from stockholders 0 (185,272) Borrowings from Engelhard Corporation 0 400,000 --------------- ------------------ Net cash provided by financing activities 1,732,320 4,895,097 --------------- ------------------ Net increase in cash and cash equivalents 65,283 4,039,868 Cash and Cash Equivalents, Beginning of Period 1,114,335 1,142,674 --------------- ------------------ Cash and Cash Equivalents, End of Period $ 1,179,618 $ 5,182,542 =============== ==================
The accompanying notes are an integral part of the financial statements. -5- 6 ICC TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 1995 (1) BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the financial statements and footnotes thereto for the year ended December 31, 1994 included in the Company's Annual Report on Form 10-K for the year ended December 31, 1994. Results of operations for the six months ended June 30 are not necessarily indicative of results of operations expected for the full year. (2) BUSINESS AND GOING CONCERN CONSIDERATIONS Business ICC Technologies, Inc. ("ICC" or the "Company") is a Delaware Corporation. On February 7, 1994, pursuant to the terms and conditions of a Joint Venture Asset Transfer Agreement ("Transfer Agreement"), by and among ICC, its newly formed wholly owned subsidiary, ICC Desiccant Technologies, Inc. ("I Partner"), and Engelhard Corporation ("Engelhard") and its newly formed wholly owned subsidiary, Engelhard DT, Inc. ("E Partner"), ICC and Engelhard, through their respective subsidiaries, formed a Pennsylvania general partnership named "Engelhard/ICC" (the "Partnership"). In exchange for a 50% interest in the Partnership, ICC transferred to the Partnership through its wholly-owned subsidiary, I Partner, substantially all of its assets, with the exception of cash and certain other assets not related to the desiccant air conditioning business, subject to certain liabilities, and Engelhard, in exchange for a 50% interest in the Partnership, (a) contributed to the Partnership through its wholly-owned subsidiary, E Partner, $8,634,000, (b) entered into a Supply Agreement pursuant to which it agreed to supply desiccants to the Partnership, (c) entered into a Technology License Agreement pursuant to which Engelhard and the Partnership licensed to each other certain technology rights, and (d) agreed to provide credit support to the Partnership in the amount of $3,000,000. The Partnership was formed on February 7, 1994 to engage in the business of designing, manufacturing and selling desiccant wheel components and desiccant air conditioners for the dehumidification cooling markets, industrial drying/dehumidification market and the air conditioning and microbe reduction market for health care facilities ("Partnership Business"), and succeed to the desiccant air conditioning business conducted by ICC prior to the formation of the Partnership and the activities of ICC and Engelhard under the Joint Development Agreement dated May 26, 1992. As a result of the consummation of the Transfer Agreement, ICC has become principally a holding company, owning a 50% interest in the Partnership through ICC's wholly owned subsidiary, I Partner, which is a co-general partner of the Partnership. Although ICC is not permitted to engage directly or indirectly in any activities that would conflict with the Partnership Business as long as the Partnership is in effect, ICC is not precluded from engaging in other activities. ICC will, in fact, continue the current cogeneration business activities that it has been conducting on a very limited basis. Presently, although ICC is exploring the possibility of pursuing other ventures, to date it has not entered into any agreements or commitments to engage in any other activities. 6 7 (2) BUSINESS AND GOING CONCERN CONSIDERATIONS, Continued Prior to consummation of the Transfer Agreement, ICC was engaged in the business of designing, manufacturing and marketing environmentally beneficial and energy efficient, desiccant cooling systems for climate control for commercial buildings. The Company's products were marketed to chain operators of supermarkets, department stores, and to manufacturers, schools, health care facilities, federal, state and local governments, and to users of all other types of air conditioning and dehumidification products. The Partnership has and the Company expects the Partnership to continue to conduct such business and to market its products to such potential users. Going Concern The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Revenues and the Company's share of results of operations of Engelhard/ICC have been insufficient to cover costs of operations for the three and six months ended June 30, 1995. The Company has incurred cumulative losses since inception of $29,783,907 and $27,222,346 through June 30, 1995 and December 31, 1994, respectively. In order to continue operations, the Company has had to raise additional capital to offset cash consumed in operating and investing activities. The Company's continuation as a going concern is dependent on its ability to: (i) generate sufficient cash flows to meet its obligations on a timely basis, (ii) obtain additional financing as may be required, and (iii) ultimately attain profitable operations and positive cash flows from operations and its investment in the Partnership. The accompanying financial statements do not include any adjustments that may result from the Company's inability to continue as a going concern. In response to the aforementioned conditions, the Company has transferred the net assets of the desiccant