-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HggMXZVzs8LjVu3QAyWA711vcONkYEN015umnPYSxF7QJeTMS5Eub3ldvu9nGDPG 84KEak5xx6MXIjR2gpTgAw== 0000950115-96-001078.txt : 19960813 0000950115-96-001078.hdr.sgml : 19960813 ACCESSION NUMBER: 0000950115-96-001078 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ICC TECHNOLOGIES INC CENTRAL INDEX KEY: 0000756502 STANDARD INDUSTRIAL CLASSIFICATION: AIR COND & WARM AIR HEATING EQUIP & COMM & INDL REFRIG EQUIP [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: 96608068 BUSINESS ADDRESS: STREET 1: 441 N FIFTH ST STE 102 CITY: PHILADELPHIA STATE: PA ZIP: 19123 BUSINESS PHONE: 2156250700 MAIL ADDRESS: STREET 1: 441 NORTH FIFTH STREET 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 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, 1996, or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ____ or ____ Commission file number 0-13865 ICC TECHNOLOGIES, INC. ------------------------------------------------------ (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 21,254,554 shares outstanding as of August 8, 1996. ================================================================================ INDEX TO FORM 10-Q REPORT PART I. FINANCIAL INFORMATION PAGE NO. -------- Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets at June 30, 1996 and December 31, 1995 3 Consolidated Statements of Operations - Three months and six months ended June 30, 1996 and 1995 4 Consolidated Condensed Statements of Cash Flows - Six months ended June 30, 1996 and 1995 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 9 PART II OTHER INFORMATION Item 1. Legal proceedings 13 Item 2. Changes in Securities 13 Item 3. Defaults Upon Senior Securities 13 Item 4. Submission of Matters to Vote of Security Holders 13 Item 5. Other Information 13 Item 6. Exhibits and Reports on Form 8-K 13 SIGNATURES 14 -2- Item 1. Financial Statements (Unaudited) ICC TECHNOLOGIES, INC CONSOLIDATED BALANCE SHEETS
June 30, December 31, 1996 1995 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 11,840,422 $ 1,573,475 Receivables - Employees 28,667 28,667 Engelhard/ICC 10,906 160,973 Prepaid expenses and other 30,847 530,131 ------------ ------------ Total current assets 11,910,842 2,293,246 RESTRICTED CASH 2,500,000 2,500,000 PROPERTY AND EQUIPMENT, net 2,385 3,180 ------------ ------------ Total assets $ 14,413,227 $ 4,796,426 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued liabilities $ 85,229 $ 315,449 Current portion of long-term debt 0 150,000 ------------ ------------ Total current liabilities 85,229 465,449 ------------ ------------ LOSSES OF ENGELHARD/ICC IN EXCESS OF INVESTMENTS 893,153 2,797,165 ------------ ------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value - Series F, authorized, issued and outstanding 0 shares at June 30, 1996 and 135 shares at December 31, 1995 (liquidation value $256,270 at December 31, 1995) 0 1 Series G Convertible, authorized, issued and outstanding 0 shares at June 30, 1996 and 135 shares at December 31, 1995 (liquidation value $664,400 at December 31, 1995) 0 4 Series H Convertible, authorized, issued and outstanding 0 shares at June 30, 1996 and 1,500 shares at December 31, 1995 0 15 Series I, authorized, issued and outstanding 0 shares at June 30, 1996 and 500 shares at December 31, 1995 0 5 Series J, authorized, issued and outstanding 0 shares at June 30, 1996 and 225 shares at December 31, 1995 0 2 Common stock, $.01 par value, authorized 50,000,000 shares, issued 21,254,551 shares at June 30, 1996 and 14,692,193 shares at December 31, 1995 212,546 146,923 Additional paid-in capital 50,538,789 35,104,011 Accumulated deficit (37,145,060) (33,545,719) Less: Treasury common stock, at cost, 66,227 shares (171,430) (171,430) ------------ ------------ Total stockholders' equity 13,434,845 1,533,812 ------------ ------------ Total liabilities and stockholders' equity $ 14,413,227 $ 4,796,426 ============ ============
The accompanying notes are an integral part of the consolidated financial statements. -3- ICC TECHNOLOGIES, INC CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Six months ended ------------------------------- ------------------------------- June 30, June 30, June 30, June 30, 1996 1995 1996 1995 ------------ ------------ ------------ ------------ REVENUES $ 0 $ 0 $ 0 $ 6,500 COST OF GOODS SOLD 0 0 0 5,961 ------------ ------------ ------------ ------------ Gross Profit 0 0 0 539 ------------ ------------ ------------ ------------ OPERATING EXPENSES: General and administrative 440,982 419,237 812,243 683,485 ------------ ------------ ------------ ------------ Total operating costs 440,982 419,237 812,243 683,485 ------------ ------------ ------------ ------------ Loss from operations (440,982) (419,237) (812,243) (682,946) INTEREST: Interest income 225,859 93,707 308,890 203,061 Interest expense on stockholders' loans 0 (4,125) 0 (8,188) ------------ ------------ ------------ ------------ 225,859 89,582 308,890 194,873 ------------ ------------ ------------ ------------ EQUITY INTEREST IN NET LOSS OF ENGELHARD/ICC (1,498,334) (1,073,505) (3,095,988) (2,073,488) ------------ ------------ ------------ ------------ NET LOSS (1,713,457) (1,403,160) (3,599,341) (2,561,561) CUMULATIVE PREFERRED STOCK DIVIDEND REQUIREMENTS 0 (456,774) (49,655) (508,649) ------------ ------------ ------------ ------------ NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $ (1,713,457) $ (1,859,934) $ (3,648,996) $ (3,070,210) ============ ============ ============ ============ NET LOSS PER COMMON SHARE $ (0.08) $ (0.15) $ (0.19) $ (0.24) ============ ============ ============ ============ WEIGHTED AVERAGE COMMON SHARES 21,021,933 12,749,218 19,445,297 12,540,386 ============ ============ ============ ============
The accompanying notes are an integral part of the consolidated financial statements. -4- ICC TECHNOLOGIES, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Six Months ended June 30, ---------------------------- 1996 1995 ------------ ------------ Cash Flows from Operating Activities: Net loss $ (3,599,341) $ (2,561,561) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 795 413 Equity interest in net loss of Engelhard/ICC 3,095,988 2,073,488 (Increase) decrease in: Receivables 150,067 (200,676) Inventories 0 5,960 Prepaid expenses and other 107,223 49,918 Increase (decrease) in: Accounts payable and accrued expenses (230,220) (29,809) ------------ ------------ Net cash used in operating activities (475,488) (662,267) ------------ ------------ Cash Flows from Investing Activities: Capital contributions to Engelhard/ICC (5,000,000) 0 Purchase of restricted certificate of deposit 0 (2,500,000) Repayments of loans from Engelhard/ICC 0 1,500,000 Purchases of property and equipment, net 0 (4,770) ------------ ------------ Net cash used in investing activities (5,000,000) (1,004,770) ------------ ------------ Cash Flows from Financing Activities: Proceeds from issuance of common stock and warrants, net 16,287,045 1,732,320 Cash dividend on Preferred Stock (394,610) 0 Repayments of borrowings from stockholder (150,000) 0 ------------ ------------ Net cash provided by financing activities 15,742,435 1,732,320 ------------ ------------ Net increase in cash and cash equivalents 10,266,947 65,283 Cash and Cash Equivalents, Beginning of Period 1,573,475 1,114,335 ------------ ------------ Cash and Cash Equivalents, End of Period $ 11,840,422 $ 1,179,618 ============ ============
The accompanying notes are an integral part of the consolidated financial statements. -5- ICC TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 1996 (1) BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the financial statements and footnotes thereto for the year ended December 31, 1995 included in the Company's Annual Report on Form 10-K for the year then ended. Results of operations for the three and six months ended June 30, 1996 are not necessarily indicative of results of operations expected for the full year. (2) BUSINESS AND GOING CONCERN CONSIDERATIONS Business ICC Technologies, Inc. ("ICC" or the "Company") is a Delaware Corporation. ICC through its joint venture Engelhard/ICC ("the Partnership") with Engelhard Corporation ("Engelhard"), designs, manufactures and markets innovative climate control systems to supplement or replace conventional air conditioning systems. The Partnership's climate control systems are based on proprietary desiccant technology initially developed by the Company, licensed honeycomb rotor technology and Engelhard's patented titanium silicate desiccant, ETS(TM). The Partnership's climate control systems are designed to address indoor air quality, energy and environmental concerns and regulations currently affecting the air conditioning market. The Partnership was formed on February 7, 1994 pursuant to the terms and conditions under the Joint Venture Asset Transfer Agreement ("Transfer Agreement") whereby the Partnership succeeded to the desiccant air conditioning business conducted by ICC prior to the formation of the Partnership. Since the formation of the Partnership, the Company has become principally a holding company whose activities have related primarily to its participation in the management of the Partnership in which it owns a 50% interest. The Company is not permitted to engage directly or indirectly in any activities which would conflict with the Partnership's business as long as the Partnership is in effect, but the Company is not precluded from engaging