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Technology Stocks : RRRR - ICC Technologies/Rare Medium -- Ignore unavailable to you. Want to Upgrade?

To: Mykldee who wrote (664)	4/23/1998 2:06:00 AM
From: Tom Caruthers	Respond to of 954

Some numbers to kick around....Trying to objectify what ICGN is really worth. I realize a lot of these numbers are arbitrary but I tried to choose numbers that were realistic in my own mind. First of all, even before the news broke on ICGN, the stock was holding steady at $2.5. This is what the market perceived as the true value of just Fresh Air Solutions. That's a market cap of about $54 million and takes into account $20 million in cash and 21 million shares outstanding. . Now the Rare deal is done. Share diluted goes to roughly 27 million shares outstanding. $10 million in cash. $22 million note. Dilution cuts our share price by 20% to $2.00 per share (Still a market cap of $54 million). Addition of $22 million note and loss of $10 million cash, and the market cap falls $32 million to $22 million or now $0.81 per share. This makes the assumption that we could get rid of the $22 million note by selling shares at good market prices. What do we get for paying up 32 million? If Rare went public, they could have easily controlled a $20 million offering. i.e. selling 2 million shares at $10...perhaps with 5 million shares outstanding after the IPO. Assuming they can earn $ 1 million after tax (they earned $950,000 pre-tax last year) on roughly $10 million in revenues, this new company would have a $0.20 EPS, much better than most of the internet companies out there. Let's say, given the current market environment and the willingness to pay a premium for high growth profitable internet stocks, the stock is valued at $30 or roughly $150 million market cap. This is not too unreasonable. The market cap of Rare would be $150 million. Subtract the $20 million in cash from the IPO and they have an inherent value of $130 million. Tack on this inherent estimated value of Rare ($130 million) to the residual value of ICGN or $22 million and you get a company that has an inherent value of roughly $150 million. This new company has $10 million in cash, 27 million shares outstanding, but now TWO fully operational businesses. It brings our share price to $5.50, relecting today's price for what it's worth. This valuation model is all dependent on what you think Rare is really worth in today's market. I think my valuations a Rare IPO are fair, given that Rare brings a lot of intangibles to the table. They have young and enthusiastic managment/personnel, are in a high growth and HIGHLY VISIBLE arena...potentially leading to increased analyst coverage, hence higher multiples..., they have a good business model based on corporate customers (flush with cash) with sources of recurring revenue/income, are in a sector that is ripe for consolidation (increasing the valuations of all potential takeover candidates) and most of all, have a seemingly highly competent CEO in Meyers who will now be calling the shots. This valuation model attempts to take into real-time account the current market conditions, current expectations for Rare but does not take into account the current prospects for Fresh Air. The valuation was based on what ICGN was worth, pre-Rare. During that time, we had heard many negative things about ICGN and how they were on the verge of heading into a death spiral. More on that in my next post..... Tom C

To: Mykldee who wrote (664)	4/23/1998 2:09:00 AM
From: Tom Caruthers	Read Replies (2) \| Respond to of 954

This is not simply an "air conditioner" company. This company makes dessicant air conditioners which do several things. A dessicant is a chemical substance that can easily absorb moisture from the air. Whenever humid air is passed through the dessicant, the water is absorbed and the outflow air is much drier. Since humidity in air is what really holds the heat, by removing this moisture, you make the air much easier to cool by conventional means (which tends to be electric and very expensive). The dessicant can be regenerated (so that it can absorb more water) easily by warm heating. Not only do you make the air less humid (leading to higher comfort and less mold and mildew) and easier (and CHEAPER) to cool, you also allow the ability to take more fresh air from the outside, into the building. Many of us have heard of sick-building syndrome. This is when air is constantly recirculated within a building with very little fresh outside air. Any organic solvents, or chemicals (from cleaning, fabrics, carpets), any viruses or bacteria or fungus...simply gets recirculated in the building. We all know the phenomenon that people get sick more often when they travel by plane because in planes, they recirculate all the air. If one person is sick, those germs spread. With dessicant technology, you can take huge amounts of fresh air into the building regardless of how humid that air may be. Also, it has been patented by ICGN that these dessicants can actually reduce the number of airborne germs by, in lay terms, exploding them as they pass through the dessicant, making it ideal for nursing homes and hospitals. The market for these types of units is astounding....every single building that exists could use a dessicant unit. For instance, we all know that in the summer, the humidity is what really kills us. Well here is the solution...and cheaper than all the others. (some people who use dehumidifiers at home....that is essentially an electric air conditioner in reverse and extremely expensive to operate). This type of unit can be used in hospitals and nursing homes to reduce the costs of A/C, improve air quality, and to reduce the number of germs in the air. It can be used in libraries and museums to reduce humidity....humidity breeds mold and mildew...the very things that books and rare items hate. It can be used in restaurants to reduce the humidity load caused by cooking and hot sweaty workers/customers perspiring inside. It can be used in supermarkets where it helps to prevent frosting on freezer windows and helps to control humidity. It can be used in every office building out there...to improve air quality, make cooling cheaper, comply with fresh air standard codes. It can be used in smoky gambling casinos where fresh air is a must. Imagine having to expel all of the smoky air to the outside and vent in warm humid air to the inside....the cooling costs would be phenomenal by traditional A/C. It can be used in ice rinks where humidity control is essential in maintaining ice quality. If units existed, then it could also be used in residential homes. IN SHORT, IT CAN BE USED EVERYWHERE!!!! ICGN has units testing in major hospital chains and major restaurant chains such as Wendy's and McDonalds. Their strategy is to go for major coporations which can roll out a chain-wide installation of ICGN's products, rather than having to win contracts for single units one at a time. Based on the recent conference call, Fresh Air is making progress....Revitalized sales force, new product offerings, new dessicant materials, increased quote activity, eventual resolution to the odor problem, new business, decreased costs, improved margins, potential to break-even this year. Q2 will be better than last year. Just this renewed knowledge alone would be enough to have kept ICGN at $2.5-$3.0 (pre-Rare announcement) IF Fresh Air solutions becomes profitable this year, all of us old shareholders know that the stock would be in the $4-5 range, easily. That tacks on $50 million in market cap, bringing the potential stock price this year based on fundamentals alone to $7-8. It could be even more if they can nail down a big order from Wendy's, etc. If that's the case, I think we will easily see $12-15. So what I am trying to say is....THERE is tremendous potential here for two businesses. We all know about Rare. I thought it was time for all of you to know about Fresh Air as well. Tom C