air conditioning line of business to the Engelhard/ICC Partnership. ICC is not obligated to contribute additional capital to the Partnership. ICC may be requested by Engelhard to provide additional financial support to the Partnership as a condition for Engelhard to provide additional financial support to the Partnership. Until the Partnership generates sufficient cash flows from operations, it will be primarily dependent upon the partners to provide any required working capital. Because ICC is a 50% partner, ICC will record its proportionate share of future losses of the Partnership under the equity method of accounting to the extent of any remaining balance of positive investment in and advance to the Partnership or commitment to provide funds to the Partnership in the future. Management intends to raise additional capital as required to continue operations and to pursue other business activities; however, there can be no assurance that the Company will be able to raise additional capital as required to continue operations or to pursue other activities. See Note 4 Stock Transactions. Although the Company is not obligated to contribute capital to the Partnership, management may also consider raising additional capital to provide additional funding to the Partnership, if needed. 7 8 (3) INVESTMENT IN ENGELHARD/ICC PARTNERSHIP The following are the summarized unaudited financial results of the Partnership:
Quarter ended Quarter ended Six months Period -------------- -------------- ---------- ------ June 30, 1995 June 30, 1994 ended June February 7 to ------------- ------------- ----------- -------------- 30, 1995 June 30, 1994 -------- ------------- RESULTS OF OPERATIONS: Revenues $ 3,373,964 $467,548 $ 5,161,966 $617,244 Loss from operations (1,805,033) (1,373,073) (3,584,230) (1,943,217) =========== =========== =========== =========== Net loss ($2,147,011) $ (1,321,990) ($4,146,976) $ (1,870,265) ============= ============= ============= ============= BALANCE SHEET INFORMATION: June 30, 1995 December 31, ------------- ------------ 1994 ------ Cash $ 745,354 $ 648,451 Receivables 1,693,706 663,551 Inventory 3,643,533 2,439,509 Other current assets 200,277 75,836 Cash held in escrow 1,261,106 0 Property, plant and equipment 8,028,405 7,946,511 Other noncurrent assets 1,729,591 1,612,497 --------- --------- Total Assets $ 17,301,972 $13,386,355 ============ =========== Current liabilities $ 1,247,792 $1,730,732 Revolving credit line 2,750,000 0 Long term debt 8,727,318 175,044 Notes payable to general partners 0 8,000,000 Partners capital 4,333,607 3,480,579 --------- --------- Total Liabilities and equity $17,301,972 $ 13,386,355 =========== =============
The Company's investment in the Partnership is owned by a subsidiary, ICC Desiccant Technologies, Inc., whose principal asset is the Partnership investment. The investment in the Partnership is accounted for under the equity method of accounting. In the second quarter 1995, the Partnership included in revenue $500,000 associated with a technology license agreement entered into with a manufacturing company located in Taiwan. In December 1994, the general partners each loaned $4,000,000 to the Partnership in connection with the acquisition of the real property and substantially all other assets of an existing manufacturing facility located in Miami, Florida. In May 1995, $1,500,000 of the aforementioned loan was repaid to each general partner, with the remaining amount, $2,500,000, for each general partner, was converted into an investment into the Partnership. The Company's proportionate share of losses in the Partnership are $1,073,505 and $2,073,488 for the three and six months ended June 30, 1995 and $4,885,911 cumulative losses since inception. The Company's share of losses have been recognized and offset against the Company's investment in net assets and loans to Engelhard/ICC. At February 7, 1994, date of formation, the Company's investment in the Partnership was approximately $0 and no losses of the Partnership were recognized for the six months ended June 30, 1994. Receivables from the Partnership were $324,771 at June 30, 1995. Interest income earned from the Partnership in connection with the aforementioned $4 million loan amounted to approximately $67,000 in the second quarter of 1995. In May 1995, each general partner was repaid $1,500,000 of the aforementioned loan, of which the remaining amount, $2,500,000 for each general partner, was converted into an investment into the Partnership. The Partnership provided approximately $24,000 in various administrative office support services to the Company. The Partnership in April 1995 obtained financing from the issuance of industrial development revenue bonds up to an 8 9 (3) INVESTMENT IN ENGELHARD/ICC PARTNERSHIP, Continued aggregate of $8.5 million . The proceeds of which were utilized to repay a portion of the bridge financing provided by the general partners and provided for improvements and capital equipment at the Miami facility. As of June 30, 1995, $1,261,106 of proceeds were held in escrow that were to be released upon the incurrance of qualified expenditures. In May 1995, the Company guaranteed 50% of the Partnership's indebtedness associated with the industrial development revenue bonds; as a result, the continued loss of the Partnership has resulted in the Investment being recorded as a liability on the balance sheet. The Company has established an irrevocable letter of credit for $2.5 million to support its portion of the guarantee. The Company's letter of credit is collaterialized by a