in other activities. The Company currently does not have any plans to engage in other activities and, therefore, is not expected to generate any significant revenues, although it will continue to incur general and administrative expenses. Going Concern The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Revenues and the Company's share of results of operations of the Partnership have been insufficient to cover costs of operations for the three and six months ended June 30, 1996. The Company has incurred cumulative losses since inception of $37,145,060 and $33,545,719 through June 30, 1996 and December 31, 1995, respectively. In order to continue operations, the Company has had to raise additional capital to offset cash utilized in operating and investing activities. The Company's continuation as a going concern is dependent on its ability to: (i) generate sufficient cash flows to meet its obligations on a timely basis, (ii) obtain additional financing as may be required, and (iii) ultimately attain profitable operations and positive cash -6- flows from its operations and its investment in the Partnership. The accompanying financial statements do not include any adjustments that may result from the Company's inability to continue as a going concern. The cash utilized in the Company's operating and investing activities during the three and six months ended June 30, 1996 was financed primarily through proceeds from the issuance of Common Stock and exercise of stock options and warrants. Management believes the Partnership will require additional capital contributions during 1996. To the extent the Company requires additional funds to continue its operations or the Partnership requires capital contributions in excess of existing available funds, the Company would expect to satisfy such requirements by seeking equity financing. The Company's ability to successfully obtain equity financing in the future is dependent in part on market conditions and the performance of the Partnership. There can be no assurance that the Company would be able to obtain equity financing in the future. (3) INVESTMENT IN ENGELHARD/ICC PARTNERSHIP The following are the summarized unaudited financial results of the Partnership:
Quarter ended Quarter ended Six months Six months June 30, June 30, ended June 30, ended June 30, 1996 1995 1996 1995 ----------- ----------- ----------- ----------- Results of operations: Revenues $ 2,720,649 $ 3,373,964 $ 4,796,748 $ 5,161,966 Cost of goods sold 3,326,514 3,212,368 6,230,247 4,892,311 ----------- ----------- ----------- ----------- Gross profit (loss) (605,865) 161,596 (1,433,499) 269,655 Operating expenses: Marketing 842,477 834,449 1,716,198 1,661,617 Engineering 304,991 200,397 583,846 414,277 Research and development 242,940 274,167 539,925 640,579 General and administrative 890,435 756,811 1,704,399 1,236,607 ----------- ----------- ----------- ----------- Loss from operations 2,886,708 1,904,228 5,977,867 3,683,425 Interest expense 109,960 242,783 214,109 463,551 ----------- ----------- ----------- ----------- Net loss $ 2,996,668 $ 2,147,011 $ 6,191,976 $ 4,146,976 =========== =========== =========== ===========
As of As of Balance sheet information: June 30, 1996 December 31, 1995 ------------- ----------------- Cash $ 1,740,989 $ 346,480 Receivables 3,293,791 2,057,420 Inventory 4,562,316 3,385,125 Other current assets 156,293 158,939 Property, plant and equipment 8,149,320 8,263,642 Cash held in escrow 746,040 865,744 Other noncurrent assets 1,825,003 1,802,155 ----------- ----------- Total assets $20,473,752 $16,879,505 =========== =========== Current liabilities $ 1,331,457 $ 1,519,394 Revolving credit line 2,750,000 2,750,000 Long term debt 8,675,915 8,701,755 Partners' capital 7,716,380 3,908,356 ----------- ----------- Total liabilities and capital $20,473,752 $16,879,505 =========== =========== -7- The Company's investment in the Partnership is owned by a wholly-owned subsidiary, ICC Desiccant Technologies, Inc., whose principal asset is the Partnership investment. The investment in the Partnership is accounted for under the equity method of accounting. The Company's proportionate share of losses in the Partnership are $1,498,334 and $1,073,505 for the three months ended June 30, 1996 and 1995, respectively and $3,095,988 and $2,073,488 for the six months ended June 30, 1996 and 1995, respectively. The Partnership has incurred cumulative losses of approximately $22.4 million since inception through June 30, 1996. The Company's share of the cumulative losses have resulted in the recognition of losses in excess of the Company's investment in the amount of $893,153 and $2,797,165 as of June 30, 1996 and December 31, 1995, respectively. The Company and Engelhard each made additional capital contributions of $3 million to the Partnership during the three months ended June 30, 1996; aggregating to $5 million of capital contributions made by each of the Company and Engelhard during the six months ended June 30, 1996. Receivables from the Partnership were $10,906 and $160,973 at June 30, 1996 and December 31, 1995, respectively. The Company and Engelhard are guarantors of the Partnership's long term debt which totals approximately $8.7 million as of June 30, 1996. (4) STOCK TRANSACTIONS: Equity Investments In February 1996, the Company issued 2,500,000 shares of Common Stock in a secondary offering at $7 per share less underwriting discounts and commissions of $.49 per share. Proceeds of $16,275,000 were offset by costs of approximately $750,000 incurred in the offering. In connection with the offering, all outstanding Preferred Stock was converted into 3,609,696 shares of Common Stock or redeemed in cash for $981,270. In addition, accrued dividends on the Preferred Stock amounting to approximately $1,044,000 were declared and paid in cash, except for $649,396 of such dividends associated with the Series G Preferred Stock which were paid in the form of 162,349 shares of Common Stock in accordance with the original terms of such series. As a result of such conversion and redemption of Preferred Stock, there are currently no shares of Preferred Stock outstanding. The Company plans to use the remaining net proceeds from the offering to: (i) fund its half of the estimated future financing requirements of the Partnership and (ii) to fund the Company's working capital requirements. In April 1996, the underwriters of the secondary offering exercised their overallotment option and purchased 186,813 shares of Common Stock for proceeds of approximately $1.2 million after underwriting discounts and commissions. On March 31, 1995, pursuant to a private placement, the Company sold 300,000 shares of Common Stock for net proceeds of approximately $3,000,000. The Company granted warrants to purchase 375,000 shares of Common Stock at $9 per share to the placement agents in connection with the private placement. The Company received proceeds of approximately $126,000 and $308,000 from the exercise of stock options and warrants to purchase approximately 67,000 and 130,000 shares of Common Stock in the three month period ended June 30, 1996 and 1995, respectively. The Company received proceeds of approximately $190,000 and $750,000 from the exercise of stock options and warrants to purchase approximately 103,500 and 318,000 shares of Common Stock in the six month period ended June 30, 1996 and 1995, respectively. -8- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview The Company, through the Partnership, designs, manufactures and markets innovative climate control systems to supplement or replace conventional air conditioning systems. The Partnership's climate control systems are based on proprietary desiccant technology initially developed by the Company, a licensed honeycomb rotor technology and Engelhard's patented titanium silicate desiccant, ETS(TM). Pursuant to the formation of the Partnership on February 7, 1994, the Company transferred its assets related to its desiccant climate control business, subject to certain liabilities, to the Partnership in exchange for a 50% interest in the Partnership through its wholly-owned subsidiary, ICC Desiccant Technologies, Inc. Engelhard, in exchange for a 50% interest in the Partnership, contributed capital to the Partnership, entered into a supply agreement to sell ETS(TM) to the Partnership and entered into a license agreement granting the Partnership an exclusive royalty-free license to use ETS(TM) in the Partnership's business, including heating, ventilation and air conditioning. The desiccant climate control business conducted by the Company prior to the formation of the Partnership is now being conducted by the Partnership, and the Company has become principally a holding company. Further, substantially all of the employees of the Company have become employees of the Partnership and the leases for the space occupied by, and certain other obligations of, the Company have been assumed by the Partnership. Since the formation of the Partnership, the Company's activities have related primarily to its participation in the management of the Partnership in which it owns a 50% interest. The Company is not permitted to engage directly or indirectly in any activities which would conflict with the Partnership's business as long as the Partnership is in effect, but the Company is not precluded from engaging in other activities. The Company currently does not have any plans to engage in other activities