certificate of deposit of $2.5 million. The general partners are guarantors of the Partnership's long term debt which totals $8,727,318. (4) STOCK TRANSACTIONS: Equity Investments- On March 31, 1995, pursuant to a private placement, the Company issued 300,000 shares of Common Stock for gross proceeds of $3,300,000. At closing cash of $1,100,000 was received along with a $2,200,000 promissory note. The promissory note is payable on the earlier of one year or forty-five days after the date on which a registration statement covering the 300,000 shares goes effective. The promissory note is collateralized by the pledge of 200,000 shares of the Common Stock purchased in such transaction. The Company granted warrants to purchase 375,000 shares of Common Stock at $9 per share to the placement agents in connection with the private placement. The expenses accrued for in connection with the offering are estimated to amount to approximately $120,000 at June 30, 1995, which has been offset against gross proceeds received. The Company received proceeds of approximately $308,000 from the exercise of stock options to purchase approximately 130,000 shares of Common Stock granted under its option plans for the three month period ended June 30, 1995. The Company received proceeds of approximately $750,000 from the exercise of stock options to purchase approximately 318,000 shares of Common Stock granted under its option plans for the six month period ended June 30, 1995. Preferred Stock- The shares of Series G and H Convertible Preferred Pock may be converted into Common Sock at the demand of the holder of such shares. The conversion rates are 8170.56 shares of Common Stock for each Series G share and 500 shares of Common Stock for each Series H share. In April 1995, the Series F and G Preferred Stock began to accrue a cash dividend at a rate equal to 15% of the respective accrued liquidation preference. Accrued dividend for the period ended June 30, 1995 for the Series F and G preferred stock amounted to $385,312 and $19,587, respectively. In August 1995, the holders of 6,750 shares of Series F Preferred Stock agreed to convert their shares into 925,000 shares of Common Stock. 9 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations (1) General Overview Pursuant to the Transfer Agreement, on February 7, 1994, the Company transferred substantially all of its assets, subject to certain liabilities, to the Partnership in exchange for a 50% interest, through its subsidiary in the Partnership. The Partnership was formed with Engelhard, which, through its subsidiary also owns a 50% interest in the Partnership, and has an option to purchase the Company's 50% interest upon certain terms and conditions. Accordingly, the desiccant air conditioning business that was conducted by ICC prior to the formation of the Partnership is now being conducted by the Partnership, and ICC has become principally a holding company. Further, substantially all of the employees of ICC have become employees of the Partnership and the leases for the space occupied by, and certain other obligations of, ICC have been assumed by the Partnership. After the consummation of the Transfer Agreement, the remaining assets of the Company, other than the investment in the Partnership, consisted of cash, a note receivable from the Company's Chairman and assets related to the cogeneration line of business, including accounts receivable, inventory, property and equipment, and other assets. These assets have been evaluated for impairment and are carried at their net realizable value. Revenues following consummation of the Transfer Agreement consist of sales of remaining spare parts related to the cogeneration line of business. The cogeneration line of business was not part of the Transfer Agreement because Engelhard was not interested in the activities of the cogeneration business. Although ICC is not permitted to engage directly or indirectly in any activities which would conflict with the Partnership Business as long as the Partnership is in effect, ICC is not precluded from engaging in other activities. Although ICC is exploring the possibility of pursuing other ventures, to date it has not entered into any agreements or commitments to engage in any other activities. (2) Review of Losses from Operations As described above, upon formation of the Partnership and the transfer of substantially all of the Company's assets to the Partnership, the Company became principally a holding company. Since formation of the Partnership, the Company's sole activities have related to it's limited cogeneration operations and the Company currently is not engaged in any activities that would generate any significant revenues, although it does have continuing limited expenses. See "Results of Operations- General Overview" and "Liquidity and Capital Resources." The Company's net loss for the six months ended June 30, 1995 was $2,561,561 compared with the net loss of $775,696 for the same period in 1994. The Company's net loss for the three months ended June 30, 1995 was $1,403,160 compared with the net loss of $330,146 for the same period in 1994. This increase in the loss is attributable to the Company's equity interest in the Partnership's losses of $2,073,488 and $1,073,505 for the six and three months ended June 30, 1995 as compared to none recognized for the same period ended in 1994. The Partnership's losses are attributable to insufficient revenues to cover operating expenses. In May 1995, the Company guaranteed 50% of the Partnership's indebtedness associated with the industrial development revenue bonds; as a result, the continued losses of the Partnership have resulted in the Investment being recorded as a liability on the balance sheet. At February 7, 1994, date of formation, the Company's investment in the Partnership was approximately $0 and no losses of the Partnership were recognized for the second quarter ended 1994. 