and, therefore, is not expected to generate any significant revenues, although it will continue to incur general and administrative expenses. The Company accounts for its interest in the Partnership under the equity method of accounting for investments. Although the Company has no obligation to provide additional financing to the Partnership, because the Company has, and expects to continue to fund its share of the Partnership's activities, the Company recognizes its share of the losses of the Partnership. Results of Operations As described above, since the formation of the Partnership, the Company's sole activities have related to its participation in the management of the Partnership. During the six months ended June 30, 1996, the Company did not engage in any other activities nor did it generate any revenues, compared to $6,500 of revenues for the same period in 1995 from the sale of spare parts related to cogeneration equipment. The Company did have continuous expenses during the six month period ended June 30, 1996. The Company's general and administrative expenses increased $21,745 to $440,982 for the three month period ended June 30, 1996, compared to $419,237 for the same period in 1995, and increased $128,758 to $812,243 for the six month period ended June 30, 1996, compared to $683,485 for the same period in 1995. Such increase was primarily the result of increased payroll and insurance costs. The Company's net loss for the three months ended June 30, 1996 increased $310,297 to $1,713,457, compared with the net loss of $1,403,160 for the same period in 1995, and the Company's net loss for the six months ended June 30, 1996 increased $1,037,780 to $3,599,341, compared with the net loss of $2,561,561 for the same period in 1995. This increase in the net loss is primarily attributable to the Company's 50% share of the Partnership's increase in loss of $849,657 and $2,045,000 for the three and six months ended June 30, 1996, as compared to the same periods in 1995. Net loss per share of Common Stock decreased to $.08 for the three month period ended June 30, 1996, compared with $.15 per share for the same period of 1995, and net loss per share of Common Stock decreased to $.19 for the six month period ended June 30, 1996, compared with $.24 per share for the same period of 1995. Such decrease was -9- primarily the result of the issuance of additional shares of Common Stock and elimination of preferred stock dividend requirements in the six months ended June 30, 1996. The Partnership's revenue for the three and six months ended June 30, 1996 was $2,720,649 and $4,796,748, respectively compared to $3,373,964 and $5,161,966, respectively, for the same periods in 1995. The decrease in revenue was attributable to a reduction in sales of substrate from the Miami plant to Ciba Geigy pursuant to a supply contract and the receipt of a non-recurring licensing fee of $500,000 from Chung-Hsin in 1995, the effects of which more than offset the increase in equipment sales. Equipment sales for the six months ended June 30, 1996 were greater than equipment sales for the year ended December 31, 1995. Equipment sales increased to approximately $1.4 and $2.6 million for the three and six months ended June 30, 1996, respectively, compared to approximately $1 and $1.4 million for the three and six months ended June 30, 1995, respectively. Sales of substrate decreased to approximately $1.3 and $2.2 million for the three and six months ended June 30, 1996, respectively, compared to approximately $1.8 and $3.3 million for the three and six months ended June 30, 1995, respectively. The Partnership recorded a gross loss of approximately $606,000 and $1,433,000 for the three and six months ended June 30, 1996, respectively, compared to a gross profit of approximately $162,000 and $270,000 for the same periods in 1995, respectively, due primarily to increases in manufacturing costs of equipment, without a corresponding increase in equipment sales. The Partnership's operating expenses increased to $2,280,843 and $4,544,368 for the three and six months ended June 30, 1996, respectively, compared to $2,065,824 and $3,953,080 for the same periods in 1995, respectively, due primarily to higher general and administrative and engineering costs. General and administrative and engineering expenses have increased primarily as a result of increased staff and related payroll costs. As a result of the gross loss and increased operating expenses, the loss from operations increased to $2,886,708 and $5,977,867 for the three and six months ended June 30, 1996, respectively, as compared to $1,904,228 and $3,683,425 for the same periods in 1995, respectively. The Partnership's net loss increased to $2,996,668 and $6,191,976 for the three and six months ended June 30, 1996, respectively, compared to $2,147,011 and $4,146,976 for the same period in 1995, respectively, due to the increase in the loss from operations offset by a decrease in net interest expense due to reduced borrowings. The Partnership's backlog for equipment amounted to approximately $3 million at July 26, 1996. Liquidity and Capital Resources The Company's cash and cash equivalents increased $10,266,947 to $11,840,422 as of June 30, 1996, as compared to $1,573,475 as of December 31, 1995. The increase in cash and cash equivalents is primarily due to the public sale of 2,500,000 shares of Common Stock. In February 1996, the Company issued 2,500,000 shares in a secondary offering at $7 per share less underwriting discounts and commissions of $.49 per share. Proceeds of $16,275,000 were offset by costs of approximately $750,000 incurred in connection with the offering. In connection with the offering, all outstanding Preferred Stock was converted into 3,609,696 shares of Common Stock or redeemed in cash for $981,270. In addition, accrued dividends on the Preferred Stock amounting to approximately $1,044,000 were declared and paid in cash, except for $649,396 of such dividends associated with the Series G Preferred Stock which were paid in the form of 162,349 shares of Common Stock in accordance with the original terms of such series. As a result of such conversion and redemption of Preferred Stock, there are currently no shares of Preferred Stock outstanding. The Company plans to use the remaining net proceeds from the offering to: (i) fund its half of the estimated future financing requirements of the Partnership and (ii) to fund the Company's working capital requirements. In April 1996, the underwriters of the secondary offering exercised their overallotment option and purchased 186,813 of Common Stock for proceeds of approximately $1.2 million after underwriting discounts and commissions. -10- Net cash used in operating activities by the Company was $475,488 for the six months ended June 30, 1996 due to the net loss (before non-cash charges and the Company's 50% share of the net loss of the Partnership) of $502,558 and net working capital provided of $27,070. The Company and Engelhard each made additional capital contributions of $5,000,000 to the Partnership in the six months ended June 30, 1996. Net cash used in operating activities and for investments in the Partnership by the Company were financed by proceeds from the issuance of Common Stock and exercise of stock options and warrants. The Partnership's cash and cash equivalents increased to $1,740,989 at June 30, 1996 from $346,480 at December 31, 1995. The increase was due primarily to capital contributions of $5 million by each the Company and Engelhard, offset by cash used in operating activities of approximately $3 million (resulting from the Partnership's net losses and working capital requirements) and cash used in investing activities of approximately $600,000. The Partnership is expected to require additional financing to support current operations and anticipated future expansion, and will be dependent on the Company and Engelhard to provide such additional financing. There can be no assurance that the Company or Engelhard will be willing, or able, to provide such additional financing. Management believes the Partnership will continue to require additional capital contributions during 1996 and the Company plans to use the net proceeds from the offering of 2.5 million shares completed in February 1996 to fund its portion of such required capital contributions. To the extent Partnership capital contributions in excess of the net proceeds from such offering are required or if the Company requires additional funds to continue its operations, the Company would expect to satisfy such requirements by seeking equity financing. The Company's ability to successfully obtain equity financing in the future is dependent in part on market conditions and the performance of the Partnership. There can be no assurance that the Company will be able to obtain equity financing in the future. In April 1995, the Partnership obtained financing from the issuance of $8.5 million in industrial development revenue bonds. The Company guaranteed 50% of the Partnership's indebtedness associated with the industrial development bonds and established an irrevocable letter of credit for $2.5 million to support its portion of the guarantee, which is collateralized by a $2.5 million certificate of deposit. The Company received proceeds of approximately $126,000 and $308,000 from the exercise of stock options and warrants to purchase approximately 67,000 and 130,000 shares of Common Stock in the three month period ended June 30, 1996 and 1995, respectively. The Company received proceeds of approximately $190,000 and $750,000 from the exercise of stock options and warrants to purchase approximately 103,500 and 318,000 shares of Common Stock in the six month period ended June 30, 1996 and 1995, respectively. ICC has not declared any dividends on Common Stock and does not expect to declare dividends in the foreseeable future. Payment of future dividends will rest within the discretion of the Board of Directors and will depend, among other things, on ICC's earnings, capital requirements and financial condition. The independent accountants report on the audit of the Company's 1995 financial statements includes an explanatory paragraph regarding substantial doubts about the Company's ability to continue as a going concern. The Company's accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Revenues and the Company's share of results of operations of the Partnership have been insufficient to cover costs of operations for the six months ended June 30, 1996. The Company has suffered recurring losses accumulating to approximately $37 million as of June 30, 1996. In order to continue operations, the Company has had to raise additional capital to offset cash utilized in operating and investing activities. The Company's continuation as a going concern is dependent upon its ability to: (i) generate sufficient cash flows to meet its obligations on a timely basis, (ii) obtain additional financing as may be required and (iii) ultimately, attain profitable operations and positive cash flow from its operations and its investment in the Partnership. The accompanying financial statements do not include any adjustments that may result from the Company's inability to continue as a going concern. -11- The independent accountants report on the audit of the Partnership's 1995 financial statements also includes an explanatory paragraph regarding substantial doubts about the Partnership's ability to continue as a going concern. The Partnership has incurred cumulative losses of approximately $22 million since inception through June 30, 1996. The Partnership's continuation as a going concern will remain dependent upon its ability to: (i) generate sufficient cash flows to meet its obligations on a timely basis, (ii) obtain additional financing or refinancing as may be required and (iii) ultimately, attain profitable operations and positive cash flow from operations. -12- PART II OTHER INFORMATION Item 1. Legal Proceedings No legal proceedings by, or against, the Company were initiated in the quarter ended June 30, 1996. Item 2. Changes in Securities. None Item 3. Defaults Upon Senior Securities Not Applicable Item 4. Submission of Matters to a Vote of Security Holders The last Annual Meeting of Stockholders of ICC was held June 6, 1996. The record date for the meeting was April 9, 1996. At such meeting, the holders of Common Stock, voting as a single class, elected a Board of Directors for the Company consisting of the following six persons: Charles Condy; Irwin L. Gross; Mark S. Hauser; Stephen Schachman; William A. Wilson; Andrew L. Shapiro and Albert Resnick. These individuals will serve on the Board of Directors until the next annual meeting of stockholders or until their respective successors have been duly elected and qualified. The votes were cast as follows for the election of Directors: Name For Withheld ---- --- -------- Charles Condy 19,960,088 208,120 Irwin L. Gross 19,960,746 207,462 Mark S. Hauser 19,959,688 208,520 Albert Resnick 19,960,988 207,220 Stephen Schachman 19,960,788 207,420 Andrew L. Shapiro 19,957,788 210,420 William A. Wilson 19,959,488 208,720 The stockholders also ratified the selection of the firm of Coopers & Lybrand LLP to be the Company's auditors for 1996. There were 19,969,947 votes in favor of the selection, 73,452 votes against, and 124,809 in abstention. Item 5. Other Information Not Applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 27 Financial Data Schedule (b) The following reports have been filed with the Securities and Exchange Commission. None -13- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DATE: August 8, 1996 BY: /s/ Irwin L. Gross ------------------------ Irwin L. Gross, Chairman and President DATE: August 8, 1996 BY: /s/ Manfred Hanuschek ------------------------ Manfred Hanuschek Chief Financial Officer -14- EX-27 2 ARTICLE 5 FDS FOR 2ND QUARTER 10-Q
5 1 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 11,840,422 0 39,573 0 0 11,910,842 4,771 2,386 14,413,227 85,229 0 0 0 212,546 13,222,299 14,413,227 0 0 0 0 812,243 0 0 (503,890) 0 (3,095,988) 0 0 0 (3,599,341) (.19) (.19)
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