10 11 The Company's general and administrative expenses increased $81,755 or 24% for the three month period ended June 30, 1995 compared to the same period in 1994 primarily as the result of increased payroll expenses and investor relations consulting expenses. The Company's general and administrative expenses increased $196,316 or 40% for the six month period ended June 30, 1995 compared to the same period in 1994 primarily as the result of increased payroll expenses, investor relations consulting expenses and non-recurring reimbursement of expenses of $250,000 under the joint development program recorded during 1994. The Company provided $30,000 for the three and six months ended June 30, 1995 for services rendered in 1993 by an investor relations vendor. Pursuant to an agreement with the vendor, the obligation was satisfied by the issuance of 20,000 shares of common stock. The Company's expenses related to marketing, engineering and development decreased or was eliminated in 1995 as compared to 1994 primarily as a result of the transfer of substantially all operations to the Partnership on February 7, 1994. Net loss per share of common stock was $.24 for the six month period ended June 31, 1995, compared with $.09 per share for the same period of 1994. Liquidity and Capital Resources General Overview. The independent accountants report on the audit of the Company's 1994 financial statements includes an explanatory paragraph regarding substantial doubts about the Company's ability to continue as a going concern. The Company's financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has suffered recurring losses accumulating to $29,783,907 as of June 30, 1995. The Company's continuation as a going concern is dependent upon its ability to: (i) generate sufficient cash flows to meet its obligations on a timely basis, (ii) obtain additional financing or refinancing as may be required and (iii) ultimately, attain profitable operations and positive cash flow from its operations and its investment in the Partnership. In response to the aforementioned conditions, (i) the Company raised additional equity in 1994 as discussed below and (ii) the Company entered into the Transfer Agreement with Engelhard which was consummated and the Partnership was formed on February 7, 1994. The formation of the Partnership has substantially reduced the Company's level of operations and has provided, principally because of the financial support by Engelhard Corporation, much needed capital to fund operations in connection with the desiccant air conditioning business now being conducted by the Partnership. The independent accountants report on the audit of the Partnership's 1994 financial statements also includes an explanatory paragraph regarding substantial doubts about the Partnership's ability to continue as a going concern. The Partnership's continuation as a going concern will remain dependent upon its ability to: (i) generate sufficient cash flows to meet its obligations on a timely basis, (ii) obtain additional financing or refinancing as may be required and (iii) ultimately, attain profitable operations and positive cash flow from operations. Although the Company is currently considering financing arrangements, does not have any firm commitments, understandings or agreements for such additional capital and no assurance can be made that capital will be obtained on a timely basis. 11 12 Management believes that the Company currently has sufficient resources to support its operations until at least June 1996. Management believes the Partnership will require additional capital contributions during 1995 of which the Company's share is estimated to be approximately $2 million in cash. The additional capital needs of the Partnership during 1995 are expected to be satisfied primarily through proceeds from the collection of its note receivable from issuance of Common Stock. The Company is not aware of any additional capital contribution requirements of the Partnership other than identified above; however, there can be no assurance that additional capital contributions will not be made. To the extent capital contributions are required the Company would expect to satisfy the requirements by seeking equity financing. The Company's ability to successfully obtain equity financing in the future is dependent in part on market conditions and the performance of the Partnership. There can be no assurance that the Company will be able to obtain equity financing in the future. In the second quarter of 1995, the Company received cash proceeds of approximately $308,000 from the issuance of common stock through the exercise of stock options. In the first quarter of 1995, the Company received cash proceeds of approximately $1.5 million from the issuance of common stock through private placements and the exercise of stock options. Offering expenses of the private placement are estimated to amount to $120,000 at June 30, 1995. The Company's cash balance at June 30, 1995 was $1,179,618. In December 1994, the general partners each loaned $4,000,000 to the Partnership in connection with the acquisition of the real property and substantially all other assets of an existing manufacturing facility located in Miami, Florida. In May 1995, each general partner was repaid $1,500,000 of the aforementioned loan, of which the remaining amount, $2,500,000 for each general partner, was converted into an investment into the Partnership. In April 1995 the Partnership obtained financing from the issuance of industrial development revenue bonds up to an aggregate of $8.5 million. The proceeds of which were utilized to repay a portion of the bridge financing provided by the general partners and provide for improvements and capital equipment at the Miami facility. In May 1995, the Company guaranteed 50% of the Partnership's indebtedness associated with the industrial development revenue bonds; as a result, the continued losses of the Partnership have resulted in the Investment being shown as a liability on the balance sheet. The Company has established an irrevocable letter of credit for $2.5 million to support its portion of the guarantee. The Company's letter of credit is collaterialized by a certificate of deposit of $2.5 million. On March 31, 1995, pursuant to a private placement, the Company issued 300,000 shares of Common Stock for gross proceeds of $3,300,000. At closing cash of $1,100,000 was received along with a $2,200,000 promissory note. The promissory note is payable on the earlier of one year or forty-five days after the date on which a registration statement covering the 300,000 shares goes effective. The promissory note is collateralized by the pledge of 200,000 shares of the Common Stock purchased in such transaction. The Company granted warrants to purchase 375,000 shares of Common Stock at $9 per share to the placement agents in connection with the private placement. The Company received proceeds of approximately $308,000 from the exercise of stock options to purchase approximately 130,000 shares of Common Stock granted under its option plans for the three month period ended June 30, 1995. The Company received proceeds of approximately $750,000 from the exercise of stock options to purchase approximately 318,000 shares of Common Stock granted under its option plans for the six month period ended June 30, 1995. The Company had negative cash flow from operating activities of $662,267 for the six months ended June 30, 1995. The reason for the operating deficit was primarily from the increase in advances to the Partnership and continued administrative costs. 12 13 Review of Working Capital As of June 30, 1995, ICC had $1,559,348 in total current assets and $307,665 in current liabilities, resulting in working capital of $1,251,683. The Company's cash position at June 30, 1995 was $1,179,618. The Company's expenses will most likely continue to be higher than any revenues from limited operations for 1995 and perhaps beyond. The Company believes that the equity capital raised described above, together with limited negative cash flow from operations, will be sufficient to meet its working capital requirements for the immediate foreseeable future. ICC has not declared any dividends and does not expect to declare dividends in the foreseeable future. Payment of future dividends will rest within the discretion of the Board of Directors and will depend, among other things, on ICC's earnings, capital requirements and financial condition. In general, payment of dividends to holders of Common Stock is restricted by requirements that all accumulated dividends due to all series of Preferred Stock be fully paid prior to the distribution of any dividends to the holders of Common Stock. 13 14 PART II OTHER INFORMATION Item 1. Legal Proceedings No legal proceedings by, or against, the Company were initiated in the quarter ended March 31, 1995. Item 2. Changes in Securities. None Item 3. Defaults Upon Senior Securities Not Applicable Item 4. Submission of Matters to a Vote of Security Holders The last Annual Meeting of Stockholders of ICC was held June 1, 1995. The record date for the meeting was April 3, 1995. At such meeting, the holders of Common Stock, voting as a single class, elected a Board of Directors for the Company consisting of the following six persons: Irwin L. Gross; Mark S Hauser; Stephen Schachman; William A. Wilson; Andrew L. Shapiro and Albert Resnick. These individuals will serve on the Board of Directors until the next annual meeting of stockholders or until their respective successors have been duly elected and qualified. The votes were cast as follows for the election of Directors:
NAME FOR WITHHELD ---- --- -------- Irwin L. Gross 15,603,445 189,779 Mark S. Hauser 15,607,255 185,969 Albert Resnick 15,603,505 189,719 Stephen Schachman 15,590,475 202,749 Andrew L. Shapiro 15,605,975 187,249 William A. Wilson 15,607,505 185,719
The stockholders also ratified the selection of the firm of Coopers & Lybrand LLP to be the Company's auditors for 1995. There were 15,652,429 votes in favor of the selection, 46,865 votes against, and 93,930 in abstention. Item 5. Other Information Not Applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: None (b) Reports on Form 8-K: None 14 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DATE: August 11, 1995 BY: /s/ Irwin L. Gross -------------------- ------------------------ Irwin L. Gross, Chairman and President DATE: August 11, 1995 BY: /s/Manfred Hanuschek ---------------------- -------------------- Manfred Hanuschek Chief Financial Officer 15 EX-27 2 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 1,179,618 0 353,438 0 11,000 1,559,348 4,770 413 4,063,705 307,665 0 129,267 0 95 1,042,137 4,063,705 6,500 6,500 5,961 5,961 683,485 0 8,188 (488,073) 0 (2,073,488) 0 0 0 (2,561,561) (.24) (.24)